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Retirement Planning

So why is Retirement Planning so important?
It is no secret that Britain has an ageing population and we all can expect to live longer than our predecessors. The life expectancy for people aged 65 is 84½ years for men and 87¼ years for woman so we can all expect a fairly lengthy retirement. However what standard of living can we expect in retirement?

The starting point for your retirement planning must be a good understanding of your likely life expectancy and how many years to you can expect to enjoy in retirement. To estimate your own life expectancy click on the following link: Life Expectancy

The number of babies born each year remains constant whilst there are more and more pensioners relying on a smaller and smaller workforce to fund their State pensions. The single persons’ current basic State pension is just £159.55* per week (*but this could be as low as £122.30 depending on your National Insurance contribution record!), and that figure is set to fall in value compared to earnings in coming years. On top of this there will be less and less State pension money available to go around. How much do you think you will need in retirement?

Did you know?
The table below shows the average household weekly expenditure in 2013 for people between the ages of 65 & 74. To see the table of expenditure for all age groups click here

Item of Expenditure Amount per week
Food & non-alcoholic drinks £56.80
Alcoholic drinks, tobacco & narcotics
Clothing & footwear £18.50
Housing, fuel & power £60.30
Household goods & services £33.40
Health £8.20
Transport £62.50
Communication £11.30
Recreation & culture £71.30
Restaurants & hotels £35.60
Miscellaneous goods & services £32.40
TOTAL £403.80
Source:The Office for National Statistics - Family Spending, 2014 Edition

You will see from the above table that £159.55 per week doesn't stretch very far!

In fact by the time you have purchased your food and paid for Housing fuel & power you would have spent £42.45 more than your pension so you would have to turn the heating down and would still have no money left for anything else!

Therefore it is vital that we all make extra provision for our retirement through some form of savings vehicle. To encourage people to save for retirement, the Government allows very generous tax breaks on pension contributions. Basic rate taxpayers receive tax relief at 20%, higher rate taxpayers at 40% and additional rate tax payers at 45%. It’s not often that the Inland Revenue actually gives you money. So it makes sense to take advantage of a pension, one of the most tax-efficient ways of investing you will ever find.

How much should I contribute to my retirement plan?
The simple answer is - as much as you can afford. Experts recommend at least 10% of your salary, but depending on your age and previous pension contributions this may not be anywhere near adequate! It is also very important to increase your contributions as your earnings increase.

See our 'Counting the cost of retirement' page for details on how much money you will need in your pension fund at retirement.

If you are eligible to invest into a Personal Pension Plan approved by the Inland Revenue (which most people are) in the current tax year you are allowed to make a maximum gross contribution (on which you can receive tax relief) up to the greater of £3,600 or your annual ‘net relevant earnings'. This is capped at the Annual Allowance (for the tax year 2017/18 this is a maximum £40,000 reducing to £10,000 for higher earners), inclusive of your own contribution and any other amounts paid into an approved pension scheme.

Contributions can also be paid by your employer and these count towards the Annual Allowance.

By making a contribution to an approved pension arrangement on which tax relief is available, you are able to reduce your taxable income. The contributions will be allowed as a deduction from your earnings for tax purposes, thus giving you full tax relief at the highest rate(s) paid on your earnings.

You can also use 'Carry Forward' to utilise unused allowances from previous years giving an overall maximum contribution of £160,000 in the 2017/18 Tax Year (again this may be less for higher earners).

What types of Pensions are available?
There are a number of different types of pension plans to choose from, and the most appropriate one for you will depend on your circumstances:

  • If you are employed your employer will need to run a pension scheme for its employees, and it almost always makes sense to join it, especially if your employer makes contributions in addition to your own.
  • If you are self-employed, or wish to supplement your retirement planning you could consider either Stakeholder Pensions, Personal Pension or Self Invested Personal Pension plans.
  • For the more experienced investors the option of a Self Invested Personal Pension (SIPP), where you can manage your own investments, provides much greater investment choice and freedom

You can contribute to as many Pension plans as you like, as long as you do not exceed the maximum levels for contributions set by the Inland Revenue - detailed above.

Which is the right choice for me?
Your employer's 'Auto Enrolment' scheme which they may pay into on your behalf (depending on your employment circumstances), is the best starting point and you should usually join it. Otherwise whether you choose a Stakeholder, Personal Pension or Self Invested Personal Pension plan to fund for retirement will depend on your preferences and retirment planning objectives. You may also be able to set up different types of pension plans should you want to, particularly if you are a company director.

Regardless of which Pension arrangement you choose, the sooner you start making realistic pension contributions, the more comfortable your retirement is likely to be.

So why choose Provident Solutions to advise you on Retirement Planning?
Depending on your experience choosing the right pension can be both complex and baffling. So the first thing we need to do is to undertake a detailed analysis of your financial circumstances and retirement plans. We can then help you choose the right pension provider and:

  • Explain the various investment options available including Pension 'Alternatives'.
  • Explain to you the different types of Pensions available.
  • Assess your attitude to risk.
  • Suggest the type of fund(s) that will suit you.
  • Look at your earnings, outgoings and priorities and indicate how much you should be contributing each month.

How do I find out more?
Call us now on 0116 2592371 and we can arrange to visit you and conduct a thorough analysis of your Retirement Planning requirements and provide you with the appropriate recommendations.

What do Provident Solutions provide to show what my anticipated retirement benefits will be?
We provide a detailed analysis and projections of what your current pension are likely to provide - click on the following Example Retirement Planning Analysis Report

Why not estimate what your current pension benefits might be by clicking on the Pensions Calculator

Information available from the Financial Conduct Authority
Guides are available from the Money Advice Service web site:

* Source: National Statistics 02/12/2014

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