Retirement planning - a New Year's resolution
Did you make retirement planning one of your New Year resolutions for 2019? Congratulations if you did and good luck in seeing it through to fruition.
But if you did not, remember that – whatever your age – it’s never too early or too late to plan for what is likely to be a lengthy and hopefully happy and healthy new chapter in your life.
So, let’s have a reminder by taking a brief look at what is likely to be involved in your retirement planning …
What pensions you have
One of the first steps is to find out exactly what pensions you have. It might seem obvious advice, but in this day and age where many people have several different employers throughout their working life, you might have overlooked some early pension pots or may need to spend time finding them.
The government’s free Pension Tracing Service can identify and locate the addresses of pension providers you can remember having saved within the past.
The Pensions Dashboard
The Pensions Dashboard is an online project (currently still in the development stages) that shows you at a glance all of the pension schemes in which you have savings – and provides an estimate of what each of them is currently worth.
Several dashboards are planned – run by your employer, your bank or a pensions advisory service, for example – and each one plans to show every type of pension to which you might have contributed, including final salary schemes (defined benefits), investment-based schemes (defined contributions), and your State Pension.
Although the Association of British Insurers (ABI) has been instrumental in developing a Pensions Dashboard prototype, working dashboards are unlikely to go live until later this year. So, until the dashboards are up and running, you will need to contact each of the pension schemes to which you have contributed for a statement of current values.
Once you have done that, you might want to use the online annuity planner offered by the official Pensions Advisory Service for guidance on converting any of your pension funds into income. It also has a separate calculator for estimating how long you might need your total pension to last.
What retirement income do you need?
Retirement planning also needs to estimate the level of income you are likely to need in retirement – a figure that may vary widely from one person to another, depending on your expectations and aspirations.
Your needs are going to be different when you retire, compared with when you were working (you won’t have the expense of a daily commute and are likely to spend less on your wardrobe, for example). But, the income available depends on the total value of your pension pots.
An article in the Independent newspaper on the 16th of May 2018, for instance, cited several insurers suggesting that a pension pot of at least £260,000 is required for anyone retiring now in the hope of remaining free from financial worries.
Planning is crucial
There are so many variables, and the subject of retirement planning remains so critical given how long that chapter of your life is likely to last, that it is worth making sure you are fully prepared financially for your retirement.
Any data referred to in this article is correct as at the time of writing.