Retirement planning doesn't have to be complicated but can often be neglected because we like to prioritise our current spending. Failing to pay into a pension or disregarding retirement saving might make your bank account a little fuller in the short-term, but when you reach an age where generating an income isn't as easy as it once was, you'll find yourself high and dry if you don't plan ahead. According to a study by Which? the average household needs £18,000 a year to cover household essentials and this doesn't include costs of any bucket-list items you might have been saving for your wonder years - keep reading to find out if you're doing enough to save for your retirement.
You might want to start by finding out how much you already have saved. While household essentials came in under £20,000, the figure rises to an average of £26,000 when you take into consideration 'luxury' additions like leisure activities (what retirements are made for!). If you check up on your funds and they're underperforming, having a reshuffle and seeing what other plans are available will help maximise your assets.
According to the Bureau of Labor Statistics, the average worker will hold 10 different jobs before the age of 40 and this can make keeping up with your work pension schemes difficult. You may have funds saved you've forgotten about entirely and you wouldn't be alone - at the last count, there was £3 billion of unclaimed savings. Workplace pensions can be traced using 'Pension Tracing Service' and for Personal plans give 'The Pensions Advisory Service' a call. This will make sure you are getting all the funds you're entitled to. You may then wish to place all your funds under the same scheme to make keeping track of your savings easier. While this might not be possible with some savings due to penalties or complex clauses, modern schemes can often be cheaper and more tax-savvy, so explore all your options.
Pensions are tax-friendly so if you can afford to pay more each month into a retirement fund it can really pay off. You will tend to find increasing the amount you pay into a Workplace pension scheme will prompt your employer to match your contributions. With Personal pension plans, savings are from untaxed earnings resulting in a 25% increase on savings where you would have normally paid 20% income tax on any earnings. If you're a higher rate taxpayer, filing your annual tax return will enable you to claim back additional tax you paid on your contributions.
If you haven't yet started paying into a pension plan, whether it be through work or a personal alternative, it's never too late to start. When taking into consideration tax breaks, even if you haven't accumulated much you'll have dropped into a lower tax band at retirement age and therefore pay less in taxes when you choose to cash out. By law, 25% of the money you take out upon retiring is tax free regardless.