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Posted 24 May 2017

Why it’s never too late to plan your pension

Left your pension until the last moment? Don’t panic, if you act now then you can still save enough for a fun rather than frugal retirement. Personal finance journalist Felicity Hannah (@FelicityHannah) reveals why it’s never a bad time to start saving for your retirement.

  • It's never too late or too early to start saving
  • Most couples want to aim for £26,000 a year
  • Five of the best ways to boost your pot

Other focuses for your finances

If you’re in your 20s or 30s, you may be clearing debt, paying rent or saving to buy a home. High childcare bills and mortgage repayments could also be taking a pretty significant chunk of your wages. And this isn’t even taking into account saving for holidays, gifts or something special for yourself.

In fact, if you’ve focused your money and time on planning your holidays, you’re not alone: the LV= State of Retirement report found that people spend two hours longer planning a holiday than planning their retirement.

If you’ve reached your 40s or 50s with little or no pension savings and you’re concerned that it’s too late to start, don’t worry – there’s still time to act.

Plenty of ways to save

If that does sound like you then don’t despair – there are plenty of ways you can boost your retirement savings, and plenty of time to do it.

If you are turning 40 this year you still have at least 27 years before the government thinks you’re ready to receive your state pension and retire. Not to mention the fact that the state pension age increases to 68 for people turning 40 after April next year.

The Pensions Advisory Service reassures savers, no matter their age: ‘If you’re young, and at the beginning of your career, you have many years ahead of you during which the money you save can grow through investments. If you’re older and think it’s too late, it’s good to know that you will also benefit from the tax-relief on your contributions and investment growth.

Whatever your age, there are steps you can take that will make a real difference to your retirement.

The pensions savings goal

So, how much are you likely to need when you retire and what do you need to put aside each month to make sure you have that?

The consumer champion Which? recently carried out a survey and found that, on average, retired couples needed £18,000 a year to cover their household essentials like food, energy bills and transport.

To fund extras like overseas holidays and some actual fun, a two-person household needs an average joint income of £26,000 a year. Which? worked out that to generate that kind of annual income a couple would need a defined contribution pot of £210,000 in today’s money, as well as their state pension.

That means a couple aged 20 who are beginning from absolute scratch needs to save at least £131 a month between them. If they start saving aged 30 that rises to £198 a month. Starting aged 40, they would need to save £338 a month, and if they’re aged 50 the couple would need to save £633 a month if they want their pot to eventually pay out £26,000 a year.

The older you are, the tougher it can feel to get saving. But there are lots of ways you can increase what you put aside.

Five ways to boost your retirement savings

1. Work a bit longer

The rules about retirement have changed: your employer cannot force you out of the door once you reach pension age; you’re allowed to keep working.

And, although you can collect your state pension at 67 if you qualify, you don’t have to take it. You can work a little longer and keep saving into your pension pot – plus, you’ll receive a higher state pension when you are ready to retire.

If you want to start enjoying your retirement but still have a source of income, you could even consider a phased retirement plan. For late pension savers, postponing retirement could be the key to a wealthier retirement – you don’t even have to stay at the same job.

2. Sign up to the right pension scheme

If you’re in work and not self-employed, enrolling in your employer’s pension scheme, or staying in it when you have been auto-enrolled, is vital.

Your employer is obliged by law to pay into your pension as well as you and that’s all topped up by tax relief.

Your employer’s pension provider might also offer different pension plans for employees, as well as the auto-enrol scheme, so do some research into which is right for you.

3. An extra source of income

Instead of staying in your job after retirement, why don’t you set up your own business? If there’s something that you’re passionate about, retirement might be just the time to explore that passion. Over-50 entrepreneurs are on the rise, and many of them started because they wanted to spend their retirement doing something they enjoy – they never expected to make any money out of it.

Alternatively, if your children have left home and you have a spare room, you could take in a lodger and earn up to £7,500 a year tax-free.

4. Enlist a pension specialist

At LV= we’ve helped thousands of people just like you to plan for their future – and helped them achieve a retirement that’s as much about fun than frugality.

Our pensions specialists help make sure you can love retirement rather than worry about it. Call our pension specialists now for a free chat about you and your pension goals, or to answer any questions you might have about your options.

5. Tracking down lost pensions

As part of your chat, your pension expert will recommend that you track down any of your lost pensions.

Pension funds worth around £400m are still sitting unclaimed, according to the Department for Work & Pensions, so you could be missing out on a considerable sum.

As well as contacting one of our specialists, read our article about lost pensions for the steps to finding your missing retirement funds.

If you’re wondering whether to get in touch with our pension experts then remember: it’s never too late to start your pension planning. However, whether you’re 25 or 52, it’s a good idea to start now.


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