Getting your pension savings on track
If you’re getting ready to retire, or are simply thinking ahead, it’s good to know whether your pension savings are on track.
The best way to do this is by looking at:
- What your costs are likely to be when you retire
- How you might be able to fund those costs
- Whether that puts you on track for the future
- And what you can do if the numbers don’t add up
Your costs when you retire
You can probably picture the retirement you want – holidays, time with family and friends, a few improvements on the house, and a new car, maybe? But do you have any idea how much this might cost?
The Retirement Living Standards (RLS) could be a useful tool. They act as benchmarks for the income you might need in order to afford different lifestyles (minimum, moderate and comfortable).
As a general rule, they suggest the following:
*Figures quoted are from the Retirement Living Standards published by the PLSA and Loughborough University. (Costs will be higher in London). Full details can be found at retirementlivingstandards.org.uk
If you’d prefer to try and work out something more specific, you should take into account:
- Household bills - e.g. gas and electric, water, telephone
- Food and drink – whether that’s a regular supermarket shop, takeaways or eating out
- Travel – this could include your car running costs, such as petrol and MOT or money for public transport
- Holidays and leisure – covering how you like to spend your free time, such as luxury holidays
- Clothing and personal costs – including toiletries, shoes and minor healthcare expenses like glasses
- Money you spend on others – think about birthday gifts, as well as charity donations
We’ll soon be launching a Retirement Budgeting Calculator to help guide you through this step, giving you the estimated total cost of your annual expenses and a personal target to aim for with your income. Please keep an eye on your myRPS account for details.
How to fund your costs when you retire
You may have several sources of income when you retire, so it’s important to take stock of each of these and work out how much you may have in total.
This could include:
- your workplace pension – check your Annual Benefit Statement or log in to your myRPS account for an estimate of how much your pension will pay out
- your State Pension – the amount you receive is set by the Government. You can request an estimate online at gov.uk/check-state-pension
- other pensions – you may have a private pension or pensions linked to previous employment. You’ll need to speak to each of the providers individually for estimates on those accounts. If you’ve lost their contact details, the Pensions Tracing Service may be able to help. It’s a free, Government-backed, service available online (gov.uk/find-pension-contact-details) and over the phone (0800 731 0193). Other companies offer a similar service but many charge a fee
- savings and investments – if you have savings outside your pension, get those statements from your bank or other provider
How to know if you’re on track
The simplest way to check if you’re on track is to look at whether the lifestyle and costs you’ll need to fund are likely to be covered by your future income.
Keep in mind, this could be affected by a number of other factors, such as:
- when you retire
- what options you take for claiming your pension
- life expectancy, particularly for IWDC members
- changes in the law, including tax allowances
- rates of inflation
You can find out more by clicking the relevant links here
We’ve also created some special planning tools, to help you take control and make your pension work better for you.
For DB members this includes a pension planner – designed to show what your annual income could be when you stop work. And how this might be affected by different options, such as taking a lump sum or opting for a level pension.
For IWDC members there’s a retirement modeller - designed to show you what your pension pot might be worth when you retire. And the different ways you can choose to use that money, such as an annuity or drawdown.
Both tools are quick and easy to use. And you can access the one that’s relevant for you by logging in to your myRPS account.
Actions you can take if it doesn’t add up
If you’re worried that your income in retirement, won’t cover your costs, there are a number of things you can do.
- Get advice –speak to an Independent Financial Adviser (IFA) for guidance. The Trustee has carefully chosen Liverpool Victoria (LV) to give members access to financial advice. LV can be contacted on 0800 023 4187. You are still free to choose your own Independent Financial Adviser (IFA). And you can find an IFA in your area at unbiased.co.uk. The Money Advice Service also has a directory of advisers who specialise in retirement financial planning.
- Consider topping up your pension pot – think about paying more into your pension if you can. This is known as making Additional Voluntary Contributions (AVCs). It’s tax-free up to certain limits. And you can do it regularly or as a one off payment. You can find out more here.
- Think about changing your retirement age – you can delay taking your pension, giving you more time to build up your pot it. This is not a decision to be taken lightly and we suggest you speak with a Financial Adviser first. You can also find out more about the implications of retiring at different times in our planning for retirement section here
- Clear your debts – if possible, consider paying off any debts you owe before you retire