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Once you get into your fifties, retirement seems like less of a far-off dream and more of an impending reality that looms rather than beckons.
However, there are some straightforward ways you can plan for retirement so that you have a long and well-funded break once you stop working.
Firstly, do make the most of the free advice session you are entitled to with the Government’s PensionWise service. Then follow this six-point plan:
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Jasmine Birtles answers questions from GB News members in the exclusive pensions and retirement Q&A JASMINE BIRTLES | GETTY Find out what money you have right now.
Financial advisor David Braithwaite from Citrus Financial said: “We are far more nomadic in our working life now, according to the Pensions Policy Institute.
"Most people will have at least 6 pensions, which will likely increase with auto enrolment, which started in 2012, meaning more people than ever are building up small pension pots without even knowing it. You can trace pensions for free by using this Government service."
Try Gretel.co.uk to trace any pensions you might have forgotten about. At this stag,e it all helps. You might find that you will need to consolidate these disparate pots too. It’s worth speaking to the people at Pension Potential about this and about your various choices when you come to retire.
It’s also worth checking your state pension forecast for a clear picture. You can then use an online pension calculator to see what your level of savings might mean for your income in retirement, and if you have gaps, there’s still time to explore how to boost your pension pot.
Consider how much income you actually need in retirement.
Ask yourself, what do you need to pay for and what lifestyle will you want? If you know what you’re aiming for, it’s easier to know what to do with your money leading up to retirement. For example, will you have a mortgage to pay? Will you want to travel more or help the grandkids buy a house?
Once you know your target income — not just a vague lump sum — you can plan much more clearly. Some people are surprised to find they need less than they thought. Others realise that with careful planning, they could afford to retire sooner than expected.
Understand your options
Mike Ambery, the retirement savings director at Standard Life, part of Phoenix Group, says: "Pensions Freedoms, introduced ten years ago, gave you control over how to access your money when you retire – but with choice comes a bit more responsibility.
"Generally, you can access 25 per cent of all your pension money tax free (up to a maximum of £268,275), which you don’t have to take all at once – you can leave it to grow and take it when you need it.
"You can then opt for an additional lump sum, a flexible income, or secure a guaranteed income for life via an annuity.
"Each has its advantages and considerations, and you can also mix your options."
Plan for the duration
It’s tempting to focus on the first few years of retirement (who doesn’t think of that first unburdened holiday), but remember that your savings might need to last 20, 30, or even 40-plus years.
Ask yourself, will your retirement be a hard "exit" or will you perhaps gradually reduce days or hours you work to effectively give yourself a glide path to no longer working – many employers support reducing your days and therefore pro rata of your salary to keep valued members of staff.
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Consider what will happen, for example, if you lost your job before retiring or became ill for a prolonged period of time? You can protect the premiums you pay into your pension with income protection to cover these, so you are effectively insuring your pension payments should the unexpected happen.
Also, don’t forget that even when you are retired, your income will be subject to taxation. "There’s no easy way to say it," says Ambery.
"Even in retirement, tax will be a consideration. Some withdrawals beyond your 25 per cent tax free cash might push you into a higher tax bracket.
"This is particularly likely if you take a large lump sum beyond the 25 per cent. Planning ahead is crucial to consider tax efficiency and keep more of your hard-earned money."
If you can, top up in your 50s
Ambery added: "If you’re in a position to do so, your 50’s are a good time to bolster your retirement savings. If you’re still working, make sure you’re taking full advantage of employer pension contributions and tax relief and if you’ve just paid off your mortgage, consider diverting some of your newly free money to your pension – if you time it right, you won’t miss it and you’ll thank yourself in a few years’ time."
Seek advice
It’s important to get your finances right at this stage as it will impact the rest of your new (retired) life.
David Braithwaite says “ask your friends and family for a recommendation for an financial adviser or head to www.unbiased.co.uk and find one that specialises in pension planning, and in particular uses “cashflow modelling” as they can show you year by year how your retirement is looking and therefore you have time to make any adjustments now rather than when it’s too late.”
It’s also always worth speaking to your employer and pension provider too to get a clearer picture of where your money is now and where it could be when you retire.
Jasmine Birtles is founder of the self-help financial site MoneyMagpie.com
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