July 1, 2023
Retirement planning is one of the areas that our clients often tell us they want to do something about, but don’t know where or when to start. Understanding the pensions market, tax allowances and the various decisions needed about when and how to withdraw pension savings are all areas that many people find confusing.
Talis’ independent financial advisers are all experienced at explaining and simplifying the complexities of pension and other investments, and talking our clients through the options.
It’s never too early to start saving for retirement. The earlier you start, the more you’ll get the benefit of compounding returns. (This is when you make a profit on the profit from money you’ve already invested). Investing a small percentage of your income can really add up over time. But it’s also important to recognise that it’s never too late either. Even if you’re among the 16% of the over-50s in the UK with no pension savings in place, there will be something you can do.
One of the first things a Talis IFA will help you to do is to define your retirement goals and put together a plan to achieve them. You might be surprised to find that this doesn’t start with the numbers. Defining your retirement goals is about life before money – what do you want life to look like in the future? Who is involved? Only when we fully understand what you hope to achieve will we begin to look at the numbers involved. We’ll look at where you are financially right now, and assess what’s needed to achieve your future aims. We can’t change your financial past, but we can make sure that your money works its hardest for you in the future.
So what should you be thinking about at different stages of your life?
Starting to save in your 20s is the best possible way to set up your financial future. It might seem that saving is a daunting prospect when you’re just starting out in life, building a career, setting up home, while possibly paying off student debt. But it’s never too early to start thinking about your financial future and setting yourself up for success. With some knowledge and planning, you can easily create good savings habits that will set you on the path towards financial security later on.
Start by setting realistic and achievable goals; whether they include buying a house, starting a business or taking out investments. Having clear objectives in mind will help motivate you to save money. Creating a budget is also vital to staying on top of your finances. Knowing the expenses you have each month will help keep you organised and make sure there’s enough left over to put aside for savings. Ensure you know about upcoming bills and other costs to build those into your budget. At the same time, remember to enjoy life too! Set money aside to do things you love, such as travel or hobbies. By taking a balanced approach to saving, and treating monthly savings like another bill, you’ll be able to get the most out of your 20s while still investing in your future financial security.
Top tips for your 20s:
One way to make the most of your 30s and 40s in the UK is to take advantage of salary sacrifice. This is an excellent way to increase your pension contributions while reducing your tax bill. While you will be contributing more to your pension, it could even leave you with an increased take-home pay as you’ll be paying lower National Insurance Contributions (NICs). Salary sacrifice can also make a difference if you’re in the higher rate tax bracket.
If you’ve previously opted out of an employer pension scheme, now is the time to opt back in and reap the benefits of salary sacrifice.
It’s important to get professional financial advice for more information on getting the most out of salary sacrifice and any potential tax implications too.
Top tips for your 30s/40s:
As you enter your 50s and 60s and retirement gets closer, now is the time to consider when is the right time to retire, and how much money you will need to live on. Currently, people 55 or over can start taking money from their pension, but from 6 April 2028, the average minimum pension age will increase to 57. It’s important to understand how this change affects you, based on your date of birth.
Again, getting professional financial advice at this stage is highly recommended. Taking out cash from your pension fund can have tax implications, and don’t forget that the more cash you take out early, the less income your fund may provide later on.
It’s in your 50s and 60s that it becomes more important to keep up-to-date with any changes that might affect your retirement and pension savings. Professional financial advice (as well as keeping up with government updates), will help you to stay up-to-date and on top of things.
Whatever your ideal retirement is, like most things in life, the best way to achieve it is to plan for it, with the help of a professional IFA. A flexi-retirement or semi-retirement approach is becoming more common at the moment, with many people continuing to work in some form during their retirement years – reaping the rewards of savings they’ve built up over decades, and continuing to earn a salary on their own terms.
Ultimately, careful planning and consideration will help ensure that you have enough money saved when the right time comes to retire.
If you’d like to start building your retirement plan, get in touch. Click here to find a Talis IFA.
This guide does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
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