Future Proof

01.09.21

As our life expectancy increases, forward planning for retirement has become a priority. Julia Millen spoke to Julie Dawes, Director of Julie Dawes Wealth Management for some pointers

Whether you’ve just started out on life’s journey, or are counting the days to retirement, pension planning should be high on your wealth management agenda. However, you will have very different needs and objectives depending on which part of the journey you are on. The earlier you start planning, the easier it will potentially be to create the retirement lifestyle you want. The stark reality is, that the majority of us need to save more.

With people generally living longer, retirement now represents a far greater proportion of our lives than previously expected and therefore we need to accumulate more, when we are earning, to meet the extra costs of living longer. The decisions we make today will dictate the standard of living we will enjoy in retirement.

The golden rule is to determine exactly how much you are going to need and to start preparing for it now.

Budgeting for a regular monthly amount towards any pension savings should be considered an integral part of household expenses, just like heating and lighting bills. Remember that making annual or single contributions has the possibility of buying into the market at the ‘wrong’ time. Monthly payments help to smooth out the effect of fluctuations in unit prices.

Those relying solely on the State Pension to see them through their later years, will have to accept that their standard of living is going to drop significantly. The State Pension provides a limited income (£175.20 for a single person, per week, based on a full NI record in the 2020/2021tax year), which falls drastically short of what is really needed to fund a comfortable lifestyle.

So how do we avoid poverty in retirement? First, decide how large a fund you will need. One method is to multiply your target retirement income by 25. For example, if you think you’ll need £30,000 a year, aim for a fund of £750,000. Next, select the most appropriate investment vehicles to help achieve your goal. Property, investment bonds and ISAs have all proved popular over recent years but don’t offer the same degree of tax breaks as a pension.

Whatever your age, you should regularly review whether your saving strategy is on track to provide for retirement.

To avoid running out of money, selecting a balanced and well-diversified investment portfolio is critical, but knowing how much money to take from a drawdown policy is arguably of greater importance.

The levels and bases of taxation and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.