Save your retirement life and pension system

Retirement


Do you need retirement relief? New research suggests the answer is probably yes. If your retirement plans feel completely chaotic, you’re never alone.

One in three Britons (35%) are at risk of falling below minimum retirement standards, according to the Scottish Widow Retirement Report released this week. In addition, 29% of them do not have a comfortable retirement. This is based on retirement standards set by the Pensions and Lifetime Savings Association, which set a minimum annual income of £12,800.

If you’re looking for retirement with no car, no annual vacation abroad, and only £54 a week on food, you might feel like you’re losing the savings game. But most defined-contribution (DC) pensioners also face a high-stakes decision about how to turn their pensions into income. And more than four in 10 people in their 50s and early 60s with DC pension savings don’t know how they plan to access their pot, according to a Fiscal Institute study.

As we approach 10 or 15 years of retirement age, these decisions become more urgent, but difficult for many to ponder, especially if you rely on a DC plan with no guaranteed income. It may seem like too much. it generates.

Even if you’re on a minimal income track, you might think that a car and a yearly vacation abroad are all you need. Those with a retirement income of £37,300 and seeking a ‘comfortable lifestyle’ will need to relax the £1,073,100 lifetime pension limit that was abolished last year. If you don’t want to rely on a lump sum from the National Pension, you’ll need more.

Many are paralyzed when it comes to fighting such a monstrous figure. An independent survey in May by investment broker Hargreaves Lansdowne found that well over half (56%) don’t know the value of their pension. And IFS speculates that the most worrying reason people aren’t planning to access the DC pot may be the complete lack of involvement in the pension scheme.

If you’re over 50, have a DC pension, and haven’t considered generating income yet, contact Pension Wise, a free government service designed to help you explore your options. Please start with A key decision will be trading off flexibility (by withdrawing large amounts of cash or using a “flexible access drawdown”) for the safety and certainty that annuities provide. Annuities now look more attractive than they have in many years.

On the other hand, for those who have 10 to 15 years of savings left and are looking to change their retirement standard, crypto investments and buzzy stock chips won’t help. It’s all about taking small steps that add up to breakthroughs.

Helen Morrissey, head of retirement analytics at Hargreaves Lansdowne, said: Choose to retire later or work part-time. “

People in their 50s often reach peak income. If so, they can focus on increasing pension contributions within the new £60,000 annual limit.

Embrace your retirement lifestyle now. He might try limiting himself to one of his PLSA income for a few months to get a taste of life in retirement. This could also help free up funds to grow your pension pot.

But calculate the total amount you need to earn a comfortable income. Try our free online planning tool at Guiide.co.uk. A sense of urgency is conveyed when faced with cold, stark numbers.

The quickest way to save retirees is to get as close to the so-called “fire” philosophy as possible. Supporters of the financial independence early retirement movement recommend saving at least half of your income to escape the rat race. At the ultra-extreme savings rate of 75%, they estimate it will take him less than a decade to achieve this.

Now, with rising costs of living and rising mortgage payments, this will require some tough trade-offs. But before you rush to cancel Netflix, check out your biggest expenses. It can be something completely different. Using our new Money Saving Expert ChatGPT app, an AI tool, we found that key discretionary spending categories included dining out, gym memberships, clothing, and travel. Cook for friends at home, start running, buy “vintage” at charity shops, trade international travel for domestic travel, even if prices in these areas are also rising. We all know it’s cheaper to do.

You may choose to live well now rather than live a poor life in the future. But before you sacrifice the standard of living you’ll enjoy in your old age, take some time to consider what your future life will look like. There is a great free app for this called AgingBooth. This may change your decision. Momentum Wealth financial planner Matt Routledge said:[The key is] Consider the balance between your current take-home pay, how much you can contribute now, and what kind of retirement benefits you want. “

There are many ways to spend your retirement time without spending a fortune. Reading (using your local library), writing, walking, meditation, volunteering, doing yoga or exercising at home (using free online videos), and using language to learn a new language. Free app.

But there are other less daring ways to increase your pension. One is to consolidate different pots to reduce fees. Platforms Interactive Investor and Nutmeg are now offering cashback incentives of up to £3,000 on pensions received.

Another is to make sure you’re taking enough risks to grow your money as you age, which may not be the case if you choose the “default” pension investment option. Routridge says not upping the scale of risk could mean losing thousands of pounds a year in retirement.

After all, a retirement relief plan requires alternative positions. This could be aimed at ‘barista fire’, a version with a little income in later life. According to the MSE ChatGPT app, the main “side jobs” for those over 60 include consulting, tutoring and teaching, freelance writing and editing, pet care and dog walking, arts and crafts, and online resale. .

For many people, fallbacks can be an asset. So think ahead about downsizing to save money or renting a room in retirement. You may find even more creative solutions. Can you accept students? Joining a Retirement Community? While my adult children have mortgages, I’ve been dreaming of using the rent of an empty room to travel the world.

Whatever options you have, thinking about it and talking about it with friends and family is far better than sleepwalking towards retirement and being horribly shocked when you retire.

Moira O’Neill is a freelance money and investment writer. twitter: @Moira ONeillInstagram @MoiraOnMoneyEmail: moira.o’neill@ft.com





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