Figuring out how much you’ll need to see you through retirement can be a complicated business.
If you’re nearing retirement age and looking for ways to make your money go further, we’ve put together a few ideas to help.
Defer your pension
One action that could influence your future pension income is if your circumstances allow you to defer (delay) taking your pension – both State and personal.
State Pension
Before you reach the State Pension age, you'll get a letter explaining how to claim your State Pension. However, you don't have to claim it straightaway. And if you don't, it will automatically defer until you do. As long as you defer for at least nine weeks, then your weekly state pension will increase.
Gov.uk has more information about deferring your State Pension.
Personal pensions
With personal pensions, you’re not tied to a set retirement age. So, you can leave your money invested and continue paying in if you want.
You cannot access the benefits until the normal minimum pension age has been reached. In the UK this is currently age 55, which will increase to age 57 in April 2028, unless your taking your pension early due to ill health or have a protected pension age.
However, many personal pensions have an upper age limit. In most cases, you’ll need to start taking your pension money before you turn 75. Some providers won’t accept more contributions into your pension after 75 either. And if they do, there’s no tax relief added to personal contributions after this age. Speak to your pension provider to check if your pension has an upper age limit.
The longer you wait to take money from your pension pot, the more time it could have to potentially grow. But remember, the value of investments can go down as well as up and you could get back less than has been paid in.
You should speak to your employer or pension provider to understand what the implications or rules are around delaying taking your personal pension.
Continuing to work
If you decide to keep working past retirement, continuing (or increasing) your pension contributions could be a smart move.
For personal pensions, assuming your contribution is within your annual allowance, factor in tax relief and you could be increasing the value of your net contribution by 20% - and if you continue to work, you can start to claim your pension as soon as you’re ready. Please note that tax treatment will depend on your individual circumstances and could change in future.
If you're thinking about deferring your pension, or want to carry on working after retirement and continue paying into your pension, it's a good idea to get financial advice.
Reducing your outgoings
Whether you’re in the run-up to retirement or already claiming your pension, cutting back on some items could make a big difference to your budget.
To start, draw up a list of your income or expected income and your outgoings. You’ll then see if there’s a gap and identify where you can cut back.
Using your home
Some people choose to use their home as their nest egg – so another option can be using your home's value. If you're able to downsize, you could end up releasing a sum of money.
Alternatively, if you're a UK homeowner aged 55 and over, you could consider equity release. The type of equity release we offer is a lifetime mortgage, which is a long term loan secured against your home. Subject to our terms and conditions. Please note, that inheritance will be reduced and tax and welfare benefits may be affected.
You have to take financial advice when you opt to take out a lifetime mortgage. It's important that you consider the benefits, costs and risks carefully before deciding whether a lifetime mortgage, or other equity release product, is right for you. If you're thinking about equity release, you must speak to an equity release adviser., or visit unbiased to find an independent equity release financial adviser.
