Market volatility amid the ongoing coronavirus crisis will no doubt be a cause of concern for pension savers, particularly those who are looking to retire in the near future. However, there may be steps which retirees-to-be can take to try to help the recovery.
How much money will I need in retirement?
“It’s important to regularly check in on your pension pot to monitor its value and growth as that will help with your planning,” she said.
“To find out what annual retirement income you’re likely to need, you have to start by estimating your retirement expenses.
“Future expenses are hard to predict but to get a ballpark figure take your current standard of living and then subtract any expenses you expect to go away and add in any new ones you think you may have.
“The Pensions and Lifetime Savings Association (PLSA) has developed Retirement Living Standards which show the different kinds of living standards people could have in retirement and the savings they require. This is worth looking at to help form some idea of what you might need.”
2. What are my potential sources of income?
Ms Laidlaw suggested retirees-to-be think about all the forms of income they may have in retirement.
As well as private pension savings, she suggested people consider their state pension as well as cash savings.
“You’re likely to have a ‘main’ pension plan, for example a workplace one through your employer. You can access these pension savings from age 55 currently. In addition to that, most people are entitled to the state pension, a regular payment from the government that can be claimed from age 65,” she said.
“The age at which you can access your state pension is rising to age 66 from October 2020 with further increases to the state pension age to be phased in from 2026. GOV.UK has a very easy to use state pension age calculator which gives you the date you’ll be eligible and how much you can expect to receive, dependent on your work history and National Insurance record.
“You may also have other forms of income from previous pensions, or perhaps investments in an ISA or even an inheritance. Or, if you think you might have a few old pensions from previous employers, you can use the government’s online Pension Tracing Service to track these down.
“It’s important to consider all your savings pots together and to have a plan which means you take an income from these in the most tax efficient way. If you are already or are just about to start taking from your pension, taking money from cash savings or other reserves of income may help your pension pot to recover from recent events more quickly.”
3. How much money do I need to save for retirement?
“Once you’ve decided the level of living standard you realistically want to aim for, you need to decide whether your savings will support this. Essentially, you need to think about a savings portfolio – or pot of money – to last what could be at least 30 years or more in retirement.
“Generally we see people spending more in the earlier years of retirement, often treating themselves to more holidays, perhaps a new car or home improvements. As people move through retirement they tend to spend less.
“Many modern pensions allow you to leave your savings invested so they have the potential to carry on growing even after you have stopped working. The level of withdrawals you take from your pension pot can be varied as your income needs change over time.
“But the key to ensuring you have enough to last you throughout your retirement is to keep your pension under regular review.
“Investing in financial advice can help you with this by ensuring you have an appropriate investment strategy and your level of withdrawals remain sustainable.
4. This doesn’t look like enough – what should I do?
“If your fund isn’t looking like it is going to be enough to give you the type of retirement you were planning on, then sometimes the only factor you have left to play with is time.
“The longer you can put off your retirement and avoid the need to tap into your pension savings, the higher the income you may be able to take in the future.
“Don’t rush decisions today, or panic sell investments if you don’t need to – there are consequences for locking in losses, which may have an impact for decades to come.
“If you can ride the wave and wait patiently, history would suggest the markets will recover eventually.
5. Is it worth getting advice to find out what is right for me?
“If you’re not sure on the best course of action, speaking to a financial adviser might give you peace of mind. An adviser will provide you with a tailored plan, designed to meet your individual needs.
“You should be able to find a good financial adviser for a fixed fee at unbiased.co.uk, advisers typically charge between £150 and £250 an hour.
“Alternatively, a lot of great guidance and support should be available from your pension provider, often online, including the impact of any coronavirus related market movements on your hard-earned retirement savings.
“On top of this, there are a number of government-funded resources available online and at no extra cost, such as The Money Advice Service or The Pensions Advisory Service websites.”