Many of us have life insurance policies that will pay out to our dependants upon our death – but we have forgotten the years before that, when our working life is over and we will live on our pensions.
Pension planning is not optional, it is essential. Here are our ‘Top Ten’ pension tips to be considered, while looking towards that distant horizon
Do not put your pension planning off! Begin your pension fund as early as you can – in your 20s or early 30s, if possible
If you already have a pension, ask your employer or pension adviser for a current evaluation and forecast of benefits – find out what your pension is likely to deliver! Once this has been clarified, decide how much you want from your pension when you retire. Ask this, whether or not you already have a personal pension in place.
Now, work backwards, and calculate what monthly contributions that income target requires today. Then, compare the returns based on several different monthly payments.
Factor in inflation! Forecasts for returns on your pensions may seem to be reasonable figures today – but remember that the real ‘buying power’ of your monthly retirement income applies to a time 40, 30 or 20 years from now
If your company still has no pension scheme in 2012, the government will ‘auto-enrol’ you into a state-run scheme, the new ‘Personal Pension Accounts’ (PPA). Many experts predict that these schemes are unlikely to be high-performers. You need to listen up!
Company scheme or private pension? If you decide that the government-run Personal Pension Account may not meet your needs, you need to consider taking out a private pension. This will not happen by itself – you need to act!
What will happen to the State Pension? In 30 years it could be worth far less than today, in real terms. Factor this into your pension planning
Bear in mind that we are living longer! In 2010, the minimum retirement age goes up from 50 to 55. This means that if you are now 50 and considering early retirement, you could draw down your 25% pension lump sum and pay off your mortgage right now. But from 2010, your lump sum payout is on hold until you are 50
The minimum age for drawing the state pension is due to rise from 65 to 68 at some time after 2024
Think of your pension as a long-term savings option, where the government gives you a generous tax rebate for every pound you save. Have you built a savings nest-egg over the years, which could now be earmarked for your retirement? Your pension could now be its best home
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