Start saving for retirement on Pension Awareness Day
- Credit: Getty Images/iStockphoto
The sooner you start saving for your retirement the better but it’s never too late to start, that’s the message from Churchgates in Bury St Edmunds on Pension Awareness Day (September 15).
“The earlier you start, the bigger the pension pot you can build. By paying in little and often, you don’t notice it coming out of your salary,” said Alwyn Evans, chartered and certified financial planner at Churchgates.
The tax benefit of pensions shouldn’t be overlooked. “When you make a contribution, so do the government [through tax relief] and your employer. Some employers match contributions too,” explained Alwyn.
Tax relief on pensions means that for every £100 contributed the government make a £20 contribution and you the remaining £80. (That is 20%, with higher rate tax-payers receiving 40% and additional rate payers receiving 45% - this is slightly different in Scotland. Such are the tax benefits even non-earners can have the government put in up to £720 per annum).
“It’s never too late to benefit from government tax relief by putting money into a pension pot and even taking the money out a few years later,” Alwyn continued.
In addition to tax benefits, you can give your savings a boost “…by taking some risk with your investment, you could aim to get a 5% to 8% return per annum, rather than around 0.5% interest in a savings account.” Alwyn added. “If you are more than 10 years away from retirement, you shouldn’t be scared of some risk, it should leave you with time to recover if there’s any market crashes.”
But if you’re approaching retirement age, you need to take less risk with your money.
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“You need to make sure you’re taking the appropriate balance between risk and return,” Alwyn explained.
“It’s important to check what your current workplace scheme is and what the options are.”
Churchgates offers a free no-obligation consultation, where they can establish what your objectives are, for example, when you want to retire and how much income you would like or need, and what provisions you already have in place. At the consultation, you can find out more about the services Churchgate offers and what the costs will be.
“If the client is happy to proceed with receiving our advice, we then do some in-depth fact finding, when we gather a bit more information on their pensions, other assets, savings and investments and anything that could be used as a source of retirement income such as rental income,” he added.
The key thing with a pension is to work out when you would like to retire and what your retirement needs are. A lot of people don’t really know what income they will need.
As a rough guide, a Which? report in 2019 said a couple spends £18,000 a year in retirement on essentials, £27,000 when adding some leisure activities, and £42,000 including added luxuries.
“Those figures are quite broad and everyone’s circumstances are different, but it may give you a starting point on how much you need,” explained Alwyn.
“A couple receiving full state pension get just over £18,500 per annum in total. That would only cover very basic needs.”
“Anyone who wants to retire before state pension age would need to cover that £18,500 a year from their own pocket before the state pension kicks in,” he concluded.
Speak to Churchgates for advice on retirement planning, whatever your age or circumstances.
Churchgates also offers Investment Management, Financial Planning, Accountancy services and Legal services for both individual and businesses.
For more details, call 01284 701271.