Omnium Wealth Management

Blog: How to maximise your retirement income

Contemplating your desired lifestyle in retirement is one thing, making sure you have enough money set aside to make your dreams come true is quite another.

One sobering thought is that, if you want to maintain the same standard of living after you give up work, you will have to build up an annual income of around two-thirds of your pre-retirement gross earnings.

Experts estimate that the average pension pot should be around £260,000, up from an equivalent figure of £150,000 calculated in 2002. If you want a better lifestyle, you should set aside even more of your pre-retirement income starting right now.

One thing is for sure, the value of your income in retirement is likely to decline – a situation not helped by the current low interest rate environment and the ever-increasing cost of living. Whatever your circumstances, the sooner you start thinking about your plans and do something about them, the more attainable your goals will be.

There are some very simple steps you can take to maximise your retirement income:

Workplace pensions

The government’s auto-enrolment scheme means that, if you are earning at least £10,000 a year, you are eligible to join a workplace pension scheme whereby both you and your employer are compelled by law to put money into a pension on your behalf. If you can afford to put in more than the minimum, government tax reliefs can make this a simple, worthwhile course of action.

ISAs

Individual Savings Accounts (ISAs) allow you to put money (up to a maximum amount each year – this varies depending on the type of ISA) into an account that accumulates interest free of tax. The range of ISA options currently stands at six – cash, cash and shares, innovative finance, help to buy, lifetime and junior ISAs – although only the first three are likely to be appropriate for those contemplating their retirement.

Clear debts

Just as the value of your income is likely to reduce in retirement, the impact of debt on disposable income is most likely going to increase. Where possible, therefore, you should clear or reduce any debts you have, such as mortgages, other loans or credit card balances.

Top-up your State Pension

Under the state pension scheme rules you will need 35 years of National Insurance Contributions (NICs) to receive the full state pension when you retire. If you have missed any contributions, you can top up your pension with voluntary NICs.

Extend your working life

Over half the population in the UK now expects to continue working at least part-time after reaching retirement age. Working for a little longer and being able to make additional workplace pension contributions could make a significant difference to your retirement savings.

Lost pensions   

Most people move jobs over the course of their working life, accumulating different pensions along the way. Many people forget they even have them; the government estimates more than £400m in pension savings remains unclaimed. As long as you have the name of your past employers and/or the providers, you can use the government’s free Pensions Tracking Service to find contact details.

Pension consolidation

In some cases, you could save money by consolidating your pensions into a single pot. This will certainly help you to keep track of your retirement fund, but this course of action may not be appropriate for everyone. You should always seek professional guidance before transferring any pension because the process may involve the loss of some rights and cause you to incur penalty costs.

 

We can help with all aspects of your retirement strategy – call us today on 01483 205890 to discuss all your options.

 

Interested in finding out more? Read our guides:

          Tax Planning Guide 2018-19          

      Guide to Planning for Retirement      

      Providing for the Next Generation    

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