You won’t be alone if you’re fast reaching retirement age but haven’t made adequate plans and are worried you won’t have enough pension provision to see you through.
Many people find themselves facing this challenge, and although it isn’t an ideal situation, there are some steps you can take now to help bridge your funding gap.
Know how much income you will need in retirement
Drawing up a budget will help you get a feel for the level of income you’ll need to cover your costs in retirement. Some expenditure like travel to work will disappear, but you may find you spend more on gas and electricity as you’ll be at home more.
Review your pension provision
It’s very often the case that people nearing retirement are hazy at best about the amount of state pension they will receive. In addition, the age at which this becomes payable is rising; from December 2018, the State Pension age for both men and women will start to increase to reach 66 by October 2020. You can get a pension forecast and confirm when you’ll be eligible to receive it by going to the gov.uk website and following the links to State Pension forecast.
If you’ve accumulated pension pots with various employers over the years, then it’s worth getting professional advice to review their worth and consider the possibility of consolidating them or transferring them to another scheme. Even if you only have a few years left to retirement, you can still benefit from the tax relief available on contributions and provide a boost to your retirement income. You may be able to negotiate a reduced salary with your employer and put the difference towards your pension, or use an annual bonus if you receive one.
Consider consultancy work for additional income
If once you’ve reviewed your pension position and looked at other assets you hold that could be used to produce additional income, you’ll have a better feel for what your financial prospects in retirement will be. You could of course consider working past your normal retirement date, or decide to change careers, work part-time or do consultancy work if these possibilities are open to you.
Think about equity release to unlock wealth tied up in your home
Many people approaching retirement find themselves with low incomes whilst living in properties that have increased considerably in value over the years. In these circumstances, it’s worth thinking about downsizing to release funds. If the thought of leaving familiar surroundings feels like a step too far, then equity release can provide a means of unlocking the wealth tied up in your property to provide a lump sum or an income. In most cases, this is achieved through taking out a loan against the property that is repaid on death, or when the occupant goes into residential care. Opting for this solution would reduce the value of your estate on death, so you would need to discuss this with your family, and professional financial advice is essential.
Talk to a specialist about pensions
Even if you fear you may have left it too late, with the right advice and some careful planning you can still provide for your retirement. If you would like some independent professional advice on how to plan effectively for your later years, then please do get in touch.
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Chat to the Author, James Appleby
Managing Director, Wealth management, Bishop's Stortford officeMeet James