When it comes to tricky topics like financial planning, most Britons might be guilty of putting off the issue, pledging to tackle it ‘later’.
This is understandable to a point; people lead hectic lives, with various financial and family commitments demanding their attention. But there are certain issues that cannot be ignored, namely retirement planning.
Unfortunately, data suggests that individuals do just that, and push retirement planning to the back of their minds – much to their financial detriment. Indeed, one in six people aged 55 and over in the UK have no pension savings at all, with that number increasing among younger workers. Further research has also revealed that 61% of Britons have no idea what their retirement income will be. And such uncertainty could cause a great deal of stress for those approaching retirement age.
Vitally, people in this situation must not panic. Whilst it might take some discipline, and careful strategising, it is important to remember that there are options available, to help people take the necessary steps to regain control of their future finances and secure their desired retirement outcome.
What are the pension options available to late savers?
First and foremost, it is important savers take into account all of their assets, which will be used to fund their retirement; this will include everything from personal savings to property. In doing so, Britons can gauge their financial position and see how much action must be taken to save for retirement.
It’s always worth checking to see if you have a pension pot that’s been forgotten over the decades or a change of careers. The government’s pension tracker can help them track down their lost pension. Whilst it does not grant immediate access to one’s pension information, it provides them with the correct contact information to reach out to their pension provider and access their information.
However, if after these steps, they find that they do not have adequate pension savings, they should not give up on preparing for retirement. While not an ideal position to be in, paying into a pension can still help their money go further when they retire, even if it’s only for the few years of work before retirement they have left.
In doing so, savers will also enjoy the benefits of pension tax relief. Put simply, an individual receives pension tax relief whenever they contribute to their pension, and the tax relief is paid at the highest rate of income tax an individual pays. So, even late-pension contributors stand to benefit from this generous policy. Consequently, some people might benefit from delaying retirement by a year or more to allow more time to top up their pension to take advantage of tax-free growth.
Elsewhere, individuals might consider placing some of their retirement savings in investments that offer higher returns. Indeed, investments have the potential to provide strong returns, which could make up for some of that lost time by making their money work harder within a shorter period. If the investments perform well, they have the potential to transform a person’s retirement outcome and substantially strengthen their financial situation.