“Our research shows that many individuals are unaware of how much they hold in pensions and even more have never estimated their income needs for retirement. So it’s even less likely that couples will have a clear understanding of what kind of retirement they’re on track for when they combine their state and private pension incomes. Unfortunately, there is often a gender pensions gap with women having far less pension savings than men, often because of career breaks or part time working to allow for caring responsibilities. But it’s risky to assume your other half has a better pension or enough for you both to get by on as in reality this might not be the case. This is why it’s so important to review your pension pots together and plan jointly for retirement.
“Many couples have intertwined finances from an early stage – joint bank accounts and joint mortgages often form the basis of many “financial” partnerships. This makes just as much sense when planning to grow old together, where it’s important to consider the adequacy of your combined retirement income. Another benefit of reviewing your retirement plans as a couple is to make sure that when one of you passes away, your loved one is provided for and won’t end up reliant on a less than generous state pension.
“The earlier you review your pension adequacy, the sooner you can begin to take action to get back on track. And while it is usually a good idea for both partners to have some of their own pension, it can sometimes be more financially beneficial to pay any extra into one or other of your pensions, for example if one of you would get an extra boost from their employer or more of a ‘tax relief’ top-up from the Government.
“While societal trends may change over time, it’s important that couples begin planning retirement finances together rather than in isolation.
“Facing up to the harsh reality of the gap between your retirement dreams and reality may seem overwhelming. But we urge people not to give up, it can be really helpful to seek professional advice.”
Pension planning tips
1. Act now, make a plan and start saving.
Unlike a mortgage or a car, you can’t borrow for retirement. You need to make a plan for retirement, and take action so you aren’t caught short. And the sooner you start the longer your savings have to grow.
The more savings you have, the more choice you have at retirement. So work out how much money you might need when you retire. A good place to start is by basing your financial needs in retirement on your current lifestyle and adapting it to suit the “retired” you. There are online tools available to help you do this or for a personalised picture, seek financial advice.
Your older self will thank you for it later when you can afford to travel, eat out, take up hobbies, buy cars and handle any unexpected expenses.
2. Patience could pay – retire later
Think carefully about your planned retirement age. You may have 60 or 65 fixed in your mind, but being flexible may give you more time to build up enough savings so that you can actually enjoy your retirement in comfort and not be forced to scrimp too much.
For some, working beyond ‘traditional’ retirement age could be the answer to making up a shortfall in pension savings. And an increasing number are choosing to do so not simply for financial reasons but to keep active and for social reasons. Working a few years longer while continuing to save in a pension can dramatically improve retirement incomes. There can be a triple boost of continued investment growth on the pension fund, further contributions being added and ultimately fewer years to spread the fund over once no longer working.
3. Get the full picture. Find out what State pension you will get
Check your state pension entitlement and state pension age. This way you’ll know exactly how much you can expect to receive and from when. This will help you work out how much extra you need to save yourself in a pension. Due to the complexities of the system, different people will have built up different entitlements and not everyone is eligible for the full new flat rate state pension.
Get a State pension forecast online https://www.gov.uk/check-state-pension or ring the Future Pensions Centre helpline on 0345 3000 168. You need to pay 35 years of full rate National Insurance Contributions to get the full State Pension. Find out if you have any gaps in your national insurance contributions and how you can fill those gaps. https://www.gov.uk/check-national-insurance-record
4. Keep track of old pension pots
Multiple jobs with different companies means that a lot of people now have more than one pension and it has become easy to lose track of some pension savings. It’s very hard to plan your retirement without a full view of your savings and it’s important everyone has a clear idea of how much their overall pensions are worth and what their state pension entitlement is likely to be.
If you’re not sure whether an old job came with a pension then it’s definitely worth checking. The government offers a pension tracing service which can be found here www.gov.uk/find-pension-contact-details
Once you have tracked down all your pensions you could consider combining them with one pension provider. However, there are pros and cons of consolidation and this is one area where professional financial advice will really add value.
5. Review your investments
It’s important to keep track of how the investments within your pension fund are performing and assess whether you might be better off moving to a different investment fund.
When you join a workplace pension your contributions are put into the “default fund”. This is designed to be broadly appropriate for members generally. You might want to consider an investment approach that’s more tailored to your needs. Investment can be daunting for some people but it’s a topic financial advisers can help with. You can find an adviser through www.unbiased.co.uk
6. Get professional advice
Planning a retirement income and when to start taking it requires careful consideration and a financial adviser can provide tailored advice to meet your personal needs and circumstances.
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