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How much should you put aside for a pension?

14th August 2018

Unless you really, really love your job, you won’t be planning on working much beyond your sixties. While thinking about pensions may seem unnecessary to any spring chickens reading this, it’s never too early to begin putting a small amount of money aside for a happy retirement. Provided you earn £6,032 or more a year, you have the right to opt into a pension scheme from the moment you land your first job. Having the appropriate pension scheme in place enables you to plan – maybe even get excited – for your retirement. It also provides the peace of mind that your pension income will meet your needs. Remember, you won’t be receiving any more pay packets.

The UK state pension (provided by the government) only amounts to a few thousand pounds per year. So providing for your own financial stability in retirement is a necessity, rather than a luxury. The problem is that your state pension won’t be enough to keep you going. What’s more, you may be in a position where you need additional care later in life which can be very expensive. It’s certainly best to begin squirrelling funds away sooner rather than later! In this post, we will run through some commonly asked questions about how much money you’ll need for your retirement.

 

How much money will I need?

Approximately one third of UK adults aren’t saving at all for their retirement. Of those that are, few are saving enough to give them the standard of living they hope for when they retire. People usually require 50-80% of their pre-retirement income. There are helpful online tools available to estimate the amount you’ll need. However, people often do not possess the knowledge and information needed in order to use these tools to their full extent. They remain useful as a starting point and guide and help to get you thinking about the type of scheme you need to begin implementing.

 

When can I access the funds in my pension pot?

You can normally access the money in your pension pot from the age of 55 but this depends on the scheme you signed onto. Be aware of pension scams. Fraudsters approach people approaching retirement age with ‘advice’ about withdrawing and investing your pension. They may attempt to attract you by making a false claim that you can access your pension sooner than you can.

 

How will my living costs change once I’m retired?

Whilst it’s really important to think about and arrange for a substantial pension pot to add to your state pension, don’t be completely terrified by the figure you’re likely to receive from the state. Your spending and financial responsibilities will change when you retire. You won’t have any work expenses for example and you may have paid off your mortgage. Despite this, increased time spent on hobbies and at home could mean more expense towards those and an increase in your household bills. This is why – however tempting it may be – cashing in your pension to clear debts or splash out on a holiday is not recommended. Doing so would reduce the funds you’ll have to live on during your retirement and you could also end up with a large tax bill.

Pension advisory service

Whether you are seeking advice regarding your own pension or you’re a business client looking to set up a workplace pension scheme, our pension advisory service can provide the information and expertise that you need.

 

Everyone’s situation is different, which is why IMC offers a bespoke service, tailoring our advice to each individual client. There’s an array of pension options out there, all with differing tax implications. Speak to an advisor for guidance on how to make your money work towards a bright future.

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