Whether you’re starting out in your career or are nearing the end of your working days, planning for retirement is really important. Generally, the earlier you begin saving the better, but it’s never too late to start.
When you’re young and at the start of your working life, saving for your pension may not seem like a priority. But what you save now could have a huge impact on your future so it’s well worth giving some consideration.
Saving £50 a month into a pension from the age of 25 could result in a pension fund of £72,600 by the time you are 65, but only £22,700 if you started aged 45.*
If you’re over 22 and employed earning £10,000 or more, you will automatically be enrolled into a workplace pension. This will mean a minimum contribution of 8% of your earnings will be invested into a pension scheme chosen by your employer. This is made up from your contribution (minimum 4%), a contribution from your employer (minimum 3%) and the Government via tax relief (1%). Many employers offer more generous pension schemes so make sure you check these out when considering career moves.
If you aren’t old enough or don’t earn enough to qualify for employer pension contributions, it’s still worth talking to your employer to see if you still want to enrol in their pension scheme.
As you move through your career you may start to earn more. You may also have different financial priorities, for instance saving for a house deposit or starting a family.
Retirement might still seem a long way off but it’s important to plan ahead. If you’ve been saving since your 20s you will probably be on track for a decent retirement pot. If you haven’t been saving already, you should think about starting now.
“Delaying saving into a pension is a mistake when saving for retirement because the earlier you start, the longer your money has to grow. Saving £100 a month starting at 35 could produce a pension pot of £85,700 at 65, but this falls to £45,500 if you delay until 45.*”
David Stevens, Savings & Retirement at LV=
Make sure you are contributing as much as you can to your workplace pension, especially if your employer matches your contribution as this will maximise how much is being saved and invested. You could also consider adding one-off payments from any bonuses or pay-rises to top up your savings.
If you get a new job, you should look into the pros and cons of transferring your old workplace pension into your new company pension pot.
It’s a good idea to seek expert advice, but you can read more about transferring your pension in our guide.
If you don’t transfer your pension across, and realise some may have gone missing during your working life, contact the government’s Pension Tracing service, which has the details of over 320,000 pension schemes.
If you're married, or in a civil partnership, you might be eligible for an extra £75.50 per week in state pension payments when you retire, through your spouse's or civil partner's National Insurance contributions.
You can find out if you're eligible on the government's website.
Likewise, in a divorce, your personal pension is considered as an asset, which can be split between the two parties in a number of ways. In Scotland, only the value of the pensions accrued during the marriage is considered; in the rest of the UK, the pension you built up before your marriage is also taken into account.
The options available in the whole of the UK include:
There are two more options – deferred pension sharing and deferred lump sum – which are available everywhere except Scotland. Read more about divorce and pensions on the MoneyHelper website.
There are two pension-related things to think about when you have a child:
If you’re under 75 when you pass away, whatever is in your pension can be withdrawn tax-free by your beneficiary. The MoneyHelper website has more information.
When you’re in your 50s you’ll probably be starting to think more seriously about when you might retire. Whether that’s early retirement at 55 or carrying on until your 70s, you’ll need to make sure your savings are on track.
It’s never too late to start saving, but if you haven’t started by now, it will certainly be trickier. However, as your earnings are likely to be near their peak at this age, it should be a good time to increase your pension contributions as much as you can.
As you get nearer the age where retiring is a very real prospect for you, it’s time to do some serious planning and budgeting.
Work out what you want to do in your retirement years and how much that will cost you. Our handy budgeting guide might help.
You might want to bring all your pensions together in one place at this stage. This could make your savings easier and more cost effective to manage. Some pensions may have guarantees or exit charges attached so it’s important to check with each provider, or your financial adviser if you have one, before making any decisions.
Don’t worry if you’ve lost track of old pensions. The Government has a pension tracking service, which will help you find them.
Once you’re ready to start looking at your retirement options, it’s important to seek some guidance.
We recommend you take a look at Pension Wise from MoneyHelper, which is the government’s guidance service - it's a great resource for providing guidance, either face to face or over the phone.
It's important to shop around for the best deal for your retirement. We believe getting regulated financial advice is the best way to get the most out of your pension savings and ensure a safe and secure retirement.
We specialise in retirement advice. Learn more about our retirement advice service or get in touch with one our friendly advisers today
* These figures are based on an investment that yields 4% per annum after charges.