Pension awareness – 5 questions you need to consider

Recent reports suggest that the State Pension age could reach around 68 by 2050, as life expectancy rises and retirement patterns continue to evolve. With today’s economic landscape, including rising living costs and market uncertainty, anyone between the ages of 45 and 70 is being encouraged to review their pension pots and retirement strategy. Projections indicate that a significant proportion of people nearing retirement could see funds running out before their mid-80s.

We’ve put together 5 important questions you should consider to help you stay in control of your retirement and maximise your savings.

How much will I need to save?

As a rule of thumb, most advisers recommend saving up 10 times your average working-life salary to be secure during retirement.

The amount to save will differ for each person. Start with your personal working situation: are you employed, or a business owner? Considerations for business owners can be different.

For business owners, tax planning should form part of your overall strategy and helps you see the full value built up in the business over time. It also affects any pensions you may wish to offer your employees.

Pension contributions remain one of the few tax-efficient ways for limited companies to use business profits while saving for retirement.

Whether an employee or business owner, the amount you need to save comes down to planning for your lifestyle in retirement. Look at categories such as mortgage (or whether it’s been paid off), utilities, vacations, and potential major expenditures like home renovations.

If you don’t have access to a financial advisor, tools such as the Money Helper Pension Calculator or the Retirement Living Standards can provide a clear guide to what you will need as you enter retirement.

How much State Pension am I entitled to?

This depends on your personal and working circumstances. To qualify for any State Pension, you need at least 10 qualifying years of National Insurance contributions. To receive the full State Pension, 35 qualifying years are required.

Getting a State Pension forecast is a simple way to check your eligibility and understand what you are on track to receive.

How much am I paying into my pension pot?

As a PAYE member of staff, you may know you are paying into a pension but not remember exactly how much versus what your employer contributes. This is very common.

Most workplace pensions are defined contribution schemes, where your contributions and your employer’s contributions, along with investment performance, determine your pot. Typically, you’ll contribute 5% of your salary, and your employer contributes 3%, though some employers offer higher matching.

If you have a private pension, review your contributions regularly. Many advisers use a guideline of half your age as a percentage of your pre-tax income, though your exact rate depends on your goals and circumstances.

Understanding what you are currently paying in ensures you can top up if needed.

I’m pretty sure I’ve forgotten about a pension I have – how can I find it?

Don’t worry, this happens to many people. Reports from industry sources indicate that tens of billions of pounds in pensions remain unclaimed.

Start by checking old statements. Having just the provider’s name is enough to recover a forgotten pension. Contacting current or former employers is another route.

You can also use free online tools like the Pension Tracking Service or the Government’s ‘Find pension contact details’ to locate lost pensions. Consolidating pensions can improve oversight and potentially reduce management costs.

Am I investing in the right pension funds?

Many people enrol into automatic workplace pensions and rarely review them. It’s important to know your investment options.

For some, the default option is suitable. Others may benefit from private pensions alongside or instead of a workplace fund. Business owners in particular should seek advice from a financial advisor to ensure investments align with retirement and business strategy.

Always review your options and stay informed about where your money is invested.

Get in touch

With so many things to consider, getting your retirement strategy right is crucial, particularly during these uncertain times. Get in touch to find out how our team of experts can help you to safeguard your future post-retirement.