Back

Take control of your retirement plans

October 2020

by Alex Binnington

People in later life are saving little or nothing for their golden years

An increasing number of people in later life are saving little or nothing for their golden years. Instead, they expecting to fall back on the State Pension. Some people are ‘under-estimating their life expectancy’ which means that the money they do save for retirement will have to stretch further.

As millions of people move within a decade of their State Pension many have still not thought about how long their retirement might last. It’s worrying that so many over-50s are potentially sleepwalking into their old age, are expecting to be better off than they will be, according to research[1].

People need to put more money aside

It’s not too late for the over-50s to take control of their retirement plans by adjusting the amount saved, or how long they are prepared to work for. The reality is that people need to put more money aside to ensure they’re on track to achieving the financial future they want.

Although it’s good news people are living longer, more than a third (35%) of women and a fifth (20%) of men over the age of 50 do not have a private pension. Worryingly 33% of over-50s don’t think they have enough money to provide them with a sufficient income for their retirement – with women more worried about not having enough money in later life than men.

Adapting financially to a new lifestyle

One of the most common difficulties in retirement is adapting to a lifestyle that meets your new level of income. It can be difficult to adjust to a drop in income that comes as a result of retiring from a full-time role and then having to live solely off our own pension. Or even more precarious, only the State Pension.

How much retirement money you’re going to need will depend on the type of lifestyle you want. One of the great things about saving into a pension is the tax relief you receive. This means that if you’re a basic rate taxpayer, for every £100 saved into your pension the cost to you is just £80. This could effectively be even less if you’re a higher or additional rate taxpayer.

Did you know?
The maximum State Pension is less than the amount most people say they hope to retire on – for the financial year 2020/21 it’s £175.20 a week, or £9,110.40 a year.

Relying on a partner’s private pension

The report also highlighted that 36% of women over 50 don’t think they have enough money to fund their retirement. Just 13% suggested they were confident they would have enough to fund a comfortable retirement.

Overall, the vast majority of over-50s thought pensions – state and private – will be the biggest contributor to funding their retirement, with 27% saying they will rely on their partner’s private pension, rising to 30% for women.

Retirement is not an age anymore

Many over-50s will look to other sources according to the report – with 12% expecting to use ‘income from work’ in later life, and 11% saying they expect to receive an inheritance. Property was also seen as an important source of income for homeowners; 14% are planning to downsize and another 6% planning to use equity release.

It can be even more difficult for those reaching retirement who have either a reduced pension or no pension at all. But it’s important to remember that retirement is not an age. Not anymore anyway. Gone are the days of being told to stop working one day and picking up your state or company pension the next. Today you have new pension freedoms to decide when and how you retire.

Source data:[1] https://www.sunlife.co.uk/siteassets/images/finances-after-50/finances-after-50.pdf/
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.

 


The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
Back