How do I prepare for my pension? | Retirement preparation guide

How do I prepare for my pension?

How do I prepare for my pension? This is perhaps the biggest of all the questions we regularly hear with regards to pensions. Preparing for retirement can be daunting, which is why Acumen has sought to answer some of your most burning questions surrounding the topic, as well as providing handy hints and tips to help you get ahead with your pension planning.

1. How do I work out my retirement income?

The obvious answer is to calculate your total savings across your various pensions (including your State Pension entitlement), savings, ISAs and other investments. However, calculating your State Pension and delving back through several disparate pension schemes requires a little more effort.

Follow our three-step checklist:

  • Get a State Pension forecast and check for any gaps in your National Insurance (NI) contributions.
  • Track down old pensions using the government’s free Pension Tracing Service.
  • Check your annual pension statement or request a new one from your provider.

2. How do I know how much I’ll need when preparing for retirement?

This is the age-old conundrum. The reality of preparing for retirement is that you’re likely to have less money to live on and certain costs (like leisure, healthcare and heating) may increase. However, this should be offset by becoming mortgage-free and the lack of work-related costs, like the daily commute. It’s important to assess your current expenditure and work out a realistic budget for retirement based on your desired standard of living.

Follow our three-step checklist:

  • Use an online Pension calculator to gain an idea of what your income might be when you retire.
  • Assess your current income and outgoings, then asses what you might need to change (if at all) to live a comfortable retirement that matches your expectations.
  • Aim to pay off any outstanding debts, like mortgages and credit cards, before you retire to maximise your retirement budget.

3. How do I protect my pension savings?

It’s important not to take any risks with your pension savings, particularly closer to retirement. For the most part, the money in your pension pot will be invested in funds. It’s a good idea to reassess the type of investments you hold as you near retirement age. Also, the new pension freedoms have been exploited by opportunistic fraudsters. Beware of cold call scammers offering investment opportunities and early access to your pension.

Follow our three-step checklist:

  • Check your pension investments continue to match your requirements. Do they match your appetite for risk? How long since you actually assessed the risk profile of your investments? Now is a good time to seek financial advice to make sure everything remains suitable for you and dovetails with your plans.
  • If you’re contacted out of the blue about your pension it’s likely to be a scam. Don’t provide any personal details or make any hasty decisions. Hang up.
  • If you believe you’ve been contacted by a fraudster you can report it to the Information Commissioner’s Office and if you think you might have been the victim of a pension scam contact Action Fraud on 0300 123 2040 or use their online reporting tool.

4. How else should I be preparing for my pension?

Having followed the previous steps, you should have amassed a great deal of valuable information. Armed with these insights, you can now make actionable plans to maximise your retirement income. Whether those plans involve boosting your pension contributions, plugging any gaps in your NI record, or continuing in some form of employment, it’s never too late to improve your pension forecast.

Follow our three-step checklist:

  • Consider bringing your pensions together into one place (this could be a SIPP or a different type of Personal Pension Plan) to maximise your money and potentially reduce the amount of fees you pay but don’t do this without advice. You might miss out on a valuable “small pots” option. Seek professional, independent financial advice.
  • Where appropriate, you might like to consider how the various options available to you through the new pension freedoms or through equity release could benefit your situation.
  • Much of what we have spoken about here involves complex, careful and in-depth planning. We highly recommend seeking independent financial advice for total confidence and peace of mind.

For more information regarding pension planning, or to arrange a meeting with one of our professional advisers, please contact Acumen today on 0151 520 4353 or info@acumenfinancial.co.uk.

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