This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).
Many people find themselves in the unfortunate position of starting their retirement savings later in life. Perhaps you had a long-term relationship which ended, and your former partner took the pension savings with them. Whatever the case, there is still time for those in their 50s to build up a retirement fund which supports your lifestyle. Below, our team at WMM outlines ideas for you to consider with your financial planner.
Your State Pension
In 2021-22, the new full State Pension grants £179.60 per week – that is, £9,339.20 per year. This is accessible when you reach your State Pension age (66 in 2021 and scheduled to rise to 67 between 2026-28), and the income rises each year by at least 2.5% under the “triple lock” system. The income is guaranteed for the rest of your life, so it’s worth getting the best deal.
You need at least 10 “qualifying” years on your National Insurance (NI) record to get any State Pension at all. 35 years are needed to get the full amount. Those in their 50s, therefore, should consider checking their NI record to see how many years have been accumulated. For instance, if you have 20 years under your belt, then you need another 15 years to get the full new State Pension when you retire. If you intend to work full-time between now and your State Pension age, then you may accumulate these naturally over the course of your employment.
However, some people may find that they will not be able to achieve the full 35 years even if they keep working until their late 60s. In which case, you could discuss making “voluntary” NI contributions with your financial adviser – to “top up” incomplete past years.
Retirement spending & current pensions
A key question to answer is “how much do I need to retire?” In particular, what kind of yearly and monthly income will you need to support your lifestyle? Here, you may need to discuss things with a professional to get some firm sums in your head. For instance, your costs may decrease due to paying off your mortgage and kids leaving home. However, the cost of living should be higher in 10-15 years due to rising inflation.
Once you have your annual and monthly target figures, the next logical question is: “Am I on track to achieve these?” Here, it is a good idea to look for any past pensions which you may have accumulated over your lifetime (e.g. workplace pensions built up across different jobs). The UK government’s pension tracing service can be helpful for this, but this process may also require contacting past employers to find the information you need. Many people will have built up 10 or more pension pots across their lifetime by the age of 50. Each one could contain large sums of money, so it’s worth taking the time to research this.
Take stock & plan
By this point, you should have a clear idea of your State Pension, past pensions and required future retirement income. Now, it’s time to identify the “gap” – i.e. how much you have versus how much you need – and then come up with a savings and investment plan to close this gap. This might involve taking a range of steps depending on your financial goals and situation. For instance, it may be a good idea to consolidate your past pensions into a single, easy-to-manage pot where you can also build up future savings. You may also need to examine your investment strategy and adjust your asset allocation (e.g. fund choices) so that you have a better chance of building up more wealth, faster. Finally, you may also need to raise your pension contributions.
Interested in finding out how we can optimise your financial plan and pension strategy? Get in touch today to arrange a free, no-commitment consultation with our team here at WMM.
You can call us on 01869 331469