Everything you need to know about planning for your retirement
Planning for your pension probably isn’t something you spend much time thinking about, as one in three people aren’t putting anything away towards their golden years.
However, not saving anything could lead you in the difficult position of never being able to retire; which is what 1.4m over-65 year-olds are currently finding.
Saving doesn’t have to be difficult, and with a little bit of careful planning you can put money away without having to diminish your current income by that much. Here’s how:
- Putting in for pensions
One of the best ways to save for your future is to take out a pension. Everyone is entitled to a state pension; the only thing that can change from person to person is the amount that they receive once they reach State Pension Age (SPA).
At the moment, a full basic state pension amount is £107.45 per week, which you will automatically receive if you have a record of 30 years’ worth of National Insurance Contributions (NICs) from full-time work.
You may also be able to take out a works pension, if your company offers one. If this is the case you should definitely do so, as many people find that a basic state pension isn’t enough to support them. This is because life expectancy in this country is increasing, going up by 10 years in the last 50 years.
The government is currently rolling out auto-enrolment throughout the UK, whereby companies must provide a pension plan and have to add each of their employees to it. Only those that are over 22 years-old, earn more than £8,105 P/A, and work in the UK will be affected by this new law though.
Taking out a private pension may be another viable option, especially if you have found that your state and works pension still may not give you enough.
- Starting your savings
Alongside your pension(s), you should also continuously save money on your own terms. This may mean opening up an ISA or another kind of savings account, into which you can regularly deposit money. Make sure you choose the right ISA or savings account for you, by thoroughly researching your options.
- Working for longer
Once you reach SPA, if you find that you haven’t got enough money to last you through your retirement, you may want to work for longer. Working past your State Pension Age can help to boost your pension. You won’t have to pay any NICs and you’ll pay less income tax, which can accrue more money in your pension pot during the years you defer your pension.
Although, who really wants to work longer than they have to?
If you choose to defer, you’ll get an extra 1% for every five weeks that you continue to work. Should you defer for a full year, you’ll have increased your pension by 10.4%. After one year, you’ll be given the choice to take a lump sum payment from your pension.
- Planning your retirement
Once you are nearing retirement age, whether you’ve deferred or not, you’ll need to start thinking about what you want to do. If you have any health complaints, it may be that you need to move into a retirement home, in which case you’ll be able to use your savings to pay for the care home fees. You may be able to apply for funding in order to cover the cost of this though through the NHS Continuing Care, so it’s worth looking into the legalities of this.
Knowing how to save for your retirement is the first step to actually doing so. Do your research, figure out what’s best for you, and start getting things sorted as soon as possible to ensure you’ve got what you need for your old age.
This article was written by Cheselden, the leading Continuing Care review specialists in the UK.
Images courtesy of Shutterstock.