There’s increasing evidence that those aged over 50 are postponing making plans for their retirement, often relying on factors out of their control like a premium bond win or receiving money on the death of elderly relatives. Others plan on selling their current property and downsizing to release cash for their retirement. However, that’s not a certainty either, as house prices can fluctuate.
Over the past few years there has been a major shift in emphasis, with financial provision for our retirement years moving from being the responsibility of the state to being the responsibility of the individual, meaning we should all start saving for our pensions as soon as we can.
REACHING YOUR PEAK
It’s widely accepted that workers are likely to reach their peak earning powers between ages 40 and 50. From then on, their incomes are likely to fall. Being aware that your earnings potential could be set to decline after your 40s can be a bit of a wake-up call for your pension and savings. At this age, the dilemma for many is how to strike a balance between saving adequately for retirement, whilst meeting all the financial needs of a growing family, and often looking after elderly parents too.
However, the good news is that you get valuable tax relief on your pension contributions and, due to the benefits of compound interest and the potential for capital growth, even small contributions made now can make a real difference when it comes time to retire.
Following the introduction of autoenrolment pension schemes, workers have an added incentive to save for retirement.
Over 9.3 million people have now been auto-enrolled into workplace schemes. If you’re employed and haven’t joined your employer’s scheme, you should think about doing so. By the end of this year, all employers will have to provide a pension that they, as well as you, contribute to. If you’re already a member of a scheme, you could consider increasing your contributions to improve your pension outlook. In addition to joining a workplace scheme, you can set up your own personal pension plan, a stakeholder plan or a Self-Invested Personal Pension (SIPP).
The above is purely for information purposes only and does not constitute advice.