According to a Pensions and Lifetime Savings Association’s (PLSA) July 2018 report, around 77% of savers simply don’t know how much they’ll need in retirement. The PLSA estimates that a single person will need £33,600 a year to retire comfortably, meaning you’d need to have just under £1m saved if you wanted to retire at 55.

In the first of a series of articles designed to help you get set up for later life, we look at some steps you could take to help make sure you can pursue those lifelong dreams when you retire.

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.

Starting early when it comes to pension planning means you have more time to look at your options and fill up that retirement pot. It’s also worth considering any other income streams you may have which could potentially serve you well later in life, such as tax-free ISAs, existing investments, and rental property.

Speak to your Premier Manager to find out about the options available to you and how we could help.

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.