Pensions: It’s never too soon to start planning for retirement

As the cost of living continues to rise and more reports emerge about the gender pension gap – much larger than the gender pay gap, it’s important to consider your longer term financial future if you can and ensure you will have enough saved when you retire.

Savings & Pensions

 

Mounting evidence about the pensions gender gap highlights the importance of working mums starting to save for their retirement as soon as possible.

Last month, a workingwise.co.uk survey revealed that 50% of older women think they will have to keep on working when they reach state pension age. The results of the poll – which gathered feedback from 1,356 workers aged 45+ – paint a bleak picture of the reality that faces women who are being impacted by the pensions and cost of living crises.

Earlier this year a committee of MPs described a £1billion shortfall in state pension payments to tens of thousands of women as a ‘shameful shambles’. The BBC reported that a total of 134,000 pensioners missed out on their full entitlement owing to errors at the Department for Work and Pensions (DWP) dating back to 1985 and Parliament’s Public Accounts Committee said that there was a risk some of those failures could be repeated.

All of this and much more evidence besides, say UK pensions experts Options For Your Tomorrow, is a reminder that it’s never too soon to start making financial plans for your retirement. Even if you’re in your late teens or early 20s, and retirement seems so far away that there’s no need to worry about it now, putting plans in place today gives you a better chance of realising the dreams you have for tomorrow. Starting to build your pension pot now could also mean that you can retire earlier and enjoy a longer retirement with those you love.

Bearing in mind the rapidly rising cost of living, if you have a pension plan already it’s worth reviewing it.

If you haven’t made any plans yet, here are five tips to help you get the ball rolling:

  1. Talk to an Independent Financial Adviser – if you don’t have one, you can find one here. Which? has some information about hourly fees here. More information can be found here.
  2. Choose an IFA who takes the time to understand your unique circumstances and requirements.
  3. After taking advice from your IFA, shop around and consider all the retirement options available to you because different providers offer different products and solutions, and not all will be appropriate for your needs.
  4. Ask your IFA about SIPPs (Self-Invested Personal Pensions) which is an option worth considering for many people.
  5. Most importantly, choose the best solution for you, not just the best ‘off the shelf’ product.

It’s also worth talking to your IFA about how much money you might need in your pension pot to live the kind of retirement lifestyle you dream of – it may be more than you think.

Last year [2021] an in-depth survey by consumer champions Which? showed that the average couple may need a personal pension pot of £155,000, plus their UK state pensions, to live a ‘comfortable’ lifestyle. That’s not for a life of luxury – it just covers what Which? describes as everyday cost of living expenses, as well as regular short-haul holidays, recreation and leisure, plus tobacco and alcohol if they smoke and/or drink. If £155,000 sounds like a lot, it’s worth considering the sobering thought that the survey was carried out in February 2021 when many of the retirees who took part are likely to have reduced their spending due to being at home during lockdowns. And, of course, we all know that inflation and the cost of living have skyrocketed since then – that means the sum required for a ‘comfortable’ lifestyle is likely to be even higher now.

So, if you’ve been thinking about making plans but haven’t got around to it yet, don’t put it off any longer! Bearing in mind the rapidly rising cost of living, if you have a pension plan already it’s worth reviewing it with your financial adviser to make sure you’re still on track to achieving the pension pot you will need to fund the retirement lifestyle you want.

*This article was written by Options for Your Tomorrow.



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