What preparations are you making today? Alex Herbert, Regional Managing Partner for Prestige Wealth Solutions, takes a closer look at your retirement fund options.
Everyone dreams of a blissful post-work life; a retirement full of glorious time spent dining and travelling and doing all the things you now only fantasise about during lulls in long days at the office. But the retirement of your dreams requires more than free time and good health – you’ll also need a satisfactory income. Most likely, a state pension – if you’re lucky enough to qualify for one – won’t be enough to meet your needs. With this in mind, you may want to spend a little of your time examining your pension planning options now.
The first thing you should do is estimate how much money you think you will need to live on when you retire. Remember some expenses will disappear, such as the cost of commuting to and from work, but it is likely you also have a list of things you’d like to see and do – many of which will require money.
Of course, perhaps you feel you’re much too young to start paying into a pension fund. Rest assured you’re not: the sooner you find a pension plan that suits and start putting money into it, the longer your money has the potential to increase. Consider John Smith, age 40. Based on a particular pension plan, if John is to get a pension of £10,000 at age 68 he will have to put aside £290 a month starting today. If he’d begun saving for his pension 10 years ago, at age 30, his monthly contribution would have been just £149. On the other hand, if he delays paying into the fund for another 10 years, until he is 50, his monthly contribution will have to be £661 for him to still receive £10,000 when he turns 68.
But just making a monthly payment into a pension plan and forgetting about it isn’t enough. You need to safeguard that fund by monitoring it closely and regularly reviewing your retirement provision. This can be done with your Financial Adviser – please email me if you would like help (firstname.lastname@example.org). Don’t hesitate to ask for statements from current and previous pension providers to see how much you can expect to receive. If you have a UK pension, consider the tax implications and whether you would benefit from transferring offshore. This can be done through a QROPS arrangement, but professional help should be sought – visit www.pws-intl.com for further details.
As retirement nears consider the type of investments your fund is in; do you need to insulate yourself from market shocks by moving your fund from high-risk shares to much lower-risk fixed-interest bonds, for example?
You may, as you monitor your pension fund, see a gap emerging between what you’ve estimated you’ll need to enjoy your retirement and what your pensions are likely to provide. If you’re unwilling to downsize your retirement lifestyle, then increase your savings now. Save as much as possible while you’re still working – especially while living and earning tax-free income offshore.
As much as you may yearn for your retirement, remember that the longer you put off claiming your pension, the more time it has to grow. Retiring at 55 may be tempting, but holding off until you’re in your sixties may mean you can afford a better post-work standard of living. Also, when deciding to claim your state pension, consider that some state pension plans offer benefits (such as an increased growth rate) to individuals who delay making a claim. Check what your state offers.
Remember also that many pension plans give you the option of cashing in early – usually at a reduced percentage of the fund’s value – so the money you pay in isn’t necessary under lock and key until you reach retirement age.
Finally, if you’re working abroad, explore offshore savings plans through life assurance companies as well as the QROPS (Qualifying Recognised Overseas Pension Scheme) plans already mentioned.
To see which options might benefit you, or to discuss anything in this article, please contact Alex Herbert directly via email (email@example.com) or visit our website, www.pws-intl.com today.