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Just How Long Will Your Pension Pot Last? 1024 591 LowerMyCharges

Just How Long Will Your Pension Pot Last?

We all know that the earlier you start saving for retirement the better, but how do you work out how much money you need to save to retire and enjoy your retirement plans and dreams?

At LowerMyCharges we can help you to plan effectively for your retirement and work out whether you’re on course to save enough to afford your desired lifestyle.

How much do you spend?

How much do you spend today and how much you expect to spend in retirement? This figure will dictate how much you need to save before you can live your desired lifestyle far away from work. You need to be honest with yourself and have a clear idea of your current spending.  Spending habits formed now are likely to be the same in retirement unless you have plans to change them.

Outgoings 

Depending on individual circumstances, it’s possible that your mortgage will be paid off by the time you retire. Once you reach the state pension age, you may also get certain benefits, such as free bus pass, council tax discount, free prescriptions and you won’t need to pay for your TV license.

Check out your pots

Conversely, you may find some outgoings higher or end up having additional expenses, too. This could be higher energy bills as you will be spending more time at home, and care cost – you need to ensure you have a plan for every eventuality!

If you need help working out your budget, you can speak to one of our advisers or why not use the Money Advice Service Budget Planner.

Depending on what stage of your work life you are at, you could possibly have several pension pots.

Depending on how many employers you’ve had, there could be a pension pot for each company you have worked for. If this is the case, then you need to take into account both your personal pension and the state pension paid by the government.

You could have additional sources of income too, this could be part-time work, rental income, interest from savings, dividends from investments, money from selling your property or benefits such as housing benefit or carers allowance.

You’ll need an experienced, independent financial advisor to help you plan your finances and choose what to do with your pension pots.

Savings

The reality is that most people are not saving enough today for their future.  In fact, the average amount of saving is just 4.4% of your salary, (the United Kingdom Household Saving Ratio).  At this rate, it is estimated that you would need to be saving for nearly 67 years to match your current income in retirement.

Actions

No matter how old you are today, you can always write — or rewrite — your own journey to your retirement story. There are ways to boost your pension, even if you are already approaching the state pension age. You have two main options: put more into your pot or defer taking your pension by a couple of years to help the pot grow.

Reaching retirement is inevitable, and so it’s important you take control and plan ahead – after all, people who receive financial advice are on average £40k better off than those who don’t! *

LowerMyCharges

Here at LowerMyCharges, we are experienced financial services professionals. The research from the International Longevity Centre (ILC UK) finds that people who receive financial advice are on average £40K better off than those who don’t. Because we believe that financial advice should be accessible to everybody, we have made it affordable and convenient. Get in touch via our website or call us on 0800 1404542.

*source: ILC

Are People Using The New Pension Freedoms Wisely? 1024 591 LowerMyCharges

Are People Using The New Pension Freedoms Wisely?

It has been five years since the then Chancellor of the Exchequer George Osborne announced the Pension Freedoms in his March 2014 budget.

This was hailed the biggest change to pensions in a generation. Under new rules, anyone aged 55 and over is now allowed to take their entire pension pot as a lump sum, paying no tax on the first 25 per cent with the rest being taxed at their personal income tax rate.

According to statistics from HM Revenue, since the announcement came into power in 2015, over £28 billion GBP was flexibly withdrawn from pensions.

Scheme members can take their pension benefits in several ways:

  • one or more payments a year for some years
  • several payments a year over a shorter timeframe
  • the full value of the fund in one large payment

Here at LowerMyCharges, we encourage individuals to use new pension freedoms but cannot stress enough that this should be done with careful consideration and wisely. Pensions freedom places great responsibility on individuals, the majority of whom won’t be familiar with the retirement income landscape. There is much at stake!

When faced with a range of choices, there is a risk that one bad decision can negatively impact your life-time savings and fortune. To protect it, you should always seek independent professional advice.

It’s really important to do thorough research, as all your pension assets hinge on the quality of the advice that you receive. But most importantly of all be wary of scammers!

Peter Deane, the co-founder at LowerMyCharges, said: “Remember that the purpose of a pension is to provide income in retirement and this should always remain the primary aim.” He added: “Don’t sacrifice long term retirement investment planning for short-sighted benefits.”

Pensions freedoms should be used to achieve more flexibility around the choice of how and when to take benefits but not at the expense of securing a regular income in retirement or semi-retirement.

Some responsibility should be also placed on employers. Financial education and accessible financial advice are crucial on all levels.

If you are faced with financial decisions and not sure which path to take, please contact one of our qualified and experienced financial advisors. Get in touch.

More information:

House of Commons Library: Pension flexibilities: the ‘freedom and choice’ reforms

HM Revenue and Custom: Flexible Payments from Pensions

Is It Worth Topping Up My State Pension? 1024 591 LowerMyCharges

Is It Worth Topping Up My State Pension?

If you’re looking to get the full value from your income in retirement, a good place to start is with your State Pension.

The amount of State Pension you get is based on your record of National Insurance Contributions (NICs). If you haven’t made enough contributions then you won’t get a full State Pension. But you may be able to pay voluntary contributions to boost the amount you get, even if you’ve already retired.

Provided you are eligible to top up, the cost of doing this is effectively subsidised by the Government which means it can prove good value for money.

Here is how it works.

Every gap year in your National Insurance contributions is worth 1/35th of your entire state pension entitlement.

From the tax year 2019/2020, those with full state pension entitlement receive around £168.60 per week. This means that each additional year you plug a gap will be worth around £4.80 per week for life (168.60/35= 4.80).

This is equivalent to £250 per year (52x £4.80). So, if you pay one extra year of NICs you’ll earn back what you paid in three years.

If for some reason, you think you won’t be getting the full amount, then it’s worth considering topping up.

The rules about who can top up, how much it costs and what impact it will have on your State Pension are rather complex. For example, in some cases, you can use your spouse or ex-spouse contributions to compliment your own or those who had already built up a pension under the ‘old’ rules worth more than the full flat-rate amount will receive that higher amount when they retire.

Here at LowerMyCharges, we can help you to navigate these various rules and regulations and make a more informed choice about whether or not to toping up will be beneficial in your individual circumstances.  Contact us to find out more: 0800 1404542.

You can also access the Government’s free guidance services by following this link.