Planning for Retirement

Planning for retirement is just one area in which, with the benefit of hindsight, many people wish they’d taken action earlier.

How often in life do we look back and wish we had done things differently? According to a recent study, two in five pensioners regret retirement-planning mistakes which have left them struggling financially.1 Nearly one in five say that they didn’t save enough for retirement, and 15% regret not starting to save earlier in their working lives. There are some compelling reasons why a pension is still the most obvious answer.

Pension contributions attract tax relief on the way in and they accumulate capital gains free of tax once inside. When you access your pension savings, the first 25% is normally tax-free. While you cannot draw benefits until your 55th birthday, this can also be an advantage as it restricts the temptation to tap into your retirement fund before then.

Getting off the mark

How much pension income you need in retirement will be determined by a number of factors, including your health, your living expenses and your desired lifestyle.Unfortunately, there’s no one-size-fits-all answer. However, the average worker in the UK earns £26,364 a year 2, so a pension income of around £20,000 might seem like a reasonable target for most people.

Assuming you qualify for the full single-tier State Pension of £8,094 a year 3, you would need to find at least £12,000 a year from your other pensions to achieve an overall income of £20,000 per annum.

This analysis assumes that the fund would be used to purchase an annuity. Of course,under ‘pension freedoms’, people can draw down their defined contribution pension in a variety of ways.Accessing your savings through Draw down can provide you with more flexibility and this is where it’s important to take advice to ensure you get the right retirement path or combination.

Playing catch up

However, the fact remains that the best wa to secure a comfortable retirement is to save as much as possible as early as possible in your working life, and take financial advice. The longer you delay saving, the harder it will be to build the kind of fund that will see you through retirement.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

1 Prudential, 15 April 2016 2 Office for National Statistics, 15 March 2017 3, 17 March 2017

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