Retirement Planning – Plugging The Gaps!

Following a recent YouGov survey there has been a great deal of publicity regarding the lack of pension provision being made in the UK. Of those surveyed 17% said they are relying on a lottery win or an inheritance to fund their retirement and over a third claimed to be relying on the state. Clearly things are going to have to change or much of the UK population are going to struggle through their twilight years.

So, in order to stop us all blindly stumbling towards such a bleak retirement, we need to take responsibility for our future and start planning how we are going to fund it.

The best place to start is by looking at where you stand today. What provision have you made so far? Have you saved anything into a personal pension or are you a member of a pension scheme at work? Do you have any other assets such as property or investments? You also need to decide what can you save each month from this point forwards?

It’s also important to think about what might change between now and when you stop working. Of course your salary will stop being paid and your lifestyle will need to be supported from another source. How much will come in from your pensions? If you’re not sure, you can get an illustration from your pension provider and a state pension forecast from The Pension Service.

What else is going to change? When is your mortgage likely to be paid off and how much will this save you each month? Are you planning to downsize or stop running two cars? How big an impact will inflation have? What does your retirement actually look like and more importantly what might it cost? Until you answer these questions you won’t know whether you’re heading in the right direction. And if you don’t know where you’re heading, you’ll really struggle to get to the right destination.

Unfortunately, working out any shortfall is the easy bit. The hard part is plugging the gap! This is when the real planning starts and it will take commitment to a set course of action to build a retirement that you can look toward to.

Establishing what needs to be done can be very complex, so expert financial planning advice is likely to be required. This should help clarify exactly what your retirement deficit is and what can be done to improve your position. This may mean saving more into a pension, but other investment vehicles could be more suitable depending on your individual circumstances. And then there’s all the different investment options within your savings vehicle to consider.

You will also need to have an idea of how you plan to take the benefits from your retirement pot. If you have saved through a pension, most of the fund will have to be used to provide an income and there is a huge range of options of how to do this. Do you want to use your pension fund to buy a guaranteed income or can it remain invested while you take withdrawals within set limits? Do you want this income to stay level or increase in line with inflation? The income you receive will be based on numerous factors such as your age, health, the size of your fund and the annuity rates available when you retire. The best option for you will depend on your individual circumstances and the decision should not be taken lightly.

Planning for your retirement can be a difficult business, but it won’t be as difficult as your retirement will be unless you start planning for it as soon as possible. There’s certainly a lot to think about and many people will need to seek independent advice to make sense of all the numbers. But more than anything else we need a healthy dose of realism to help us prioritise what we actually want from the rest of our lives.


Source: YouGov & The National Association of Pension Funds.

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