To get the most from your pension when you retire it pays to think ahead. Planning for your retirement is one of life’s big decisions. Read on and discover how you can get started.
How much money will you need for retirement?
The general rule of thumb is that you’ll need between half and two-thirds of the income you had when you were working to have a comfortable retirement. This is just a rough guide though. It can depend on any changes to your earnings and spending habits. For example, if you’ve reduced the hours you work, or have loans to pay.
Take your time
Don’t forget, hasty decisions about your pension savings could have a big impact on your future.
Pensions are invested, so can be affected by major changes in the markets. Sometimes, it might be best to wait before you access your pension savings, as you might miss out on any increases in value if markets recover – but please remember values can go down as well as up. Even though you’ll see a selected retirement age in your account, you don’t have to take your money from that age – it’s just the age we think you might want to retire. It’s a good idea to focus on your needs in the long term rather than on current events, and to take advice before making decisions.
If you’re experiencing financial difficulties, it’s worth exploring any other savings you might have before taking some (or all) of your pension savings and looking at what other sources of support are in place. More information can be found on the MoneyHelper website. MoneyHelper also has a debt advice locator tool to help you find out where you can go to get free debt advice.
What lifestyle will you want?
If you want to continue enjoying life like you do now, you need to save towards it.
To start, it’s useful to know what your own outgoings will be so you can estimate how much you’ll need in retirement. This could be anything you regularly spend money on such as housing, transport, food, insurance, healthcare, entertainment, gifts and clothing.
And if you’re not sure what your outgoings might look like, our retirement planner can help. We use the Pensions and Lifetime Savings Association’s Retirement Living Standards to give you an idea of what certain goods and services would cost at 3 different lifestyle levels. These are minimum, moderate and comfortable.
Once you’ve chosen one of these lifestyles (and if you like – personalised it), you can use the planner to work out your expected retirement income to see if it could cover your retirement lifestyle.
Access your account to get started with the retirement planner.
How long will your money need to last?
This depends on when you decide to give up working or reduce your hours. Keep in mind, your pension and other savings will need to last for as long as you do. And longer if you’re providing for a loved one.
At The People’s Pension, you can pass on anything that’s left from your pension savings to a loved one – or to several people, a charity, a company etc. You can do this by nominating them as your beneficiary in your account.
If you retire at 65 today, you can expect to live for roughly another 20 years.* Of course you might live much longer than this. Our life expectancy calculator can give you an idea.
*According to the Office for National Statistics.
Planning for inflation
Inflation is the changing cost of household items. Over time, inflation will push prices up, which means that your pension won’t buy as much as it did before. So, in 20 years’ time, you’ll need more money than you do today to buy the same goods and services.
Our retirement planner considers inflation to reduce the projected value of your pension, to give you an idea of what its value could be in today’s money.
Sources of retirement income
Once you know how much you might need to live on when you retire, our retirement planner can help you to work out if you’ll have enough income to cover your costs in retirement.
View the retirement planner in your account.
When it comes to your retirement income, you may also want to think about…
Your pension pot with The People’s Pension
To find out how much your pension pot is worth just log in to your Online Account.
Don’t forget to take your State Pension into account when you’re working out your total income. Since 6 April 2016, when you reach your State Pension age you should be eligible for the new State Pension. Calculate your State Pension on gov.uk.
Other pension pots
If you’ve worked for other employers or been self-employed, you may have other pension pots. If you’re not sure how to find these pensions, you can use a free pension tracing service. Trace lost pensions on gov.uk.
When you get closer to retirement, you’re also eligible for other benefits such as a free bus pass, free NHS prescription and eye tests. Depending on your age, you may also qualify for winter fuel payments. If your retirement income is very low, you may be able to claim pension credit. This can also give you access to other benefits such as housing benefit and a reduction in council tax. Read more about benefits in retirement on MoneyHelper’s website. Remember, once you access your pension savings this could impact the state benefits you get as you’ll have more income.
You may have bank or building society savings, ISAs, premium bonds, investments or an inheritance that you can use to top up your retirement income. If you think you’ve lost track of any savings, you can get help to trace them. Trace your lost accounts and savings.
It’s worth noting that if you have additional income from a rental property or holiday home, this will be counted as income. You’ll need to consider how your total earned income, rental income and pension income could affect your tax bracket as you may find yourself paying more. Read more about income tax rates on the government’s website.
Ways to boost your retirement income
If you think your retirement income could fall short of your expected outgoings, there are plenty of ways you can boost it.
Increase regular contributions
Adding to your regular pension savings by even a small amount can add up over the years. This is because if you increase your pension contributions, you should get more tax relief from the government and your employer might contribute more too. Also historically, in the long run, the return on your savings has shown to be better than from any savings in your bank account.
