Over the next decade the number of people set to retire will hit a record high, reaching over 800,000 a year by 2028, according to a June 2022 report by think-tank Resolution Foundation. And yet the Pensions and Lifetime Savings Association (PLSA) report found in July 2018 that around 77% of savers didn’t know how much they’d actually need in retirement.

It begs the question – have you thought about how much you’ll need to maintain your lifestyle when you stop working? And if you already have a pension plan in place, does it go far enough?

The first piece of the puzzle involves assessing what your future expenditure might look like:

• Counting up the day-to-day – a great way to start is by calculating what your day-to-day spending might be if you were to maintain your current lifestyle. Our budget calculator is a simple tool to help you work this out.
• Fulfilling your lifetime goals – retirement is often the best time to pursue your lifelong dreams. Whether it’s travel plans or charitable endeavours, it‘s worth working out how much you’ll need for your goals.
• Passing on your wealth – if you have plans to give away some of your money, such as to help family get onto the property ladder, consider working out how much you want to set aside or leave behind. Our will-writing service could help you with this.

Here’s five things you should consider when it comes to your pension:

1. Consider what you want to achieve

Think about what you want for yourself and those important to you when you scale back or stop work. When would you like to retire? What sort of lifestyle do you want to have? Once you’ve worked that out, our specialists could help you devise a plan to make the most of the various financial tools available to you, not just your pension. This in turn could help you achieve your specific goals in a way that suits you and is tax-efficient.

2. Use a pension calculator

A pension calculator will give you a forecast of your likely pension income based on your defined benefit and defined contribution pensions, as well as your State Pension. It also helps you determine a target retirement income by taking your age and salary into account. You can find this tool and other helpful free pension advice on the government-backed MoneyHelper website. You can also contact your Premier Manager at any time for a free Financial Health Check, to help you review your personal finances, and we have specialist financial planners who could then discuss your options with you in greater detail. 

3. Consider maximising your contributions

Increasing your contributions – within what you can afford – doesn’t just help you set aside more money for your retirement, it could also bring additional benefits. For example, you could get more money from your employer – if they have a contribution matching scheme, then the more you put in, the more they may have to match – and it all comes out of your gross salary so you don’t pay any tax or national insurance on it.

4. Tax efficiencies

Maximising your contributions could also be beneficial from a tax perspective because the government pays tax relief on pension contributions. If you’re a higher rate taxpayer, you could get up to 40% tax relief on pensions. That means for every £100 you add to your pension it could only cost you £60. Many people under 75 could benefit from tax relief on pension contributions, even if they’re a non-taxpayer. There are limits, but it could be worth understanding exactly what’s possible for you.

5. Consolidate your pensions

By bringing all your pension pots together you could create a unified, holistic pension strategy. It not only gives you more control over the risk profile of your pension investments, it could mean lower administrative fees. There could also be reasons to keep your pensions where they are though. For example, some pension schemes will have high exit charges. When in doubt, it’s always worth seeking financial advice. Want to know more? Read our guide to having all your pensions in one place.

It’s worth considering maximising your pensions and making the most of the interest and tax benefits that come with it. It’s also worth considering any other income streams you may have, such as tax-free ISAs, existing investments, and rental property.

Ultimately, it’s about piecing together a financial jigsaw to create the picture you have in mind for your retirement.

This article is based on our understanding of current tax law and practice as at August 2022. Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances. Advice and product fees may apply. The value of investments can fall as well as rise, and you may not get back the full amount you invest.