Retirement should be your chance to do all the things you've been looking forward to throughout your working life. But to make the most of your time, you need to have some financial plans in place. For most people, this means putting money aside in a pension.
Why save into a pension?
If you're a member of a workplace pension, in most cases, when you pay in, your employer also makes a contribution. This is then topped up with tax relief from the government. Your pension pot can be invested in a range of funds which invest in assets that can go up and down in value, like shares, bonds and property, with the goal of growing the value of your pension savings over the long term.
Over time, saving regularly can mount up. If you started paying £150 a month into a pension when you were 20 and your fund grew by 5% a year (and didn't go down in value), then by the time you were 65, your pension pot could be worth around £300,000. These figures are very much an example and not a guarantee, because the value of your pension can go down as well as up.
The State Pension age is currently rising and varies between 65 and 68, depending on your date of birth. The State Pension age is regularly reviewed to take into account life expectancy, so could increase again over time.
What to think about as you approach retirement
As you approach your chosen retirement age, you should think about what you want to achieve in retirement. How might you be able to afford the kind of lifestyle you would like?
If you've not done so already, review your current financial situation. Look at how much you've saved, how much you can contribute each month and what kind of income this could give you in retirement.
If you have a defined contribution pension, at Skipton we can review where and how it is invested, regardless of who it is held with. By arranging an appointment with a Skipton financial adviser, you can receive personalised recommendations towards achieving your retirement goals, with no pressure to act.
Your retirement income options
When you retire, there are different solutions to your income needs. You could choose to turn your pension fund into a retirement income by buying a lifetime annuity, which could guarantee to pay you an income for life. Should we advise you to purchase an annuity, you should be aware that annuity rates depend on your individual circumstances such as age, health and lifestyle factors as well as the rates available at the time of purchase.
You could consider alternative options, like keeping your pension invested and making withdrawals, or you could instead take an income from any other investments you have. But, both could see the value of your pensions and investments, and the income you take from them, going down in value. Also, if you take too much income too quickly the value of your funds could become depleted or run out altogether. There's a lot to consider.
You have the option to withdraw all of your defined contribution pension in one go. Although the first 25% is still tax-free, income tax is payable on the remaining 75%. Seeking advice is important though, because if you withdraw too much too soon you'll pay a higher rate of tax, as it's treated as income, or you could run out of money in retirement.
Making sure you have made the right decisions that are appropriate for your own circumstances and retirement aspirations is important. At Skipton our financial advisers will help you reach an informed decision as to whether investing will suit your retirement plans.