We’ve now entered a new age of retirement planning with the introduction of pension freedoms. Your retirement is likely to be the most important time in your life you’ll even plan for – you could be retired for 20 years or more.
Thinking about pensions sooner rather than later can mean the difference between a comfortable retirement and struggling to make ends meet. Unfortunately, some people put off retirement planning when they are young because they think they’ve got time on their side. However, the earlier you start saving for your future, the bigger the pension pot you’ll end up with when you’re older.
7 pension tips for nurturing your nest egg in 2018
Research shows we’re more likely to achieve our financial goals if we write them down and start with a clear plan of action. Work out what financial goals you want to achieve, then break them down into realistic steps that will lead you there. We’ve provided seven pension tips for you to consider to keep your retirement plans on track at the start of the New Year.
1. Consider consolidating your pension pots – while it might be hard to keep track of pensions with job changes, the Government offers a free Pension Tracing Service. Bringing your pension pots together may help you manage them, but take care to understand the benefits associated with the existing contract, along with any potential risks/disadvantages of transferring the funds – and always seek professional financial advice to see if it’s suitable for you.
2. Make use of your tax reliefs on pension contributions – when you are able to do this, particularly at higher rates, this can be beneficial. The Government may well revisit pension tax relief post-Brexit to help ‘balance the books’.
3. Maximise your workplace pension contributions – if your employer pays a contribution that is linked to your contribution, see if it’s affordable for you to pay the maximum in order to receive your employer’s maximum.
4. Invest for the long term – there have been various moments of uncertainty in the markets – think back to the ‘crash’ of 1987 which now looks like a ‘blip’. Keep an open mind, and don’t panic or have knee-jerk reactions. You must remember that when investing in the stock markets, it is inevitable that there will be times of volatility and you can weather the storm.
5. Review your State Pension entitlement – given so many changes, it is worth keeping your finger on the pulse and looking at what you may need to do to top up to the maximum entitlement available.
6. Review your expected expenditure in retirement – it’s key that you clearly establish ‘essential’ and ‘discretionary’ spending, so in poor market conditions you can always look to reduce income from pension funds if necessary to cut back on discretionary expenditure that can wait for another day.
7. Ensure your income in retirement is set up as tax-efficiently as possible – making full use of all available tax allowances/exemptions is crucial. Don’t forget to look at how different tax wrappers can work for you.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.
