24th August 2018

Research from Dunstan Thomas last year, showed that just 17% of 54-71-year olds know how much money they will have when they stop working.

You may have read, heard or seen advice telling you to start your retirement planning as early as possible, alongside information which assumes that you have 40+ working years left to build a pension fund.

But what if that’s not possible?

How can you make the most of your pension, if you have found yourself within 15 years of leaving work, with no plans to provide an income for yourself in the years following?

You could start with these five tips:

1. Know what you are working toward

Before creating a plan to support yourself financially in retirement, you need to know what you are working toward. Of course, you will need to make sure that your aims are realistic, especially if you have left retirement planning a bit later than most.

However, it might not be too late to afford yourself some luxuries, and there are options available to make sure that your retirement income matches your expectations; if they aren’t unreasonable.

2. Maximise your State Pension

The State pensions forms a foundation income for most retirees. While it won’t be available until you reach State Pension Age, it will provide a guaranteed basic income for the rest of your life, if you are eligible.

To receive the Full State Pension, you need to have enough qualifying years on your National Insurance record. That’s 30 years for the State Pension or 35 years for the New State Pension. To receive any State Pension at all, you will need at least 10 qualifying years on your record. The amount you receive is proportionate to the number of qualifying years on your record; the less you have, the less you receive.

Qualifying years are those in which you have made National Insurance contributions. You can check your National insurance record here to see where you currently stand.

If your qualifying years fall short of being able to provide you with a good foundation income, you will need to increase the number. There are three ways to add qualifying years to your record:

  • Pay National Insurance contributions through your employer for every year you are an employee.
  • Make voluntary contributions here.
  • Claim National Insurance Credits, if you are entitled to them. These are available alongside some State Benefits, including Child Benefit, Income Support and Carer’s Allowance. You can find out more about who is eligible for National Insurance credits here.

3. Find the right product for you

If you are in employment, you should be contributing to a Workplace Pension. These are available for anybody who is classed as an employee, works in the UK and earns £10,000 or higher. You should have been automatically enrolled into a Workplace Pensions within the past few years.

The main benefits of being enrolled in a Workplace pension are employer contributions and tax relief. That means, while you are bound to contribute a legal minimum of 3% of your qualifying earnings (rising to 5% on April 2019), your employer must also add a minimum of 2% (3% from April 2019). Tax relief recovers the tax you have already paid on that contribution and increases the amount you put in by 20%.

However, if you are self-employed or a contractor, you will not have been included in the automatic enrolment process. Therefore, you will need to look at the alternative options available to you, such as a personal pension.

Your circumstances will be different to the next person, so we encourage you to get in touch with us for further guidance regarding the retirement saving option which is best suited to your needs.

4. Put away as much as you can

Once you have a pension in place, make sure you are maximising it’s potential. That means putting as much as possible into your fund, when possible.

If you are in regular employment, you can assess your financial situation to determine whether you can increase the amount you put in each month permanently. And, though they might say no, there’s no harm in asking your employer if they can offer higher contributions.

If you have a less-stable income, perhaps if you are self-employed or a contractor, you will be entirely responsible for your pension contributions. Therefore, you may wish to set a minimum monthly contribution level for yourself, while topping-up the fund when you have the money available.

Pensions often offer tax relief, which reclaims some of the tax which has been paid on your salary and allows you to invest it instead.

5. Consider working for longer

If you are struggling to make sure that your retirement income will be enough to support your goals, you may wish to consider the alternatives. One of these is to delay your retirement and continue to work on a full-time, part-time or consultancy basis. In doing so, you can continue to put money into your workplace or personal pension, although you will need to continue earning above £10,000 to be eligible for employer contributions.

If you continue working past the State Retirement Age and have enough income to support yourself, you can choose to delay taking the State Pension. For each year you push it back, your eventual income will increase.

The value of financial planning

Retirement planning can be complicated and missing even the smallest detail could leave you with less income than you should have available to you when you leave work. That’s where talking to a financial planner can help.

With years of experience, skills, knowledge and qualifications, we can help you to navigate the retirement landscape and maybe introduce you to ideas that you had not previously heard or thought of.

For more information, or to get started, please get in touch with Ben on 0113 262 1242.