Retirement planning top tips

It’s never too early or too late to start planning 

The earlier you can start to plan for your retirement, the better. If you contribute from an early age, you have longer for your pension fund to grow. However, if you start to pay into a pension later in life, you can still contribute up to either 100% of your earnings or a gross contribution of £3,600 (whichever is greater) and receive tax relief. 

The state pension is just a safety net

Even if you qualify for a full state pension, on its own it may not be enough to give you a financially comfortable retirement. The age at which it becomes payable is rising too.

Maximise contributions to workplace schemes

Employers are now legally obliged to automatically enrol their employees (subject to age and earnings criteria) into a qualifying pension scheme, where employees and employers make monthly contributions. If you save into a workplace pension, your employer should match some, or all, of your contributions, providing a welcome boost to your pension. However, in order to ensure you’re saving enough, you should consider topping up your contributions or contributing to a personal pension as well. 

Clear your debts before you retire

It makes sense to focus on clearing all your credit card and loan debt before retirement. Many homeowners over 65 are still paying off their mortgage and in retirement, a large monthly mortgage repayment may become more of a burden.

Think about inheritance and Inheritance Tax (IHT) planning

You may want to help other family members by passing some of your wealth on to them during your lifetime, rather than after you’ve gone. If so, you need to make sure you have sufficient money for your own needs and be aware of the IHT implications of gifting. Professional advice is essential. The individual threshold for IHT has remained at £325,000 since 2009, so many more families now face having to pay this tax.

Get help navigating the tax system

When considering how much to take out of your pension, you need to be mindful of the likely effects on your tax position. Taking professional advice will help minimise the tax you pay and ensure your money lasts as long as you do.

Get good advice 

It pays to take professional advice to ensure that you make the right decisions concerning how your pension is invested, whether it’s advisable to take money out of your pension and what level of income you can take, without eating into the capital, and that you’re doing this in the most tax-efficient way possible. 

The value of your pension investments can go down as well as up, so you could get back less than you invested

Income from a pension could go down as well as up.

Taking income or withdrawals in excess of fund growth may result in the fund running out quicker than expected.

Inflation will reduce how much your income is worth over the years.

A pension is a long-term investment.

Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.