In this current climate of high inflation, low interest rates and volatile market conditions, it is more important now than ever to make sure we are making the most of our hard earned cash. There are things we can all do to ensure our pension savings are working as hard as possible for us, and that we take advantage of the tax breaks available.
In this month’s blog we look at pensions and retirement planning and taking you through the steps of ensuring your goals and plans for the later years are given the best chance possible of being achieved.
April 2015 saw the introduction of
pension freedoms. So, what does this actually mean for people who are looking
to access their pension pot?
Prior to April 2015 the options available for the majority of people were very limited and in most cases an annuity would be the only option, offering a lack of flexibility and a poor deal especially with interest rates being at rock bottom.
On average people undertake 11 jobs during their lifetime which could mean 11 different pensions. This makes it very difficult to work out how much money you will actually have once you retire.
Could you afford to live on an income of £155 per week in retirement? How about £8,060 per year?
You may be surprised to be told that these figures are one and the same. This is the Flat Rate State pension which a UK citizen with 30 years of National Insurance contributions will be eligible for from age 66 (as at January 2019).
The national living wage in the UK is currently £16,009 per annum. With this in mind, are you saving enough now to ensure that you can enjoy retirement without worrying about your finances?
How much are you contributing?
If you wish to receive a guaranteed income for life in retirement of the remaining £7,949 with no investment risk to your capital, you would need a pension pot of around £142,750* for a level income or a pension pot of £245,000* if you wish for your pension to increase in line with inflation.
In order to achieve these fund values in today’s terms (i.e. after the effects of inflation) this would mean making monthly pension contributions of at least £185.60 net or £317.60 net respectively from the age of 30 into a cost effect personal pension plan – assuming growth is 5% per annum, with an ongoing advice charge of 0.50% per annum paid monthly.
What can you do?
Of course, everyone’s situation is different. However, the Financial Times Adviser have calculated that clients who have an appointed financial adviser accumulate, on average, 21% more in their pensions than those who self-invest**. With this in mind, can you afford not to review your retirement planning? After all, a goal without a plan is just a wish, and you do not want to wish you did it on the day that you retire.
Contact one of our Independent Financial Advisers at Temple Wealth Management to find out how we can help you with your retirement planning and review your pension contribution levels.
You can contact us by calling our office on 01329 282882, send an email to Fareham@templewealth.co.uk or send us a message on our Facebook or Contact Us Page.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
*Figures based on AssureWeb research completed on 08/02/2019 and are based on a single life, 5 year guaranteed annuity paid monthly in arrears for a healthy 66 year old, not taking into account advice charges.
You may have started to see the TV adverts with the big fluffy monster, called The Workplace Pension. He wanders around and is ignored by those he meets. You may have even wondered what it was all about!
A workplace pension is a system of saving for your retirement. Under the Pensions Act 2008 every employer must create a pension scheme that both the employee and employer contribute to. Read more