How often do you pause to think about your pension plan? Are you saving enough for a comfortable retirement, or will your standard of living fall? Are you missing out on valuable tax relief on pension contributions? These are mistakes you should avoid at all costs.
Thinking you’ll get by on your state pension
Although the basic state pension has increased to £155.65, not everyone will get this amount as it will depend on their contribution record. Getting a pension forecast from gov.uk will show you what you are likely to receive. The state retirement age is set to increase too, so if you were born after 6 April 1978 you won’t be entitled to receive your state pension until you’re 68 years old. You don’t have to be a maths genius to see that the basic state pension won’t amount to much more than £8,000 a year, falling well short of the UK average wage of £27,600.
Not joining a workplace scheme
By 2018, all UK companies will be required by law to offer a pension scheme. Joining is simple and means you will have an additional source of income in retirement. Employers pay into the scheme on behalf of their staff, provided they don’t opt out, and employees receive tax relief on their contributions.
Believing you can just keep working
Many people put off making proper plans on the basis that they’ll never give up work. This is a dangerous assumption. Physically, we all age at different rates and you may not feel fit enough to continue into old age.
Banking on a windfall
Whilst some people will receive money from their families, figures from the Prudential1 indicate that just 28% of people retiring this year believe they will have money spare to leave to loved ones on their death. With life expectancy steadily increasing and the cost of care continuing to rise year on year, hoping for an inheritance from the older generation shouldn’t be a substitute for proper pension planning.
Selling a business or property
Relying on your home or business to provide money when you want to retire poses a number of problems. Finding a buyer might prove difficult as markets can go up and down. If you plan to sell your home to raise funds, you will have to find a suitable property to live in, and there will be costs associated with the sale and purchase.
Pension planning can seem complicated, but taking professional advice and regularly reviewing the progress of your plan with your Polestar adviser can mean the difference between enduring and enjoying your retirement years.
1 Prudential, 2016