As more and more changes are introduced which make approaching pensions and long-term planning seem incredibly complex, it can be easy to overlook the basics. However, it’s the basics which make all the difference, and taking a bit of time to ensure each of these are remembered will go a long way to helping build up a comfortable retirement income when the time comes. There are five very simple steps to take to ensure this happens:
1. Increase your contributions
This is a long-term game, and £20 a week contributions – which may have been fine in 1998 – are simply not going to be enough to build up a pot that will support you throughout retirement. It doesn’t have to be a huge spike in the amount of money put aside, but thinking about how much income will allow you to not only have a comfortable standard of living, but also to enjoy these years to the full, will help you realise that more of an investment needs to be made. Going forward, if and when you secure a pay rise, you may also want to consider increasing the level of contributions.
£20 a week contributions are not going to be enough to build up a decent retirement pot
2. Take advantage of your employer’s auto-enrolment scheme
While people now have to actively make the decision to ‘opt out’, doing so would essentially be opting out of free money and tax relief on these contributions. To take this one step further, ensuring you don’t become complacent and take an interest in how much you are contributing through the scheme will have a huge impact over the years
3. Don’t panic over market volatility
It’s easy to look around at uncertainty in the market – to-and-froing over interest rates, inflation or stock market volatility – but these jitters won’t be the same as the ones in 10, 20 or 30 years’ time. Letting these short-term changes influence the decisions you make when it comes to pension savings would be a mistake. Take a step back, bide your time and focus on the long-term.
4. Long-term income not a lifestyle facility
Picture where you think you will be in retirement – your surroundings, location and activities - and whether you will be able to support this on top of the other factors in your life. If you want to buy abroad, consider your other outputs: will you have children or grandchildren to support or remaining property in the UK to look after? All these will weigh on income, so consider the lifestyle you want to have and be realistic about how to achieve that
5. Take advantage of the higher-rate tax relief
More and more savers are falling into this category without taking advantage of the relief available. If you're part of a workplace pension scheme, this tax relief is sometimes taken care of for you. However, this is not always the case, and for those who have a personal pension, or a self-invested personal pension (Sipp), it can be all too easy not to realise this without the right guidance. Understanding all your options is key to making the most of the income you do have, and it’s important not to overlook something which can boost this in the long-term.