How to plan for retirement

The earlier you start thinking about your retirement savings, the more likely it is you’ll enjoy a comfortable lifestyle when you stop work

Published: November 9, 2018 at 3:21 pm

Retirement may be many years away, but it’s never too soon to start planning how you’ll pay for it. Lots of us have so many other financial commitments to think about that it can be easy to push retirement planning to the bottom of our priority list. However, the earlier you start thinking about your retirement savings, the more likely it is you’ll enjoy a comfortable lifestyle when you stop work.


Here's what you need to know.

Start young if possible

The later you leave it to start paying into a pension, the more you’ll have to put away. According to calculations by insurer Legal & General, to get an annual pension income of £5,000 when you’re 65 in today’s terms, assuming you used your pension to buy an annuity or income for life, you’d need to pay in £322 a month if you started saving at the age of 25. If you started saving into a pension later at the age of 45, you’d have to pay in £534 a month to achieve the same level of income at retirement. These calculations take the effects of inflation into account and assume a growth rate of 1.5% a year.

You can pay in more than the auto-enrolment contributions

If you’re employed, aged 22 or over and earn more £10,000, you’ll have been automatically enrolled in a workplace pension into which both you and your employer must contribute. Currently, you must pay in 2.4% of your salary, the government pays in tax relief of 0.6%, and your employer pays in a further 2%, bringing total contributions to 5%. The amount you’ll have to pay will rise next year. Remember however, that these are only minimums, so you can choose to pay more into your pension at any time if you want to.

Find out how much State Pension you may be eligible for

Remember to factor in the State Pension when thinking about what level of income you’ll need in retirement. This tax year (2018/19) the maximum you can get from, the new state pension is £164.35 a week, equivalent to £8,546.20 a year. To get this amount, you’d need to have made 35 years’ worth of National Insurance Contributions (NICs). If you’re not sure how much you’re likely to receive, you can request a State Pension Forecast at

Know where your money is invested


Lots of us stash money away in our pensions without knowing exactly where it’s being invested. Usually there’ll be a ‘default fund’ into which your contributions automatically go, but it’s worth checking with your pension provider to see if they offer any other funds which you might prefer to put your money into. You should also make sure you know how much you’re paying for your pension in charges. Some older pension plans are much more expensive than many newer plans, so you may be able to reduce the amount you pay be transferring to a different provider. If you’re unsure where to invest your retirement savings, or whether or not to transfer your pension, you should seek professional financial advice.


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