Date: March 2020
In the UK, we are fortunate to have the state pension to help fund our retirement. However, not everyone is entitled to receive the full state pension – and this can be a nasty surprise for people approaching retirement age. The state pension generally isn’t enough to provide a comfortable lifestyle, at just £8,767 a year (rising to £9,110.40 from April 2020). It is therefore essential to have built up a pot of savings alongside the state pension. Here are some actions you can take right away to boost your chances of an enjoyable retirement.
In order to receive the full state pension, you need to have built up 35 years’ worth of qualifying national insurance contributions. You can check your record and whether you have any gaps at the Government’s online portal (https://www.gov.uk/check-state-pension). Gaps are when you didn’t pay enough national insurance in a particular year – perhaps because you were studying, living abroad or didn’t earn enough.
You could consider making voluntary contributions to boost your national insurance record. It currently costs £780 to “buy back” a full year of national insurance credits. If you are unsure whether it is worth paying, the Future Pension Centre can help on 0800 731 0175. You usually have to make up the shortfall within six years of the end of the tax year for which the contributions are being paid. However there are extended time limits for some tax years.
Take a close look at all your private savings and see whether you are getting the best from your money. If retirement is some way off, investing is worth considering. Cash will not keep pace with inflation long-term. This is particularly true with interest rates being as low as they have been in recent years so it’s important the buying power of your retirement fund isn’t eroded.
However, make sure you invest through a legitimate company to avoid being the victim of a scam. A Financial Planner can guide you with investments and help you draw up a financial plan.
Saving into a private pension is one of the best ways to boost your savings due to generous tax relief. For example, basic-rate taxpayers only need to pay £80 to get £100 paid into their pension. For higher-rate taxpayers (those earning between £50,001 and £150,000), a £100 contribution costs just £60.
Get your FREE ‘retirement ready?’ checklist at our website at www.rosewoodfp.co.uk for easy, simple action points to get your planning on track.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Charlotte Wood trading as Rosewood Financial Planning is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority.