Let’s face it, after a challenging few years for everyone’s personal finances, it hasn’t been easy to prioritise saving for retirement.
My view is that putting off planning could make it more difficult for you down the line. At the very least, paying something into a pension now helps you to build good habits.
With this in mind, here are my tips for how you could get your money working harder – to help you achieve a fulfilling retirement.
Okay, that sounds tricky to work out. But put down that crystal ball, because Which? have produced some useful figures that can help to give you an idea.
The following table gives you an idea of how much income you might need, as a couple, to achieve different levels of comfort.
Of course your own situation might be very different. If you want support working out what you’re likely to need, our financial advice team might be able to help you plan.
If you can find ways to pay more into a pension now, you might be able to lessen the amount you’d need to save later.
This table shows why. It looks at saving into pension from different ages. And compares how much you’d need to save – each month – to reach a certain amount in your pension by the age of 65.
What these figures show is that the sooner you pay more into a pension, the better chance you have of achieving the retirement you deserve.
3. Thinking about your plans now could give you more choice in how and when you retire
We typically think about retirement in all or nothing terms. One day you’re working full-time, the next you’ve retired and your time is your own.
For many people, that’s not really how it will work. For many reasons – perhaps health or just wanting to wind down and start enjoying more free time – some people choose to take a phased retirement.
This is where you gradually reduce your working hours, or maybe swap from a full-time job to a part-time role. So you can start to enjoy some of the benefits of a retirement lifestyle, whilst still earning money towards your future. You might need to do this for health reasons.
A phased retirement could be a really good option for you
- Right now, for example, you only start to get state pension when you turn 66 (rising to 67 between 2026 and 2028)
- State pension could play a really important part of funding your retirement. But you might not want to wait until you’re 66 to retire
- So you could choose to phase your retirement by reducing your working hours and start to use some of your pension. But hold off fully retiring until you reach state pension age.
There’s no right or wrong to this, it’s about what’s right for you. And the chances are you probably don’t know what you’d want to do until you’re nearer retirement age.
But it’s another reason to prioritise saving into a pension now if you can, so you could have more financial flexibility in future.
4. It really is worth paying into a pension
Unless you work in the public sector, you’re likely to have what’s called a defined contribution pension. This is a fantastic way to grow your money for the future. And that’s because just paying into a pension should see its overall value grow significantly over the long-term.
The biggest reason for this is tax relief. You get 20% extra added by the government to your pension as a minimum. If you’re a higher or additional rate taxpayer, you can claim even more.
Let’s say you want to save £500 a month into a pension. This table explains how the actual upfront cost to you is much lower, because of tax relief.
| Tax rate |
Tax relief |
Actual cost to you to save £500 |
| Basic rate taxpayer |
20% |
£400 |
| Higher rate taxpayer |
40%* |
£300 |
| Additional rate taxpayer |
45%* |
£275 |
* To get this full tax relief, you need to claim the extra 20% or 25% through self-assessment.
If you have a workplace pension, your employer is likely to pay into your pension too. This could further boost your pension pot.
Quite simply, a pension is a fantastic product that could make such a difference to your future. Offering you greater financial security.
It’s a really good idea to check your pension contributions. And think about if you could afford to put more away. Depending on their situation, we find some of our customers also benefit from setting up extra personal pensions.
5. Review your pension plans to see if you can get your savings working harder
Are your pension savings invested in a way that’s right for you? Chances are it’s in a provider’s default scheme, which might be all well and good.
But there could be other, more effective options available – to help you get your money working harder. It all depends on your circumstances, including appetite to risk.
If you’ve already retired, you might be wondering how you could make your pension last. Or if you could even be spending more of it now.
We could help you to review your arrangements and build a plan that suits your circumstances.
6. Ask yourself – do you have sight of all your pension plans?
Here’s some good news: you might be further along than you think. The chances are you’ve changed jobs and employers over your career, meaning you may have been paying into different pensions.
Latest figures show there’s 4.8 million pensions classed as missing in the UK. This might include some of your money.
At Skipton Building Society, we offer a pension review as part of our pension planning service – where we contact your providers for you. We can check the details of your defined contribution pensions, and advise you what you could be doing with them to support your overall plans.
7. Consider how to make the most of your pension – and your other savings and investments
Full retirement means you no longer have a regular employee wage coming through. Most of us qualify to receive state pension. Beyond that, it's down to you to use your savings, investments and pensions to fund your lifestyle.
In a nutshell, you need to be thinking about:
- the fun stuff, like more holidays or fulfilling a lifelong dream
- the regular stuff, like paying your bills and enjoying your free time
- the important stuff, like keeping ahead of inflation. Plus provisions for any later life needs, such as long-term care.
It sounds difficult to work out, doesn’t it? And to make it even more confusing, there’s important tax considerations around using your pension. Only 25% of your pot is tax-free to withdraw (subject to a total lifetime amount of £268,275). You pay tax on the rest, in line with current income tax rates.
Start feeling better
You work hard for your money. You make sacrifices along the way. So you deserve to feel excited about retirement. That’s where we come in. Our financial advisers are here to help you plan for a relaxing retirement and to allow you to look forwards with confidence.
- Recommendations personalised to you
- No upfront fees. You only pay a charge if you act on advice
- No pressure to take up our advice – that’s a promise.
Important information
- Investing does mean placing your money at risk. You also need to be willing to commit your money for at least five years.
- The tax treatment of savings, investments and pensions depends on personal circumstances. Tax rules may change in the future.
- Our financial advice service is available if you can invest at least £20,000, or can commit to investing at least £500 per month. If you'd like advice on your current investments/pensions, the minimum value required, including the investments/pensions under review, is £50,000.
- The opinions and information provided in this article are not advice. If you are looking for advice, you should speak to a financial or tax adviser.
Free Pension Health Check for Skipton Members
If you are a Skipton member, we can help you find out if you’re on track to achieve the retirement you want.