If you have not yet started investing in a private pension, you may be worrying that it’s too late. Don’t panic though! It’s never too late to plan for your retirement, no matter your age. Of course, the earlier you begin investing, the more funds you’ll have for your retirement. In order to reach a certain amount in your pension pot, the earlier you begin contributing to the pot, the smaller the proportion of your earnings you’ll need to contribute.
In this article, we’ll discuss why it’s more important than ever to have a private pension pot. We’ll also tell you how Willday Wealth Management can help with your retirement planning.
State Pension
Did you know, the age you can draw your State Pension depends on when you were born? The age is currently set at 66 for both women and men. However, those born after 5th April 1960 will not be able to draw their State pension until age 67. This will move to 68 in time. In the 2023 Autumn Statement, Chancellor Jeremy Hunt announced that from April 2024 the State Pension payments will rise to £221.20 per week. This equates to just over £11,500 per year. It should be remembered that the tax-free allowance that currently sits at £12,570 also applies to those of pension age. So, the total amount of State Pension received may be lower than £11,500 if you have any additional income streams.
Workplace Pension
Since 2012, all employers must now offer a workplace pension scheme, which eligible employees are automatically enrolled in. The purpose of this scheme is to encourage people to save for their retirement. Employees must contribute a minimum of 5% and employers must contribute a minimum of 3% of the employee’s earnings. The contribution percentage applies to anything you earn between £6,240 and £50,270 – these are your qualifying earnings. The higher the contributions you make, and the number of years you are paying into it for, will impact the amount you can draw down in retirement. It’s important to remember, though, that the total workplace pension pot you accrue must be divided by the number of years you’ll spend in retirement.
Why is it a good idea to have a third pension income stream?
Depending on your working-life income, you may require a further income stream in retirement to maintain your standard of living. Life expectancy is now 81 in the UK, and ever-increasing. This means that if you retire at the State Pension age, your retirement may be longer than before. This means that your pension pots will need to stretch further. A private pension could be a safety net for unexpected financial burdens or allowing you to enjoy your dream retirement. An individual’s dream retirement is different depending on the person. For you it may be seeing the world, for others, spending quality time with your family.
It’s important to have a plan when it comes to your retirement, so that you can gauge the funds you’re likely to need. The earlier you can start contributing to your retirement fund, the greater the funds that will be available for you when you need them. However any additional pots of money will be better than nothing. So, regardless of your age, it is never too late to start financial planning for your retirement.
How can Willday Wealth Management help you?
Here at Willday Wealth Management, we’re ready to help you plan for a successful retirement. Simply tell us when you aim to retire, and we’ll manage your portfolio around your target date. We’ll reduce the level of risk in your portfolio as your target retirement date approaches. You can work towards your goals with a personal investment consultant by your side. You can chat, phone, email or meet your consultant in person. We’re here to help you get the most from your pension and overall investment plan. We’ll help you get higher returns from your investments and monitor your progress by combining pensions where appropriate.
We’ll also guide you through the pension drawdown process. From the age of 5, you can withdraw up to 25% of your pension tax-free either as one single lump sum, or in instalments. You can also pass on your pension funds to your beneficiaries free of inheritance tax. Sounds confusing? Don’t worry! We’ll help you through it all!
