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5 simple steps to avoid “sleepwalking” into retirement

Category: News & Retirement

Recent figures published in the Telegraph suggest that as many as 90% of UK workers could be “sleepwalking” into retirement.

A failure of outdated pension models to consider changing lifestyle trends, insufficient minimum contribution levels for workplace pensions, and the coronavirus pandemic have all been blamed. The result is that as many as 10 million UK workers could reach retirement with insufficient pension funds.

The rise of “late financial bloomers” – those who started a family and bought their own home later in life – is also said to be a factor.

Whatever your pension funds now, and however far off your retirement, Hartsfield Planning can help. Here are five simple steps you can take to help ensure you retire with the funds you need.

1. Understand what your dream retirement looks like

Before you can decide if you are putting sufficient funds aside to live your dream retirement, it’s important you have a clear idea of what that dream looks like.

Royal London recently surveyed over-55s to find out what they plan to do post-pandemic. The top three responses involved world travel, from seeing the Northern Lights and journeying on the Orient Express to visiting one of the Seven Wonders of the World.

You might plan to spend more time in the garden or relaxing with your grandchildren. A family day trip or a new hedge trimmer will likely cost less than a holiday to the Great Pyramids, and you’ll need to bear this in mind.

You’ll also need to think about when you plan to retire. The earlier your retirement date the longer your potential retirement and the more money you’ll need. Plans you make at this stage needn’t be set in stone, but they can give you a goal to work towards.

2. Start contributing early

Starting to contribute to a pension early will allow you to make more contributions and give your investment more time to grow. It also means that you can start benefiting from the effects of compound growth sooner.

Auto-enrolment is a fantastic way to begin building a pension fund so be sure to make at least the minimum contribution if you can. You’ll benefit from tax relief too.

As a basic rate taxpayer, you receive a £20 top-up from the government for every £100 you contribute. Higher- and additional-rate taxpayers can claim back additional relief – above the 20% basic amount – through their annual tax return.

The minimum contribution is currently 8%, with 5% paid by you and the remainder provided by your employer. The Centre for Aging Better last month released a report on retirement savings and suggested the minimum contribution amount needs to be raised, possibly to around 15%.

Hartsfield Planning can help you decide on the right amount for you, so get in touch if you are worried about a pension shortfall.

3. If you can’t start early, remember that it is never too late

Your financial position will vary throughout your life, from the paying off of student loans to getting a mortgage and your children leaving home, your incomings and outgoings will vary. The amount you pay into your pension can too.

You might be approaching retirement with your mortgage cleared and the highest salary of your career. Equally, if you are a “late financial bloomer” you could be approaching pension age with a large mortgage or rent to pay.

You might be at the optimum time to increase your contributions or find yourself unable to contribute as much as you’d like. Remember that the contribution itself is the important thing and it is never too late.

4. Make sure you factor in your State Pension

It can be all too easy to forget the value of your State Pension when planning for retirement. At £179.60 a week for the 2021/22 tax year, it might not form the largest proportion of your retirement income, but £9,339 a year could be a great foundation on which to build.

It’s also important to remember that the triple lock currently in place protects your State Pension against the impact of inflation.

You’ll only receive the full State Pension amount if you have 35 qualifying years of National Insurance contributions. With less than 10 qualifying years you won’t receive a State Pension at all.

You can use the government website to check your National Insurance record for gaps. If gaps do exist, it might be possible to make voluntary contributions to plug them.

5. Speak to the experts

At Hartsfield Planning we have the experience and expertise to help you attain your dream retirement.

By getting to know you, we can put a retirement plan in place that is realistic and attainable, whatever your circumstances.

Get in touch

If you are worried about a potential pension shortfall or would like to discuss any aspect of your long-term financial plans, please get in touch and find out how our team of expert planners can help you.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

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