For many UK adults, it will feel like only yesterday that they were just starting out in their chosen careers. Retirement would have felt like centuries away, and so required little-to-no thought whatsoever.
Indeed, over two fifths (42%) of UK adults aged 40 to 67 have no clear retirement strategy in place, as they were putting it off until a later date, according to a recent study conducted by My Pension Expert.
Of course, the sudden realisation that they may have insufficient savings to enjoy a comfortable retirement can be jarring. Luckily, however, it is never too late to develop a retirement savings strategy.
For those concerned about the size of their current pension pot, here are five key steps to developing a sustainable retirement plan, at any age…
Keep calm and increase contributions
First and foremost, savers must not panic. Doing so could lead to making rash, ill-informed decisions, which could be damaging to long term finances.
In fact, the simplest, yet most effective method to grow one’s pension pot is to increase contributions to a workplace pension scheme. With workplace pension schemes, employers are obligated to match their employees’ contributions – and this is on top of tax relief. So, those looking to grow their pot should speak to their employer about increasing the amount they put into their pot each month – the more they contribute, the more they will receive from their employer!
Track down different pots
The modern jobs market has become much more fluid over the past few decades, meaning that it is much easier for employees to change jobs. In doing so, many Britons amass multiple pension pots throughout their working lives. This can make it difficult to keep track of savings, particularly for those who have long-established careers. Indeed, almost a third (31%) of UK adults aged 40 to 54 admit to losing track of their numerous pension pots, according to research from My Pension Expert.
So, those worried about the size of their pension pot should use the Government’s useful tracking tool, to find their pension providers from old workplace pension schemes. Although this tool does not inform savers about the value of their old pot, it provides them with the right contact information, so that they can find out further details about their pot. After all, even small pots will help to boost an individual’s retirement savings.
Tactical delays
Retirement age is no longer regimented. Whilst Britons can collect their state pension at the age of 67, it does not mean they are obligated to do so. Instead, savers might consider working a little bit longer to continue building up their pension pot. Delaying formal retirement could also mean that retirees will receive a higher state pension; an individual’s state pension increases by 1% for every five weeks it deferred.
Another viable option could be a phased retirement. This involves reducing the number of hours an employee works. This way, an individual can continue to contribute to their pension pot and enjoy tax relief on their contributions (provided they are under the age of 75), whilst still receiving an income.
Consider alternative routes to retirement
Whilst traditional pension schemes or savings accounts are still highly popular methods of saving for retirement, today more and more Britons are keen to explore different ways to make their money work harder.
Indeed, My Pension Expert’s aforementioned study revealed that almost a quarter of 40 to 54 year olds expect the majority of their retirement income to come from alternative investment options (such as property, stocks and shares or LISAs) as opposed to traditional pension schemes. So, for those looking to make potentially substantial gains on the pension, certain investments may be worthy of consideration.
Of course, such investments present the possibility of making generous gains on savings. However, all investments do come with risk. So, before committing to such a retirement strategy, savers should carefully consider their risk appetite.
Ask an Expert
Perhaps the most important point to remember, is that savers don’t need to muddle through the retirement maze alone. Instead, I would urge savers to seek independent financial advice.
Regulated financial advisers will conduct a thorough audit of a client’s financial situation and use all the information on hand to create a tailored financial strategy to suit their needs. For later savers in particular, advisers are an invaluable tool in helping them to achieve a financially secure retirement.
Of course, the earlier one starts planning for retirement, the better. However, that does not mean that those who delayed retirement planning until their 40s or even 50s should give up on their retirement dreams. By simply remaining calm and seeking advice where necessary, Britons of all ages can plan for the future with confidence.