Retiresavvy Senior Manager, Clare Mahood, said: “Anyone who’s started thinking about retirement will have wondered how much they need to retire. This is a bit like knowing the length of a piece of string – it’s likely to vary for everyone. But there are a few important questions you can ask yourself to help make planning easier.”
1. When can I retire?
Retirement ages can vary from scheme to scheme, but the State Pension Age is also set to rise to 65 for both men and women by November 2018, and then to 66 by October 2020 and to 67 by October 2028 - make sure you factor this into your retirement planning.
The age you can access your defined contribution pension will also increase in line with the rise in State Pension Age – so it remains exactly 10 years before.
2. What pension entitlement do I have?
The Basic State Pension is currently £115.95 per week. To qualify for the maximum amount, you need to have at least 30 years’ National Insurance (NI) contributions. Next April, the existing basic state pension will be replaced with a new flat-rate basic state pension (called the New State Pension).
The exact weekly amount will not be confirmed until nearer the time, but it will be worth £148.40 weekly in today’s terms. To qualify for the full flat-rate pension scheme, you need to have at least 35 years' NI contributions. You can find out more about the new state pension here.
3. What are my options?
As of April, savers face fewer restrictions on how they use their pension pots from the age of 55. You can dip into you pension fund or withdraw all your money in one go, but take into account the Income Tax implications, which may be considerable. Pension Wise offers guidance on the new pension freedoms and you can find more about that here.
4. What are my outgoings?
Understand your likely outgoings. You could start by looking at your current bills and making some assumptions about how they will change in retirement. Think about whether your mortgage will be paid off by the time you retire? Some costs might be lower in retirement, while others may be higher.
5. What do I want to do?
Retirement should be seen as your reward for a lifetime of work. Think about what you want to do and achieve, and how you can finance it. Ask retired friends about financial shocks or surprises when they retired to understand how much you may need to enjoy the retirement you want.