BLOG: It’s time to get real about retirement
We all look forward to receiving the state pension and getting back some of those National Insurance contributions we’ve made over the years. If you were to ask the man on the street how much they expect to receive each week the chances are you’ll get an answer of “something like £100”.
Very few people, including the Shadow Pensions Minister this week, are able to name the exact amount. To be fair it’s not particularly straightforward, given that the actual amount will vary depending on an individual’s NI contributions and whether they’ve paid into the Second State Pension.
The actual basic state pension is £113.10 but Aegon’s Retiready Report, which surveyed 4,000 UK residents, found that more than half (56 per cent) of people thought that the maximum basic state pension was higher than this.
It’s worrying that even now, when pensions are more topical than ever, people seem to be unclear on how much they can expect to live off in retirement. Here’s how you can get real about your retirement:
Think about the future you want
Have some sort of a realistic expectation of how you want your retirement to look, and use this to plan your required income. What sort of income do you need to continue the lifestyle you want into retirement? Many of us are being automatically enrolled onto a workplace pension, but do you know how much this will provide for you, and can you rely on this plus your state pension alone?
The latest ONS figures show an average total household expenditure is £489 per week – that’s more than four times the current weekly state pension. If you don’t have an accurate grasp on what your income will be, it might come as a bit of a shock. Now is the time to assess this and prepare.
Get savings savvy
There are a number of ways to make the most of your money and maximise your retirement income. This year’s Budget introduced New ISAs or NISAs as they’re being called and these accounts allow you to save up to £15,000 a year tax free. Few people are fortunate enough to be in a position to maximise this tax free allowance each year, but it’s worth keeping ISAs in mind when it comes to your retirement savings as they’re often a good way to put additional savings aside on top of your pension.
Today’s fast-paced lifestyle can make it difficult to keep track of finances – for instance, where traditionally we may have been in the same job for a number of years, or even a lifetime, we’re much more likely to chop and change to suit our career and lifestyle choices. In this case, it can be difficult to keep track of the different pension pots you’ve acquired. The industry is waking up to this and there are an increasing number of ways of monitoring your money online so take advantage of these services. One example is Aegon’s Retiready service, which is available online and on mobile devices and allows you to manage all of your pension and ISA savings in one place.
David Macmillan is managing director at Aegon UK.