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‘Never too late’ to boost retirement savings

As financial services firms launch pension tracing initiative


Today, 13 September 2021, marks the beginning of Pensions Awareness Week in the UK, a five-day initiative looking to shine a light on people’s attitudes towards retirement, savings, and planning for later life and care.

Unsurprisingly, the pandemic has made retirees and savers rethink their financial situations and assess what they want for when they stop working, and how to achieve those goals.

Many took covid as a catalyst to go into early retirement, while for others it helped them realise the road to the end of their working lives is probably going to be longer than they previously imagined.

A study by Abrdn revealed that 37% of people who are going to retire this year do not have enough money to last them for their entire later life.

Nearly half (48%) said they had to cut back and reduce spending, while 21% will be relocating to a smaller home to release some cash.

Worryingly, just 39% have sought financial advice in the run up to retirement.

‘Emotional preparedness’

Ben Hampton, retirement advice specialist at Abrdn, said: “With retirement potentially lasting 30 years or more, it’s vital that people are fully aware of how they’re going to make their money last.

“After the last few years, we think initiatives like Pensions Awareness Week are more important than ever for people to get back on track with retirement plans after so much upheaval in other parts of their lives.

“Being aware of how much you will need to meet your retirement goals, how much you can afford to spend and how this could change as the years go on, as well as considering how to piece together different types of income options, can be daunting. This is why preparation is key.

“Emotional preparedness is a vital factor to think about when it comes to retirement, and plays a huge part in the financial considerations. When you feel ready to retire, and know what you want your retirement to be, it undoubtedly influences what the financial profile of your retirement will look like.

“The big lifestyle changes that retirement transition brings can be unsettling, and particularly so if you don’t have a plan in place. A well-developed retirement strategy will help give you the confidence that everything is in place to help deliver the retirement that you want.”

‘Never too late’

Similarly, research by Killik & Co found that the majority (64%) of people aged between 40 and 59 had to reassess their finances as a result of covid.

Around six in 10 (58%) of grandparents are now worried about their retirement and nearly half (48%) had to step in to help their families financially throughout the health crisis.

William Stevens, financial planning manager at Killik & Co, said: “Pensions Awareness Week is an excellent opportunity for savers of all ages to pause and reflect on their pension, ensuring that they have made the appropriate plans and are in a position to live comfortably.

“Many people are concerned as they approach retirement because they did not create a financial plan, did not start early enough, or were simply uninformed about the process.

“It is never too late; however, to increase your retirement savings, and it is always a good idea to evaluate your pensions with the help of a professional to ensure that it corresponds to your long-term goals.”

Plan it out

Also, in a bid to help savers, Rebecca Williams, head of wealth planning at Brown Shipley, has spoken about five questions every person should ask themselves in the run up to retirement.

What income do I need in retirement and how will this change?

“Many people enjoy the opportunity to travel and pursue active hobbies in the early years of retirement and spending tends to be higher to reflect this,” she said.

Even though such spending will fall in later years, there are still costs related to later life care, whether this will be done at home or at a facility.

“A cash flow model is an excellent method of looking at spending over the long term in the context of your overall financial position.”

Should I repay debt? 

Williams continued: “Maintaining debt requires careful consideration after earnings cease.

“Consider how comfortable you are with maintaining debt in retirement – for how long and at what level? Where will income to repay the debt come from?”

What investments and pensions do my partner and I have? 

“A review of your overall financial position, including pensions and investments will ensure that your finances continue to be structured appropriately for retirement,” she said.

“Retirement often prompts a conversation about the amount of investment risk being taken especially if you will be reliant on your investments and pension to provide income.”

As a result, Williams explains that retirees should always see what tax relief are available to them and take advantage of those, especially the ones between spouses and/or civil partners so that assets are owned in the most tax efficient ways.

A part of this conversation is making sure all available tax reliefs and allowances are being used effectively and between spouses/civil partners and assets are owned in the most tax efficient way. You may hire a Tax Strategy Services expert to take care of these tax concerns.

What is my risk appetite?

Williams added: “Planning for retirement should include a reappraisal of investment risk tolerance – has your attitude to investment risk changed?

“Can you afford to take risk or are you relying on the assets you have to support you for the rest of your life?

“How would your lifestyle be affected if your investments and pension fell in value?”

Do I need to protect my family now and in the future?

There is always need for protection at any stage of life, but as income reduces when people stop earning, retirees should consider what type of coverage they may require and whether that should be extended to their families as well.

“Life assurance provided through an employer will end at retirement,” Williams said. “Consideration should be given to your particular family situation and if ongoing cover is required.

“Life assurance also forms part of discussions about estate planning and providing a capital sum to pay a potential inheritance tax liability on death.”

Track it down

Elsewhere in the industry, five financial services firms have teamed up to unveil National Pension Tracing Day.

On 31 October 2021, as clocks go back one hour in the UK; Punter Southall Aspire, Scottish Widows, Aegon, Legal & General, and Standard Life are calling on the industry to help people trace their forgotten pots.

At the moment, there are 1.6 million pensions worth around £19.4bn ($26.7bn, €22.6bn) – the equivalent of £13,000 each – that people have lost track of.

But this is set to increase. The Department for Work and Pensions believes that, by 2050, there could be as many as 50 million in lost pension pots.

Robert Cochran, retirement expert at Scottish Widows, said: “Our research tells us that, whilst savers already have the option of combining their pensions, one in 10 have no idea how to do this, while 12% say it’s just too much hassle.

“As a result, 44% say they’ve never bothered to track down savings from a previous employer.

“The issue of lost pots will only increase as people change jobs and are enrolled into new pension schemes.”

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