Add lump sums
Maybe you’ve had a bonus or an inheritance – it’s good to consider investing it into your pension pot. The more you pay in the more tax relief you may receive and the more money you could have later in life.
Combine your pensions into one
If you have several pensions with different providers, it may be a good idea to combine them into one pot. This will make it easier to keep track of your overall savings. You could also pay less in charges with just one pot.
Before you transfer, check what type of pension you have. Final salary schemes, or defined benefit schemes, are usually best left where they are as your retirement income is already agreed and so transferring may mean you lose this certainty.
Other schemes, such as defined contribution schemes can be transferred. Some schemes charge you to transfer, so check first if this is the case.
If you think you might have lost track of a pension, discover how to find a lost pension.
Retire in later life
You no longer have to retire when your employer tells you to, or even when you start taking your State Pension.
So, if you think you can’t afford to retire, you don’t have to. You can continue working full time or part time and carry on contributing to a pension pot to create more income. The longer you defer taking your pension, the more time it has to potentially grow.
You can also defer taking your State Pension.
If you decide to retire later – you can change your retirement date in your account.
Please note, once you’re over age 75 any contributions you make into your pension won’t receive tax relief.
Generate additional income elsewhere
If your pension income falls short, there are other ways to generate an income elsewhere.
- Part-time work
- If you own your home, rent out a room or even your driveway
- Make money from a hobby
- Set up your own business
- Downsize your home
- Move to a cheaper area
Of course all these options will have their pros and cons. Bear in mind the tax implications of generating extra income and how much it costs to set up a business or move home. And if you move, always keep your address updated in your account.
Kicking off 15 years before you plan to retire, our timeline gives you a checklist of what you should be considering at each stage.
15 years until retirement
It may seem like a long time until retirement but our investment approach means we’re already thinking ahead.
If you invest in the ‘balanced’, ‘cautious’ or ‘adventurous’ investment profiles, your money will gradually switch to more secure / lower-risk investments, to safeguard your savings. This ‘glidepath’ process begins 15 years before you retire. So, if you plan to retire at 65, we’ll start your glidepath when you turn 50. And if you join our pension scheme after you’re 50, we’ll add you to the relevant stage in the glidepath.
If you think you might retire earlier or later than your selected retirement age, this will affect your glidepath. You can change your selected retirement age in your account.
If you chose to self-select which funds to invest your pension in, you won’t be added to a glidepath. Instead, you may want to consider getting financial advice as you get closer to retirement.
Find out more about our investment funds and the glidepath. Then when you’re ready, log into your account to see how your pension is invested and if this investment option still meets your needs.
There’s still time to plan ahead if you think you won’t have enough to retire.
If you haven’t already, you might want to consider combining any other pensions you have into one pot. This could make it easier to see how much money you have, from one place.
Retirement is getting closer. Start thinking about how you’d like to retire and what you want to do with your time. This will help you work out when to retire.
Take time to look at your options for creating your retirement income and choosing what’s best for you and your loved ones. If you want to carry on working, discuss this with your employer.
Think about these important considerations when deciding how to take your pension pot.
With retirement only months away you should have a clear idea about how you want to take your pension.
We’ll send you a pack of information, including a valuation of the pension savings you have with us. You can also view the following:
- Articles and information from MoneyHelper on the full range of options available.
- Your options at retirement booklet which explains how you can take your pension savings with us.
- A booklet from The Pensions Regulator on avoiding pension scams.
Log in to your account to take money from your pot with The People’s Pension.
Get ready for retirement
Getting organised to take your money may take a while so give yourself plenty of time. Below are a few key things to get you started.
Pension statements for all your pensions
Your statements cover much of the information we’ll ask you for when you take your pension savings. So, it can be useful to have these to hand.
You can get valuations from your pension providers and a State Pension forecast online.
Confirm the date you’ll take your money
Although you can usually access your pension savings from your normal minimum pension age, most pensions have a selected retirement age. This is often the same as your State Pension age and is used to work out the projected value of your pension. Did you know, you don’t need to take all your money at once? Compare your retirement options.
Check what type of pensions you have
Not all pensions are the same. Some pensions have special rules that may affect when you can take your money or might have charges if you cash in early.
Read about your options
Make sure you’ve read and understood the information sent by your pension providers. If you have any questions, give them a call. You can contact us about your pension savings with The People’s Pension on 0300 2000 555. Our calls are recorded for training and monitoring purposes.
Guidance and advice
Making decisions about your pension can be complicated. So you may need some help.
Find out more about your guidance and advice options and discover helpful resources on our guidance and advice for members page.