Our economic outlook
16 April 2024
Pensions – Saving
Pension Saving for Retirement
When you retire, you will still need an income to meet the lifestyle you have planned for a long time. People are living longer and enjoying better health than their forefathers. One way of determining how much income you need is to work out the likely expense of household bills and add to this your lifestyle choices, such as traveling, hobbies and entertainment. Another way is to determine what outgoings you will not have in retirement, such as traveling to work, and deduct these from your current income requirements. Either way most of us live up to our income and that is likely to form the basis of your needs in retirement.
The state makes some contribution to this in the form of a basic pension. The maximum a single person can get from it is £164.35 (2018/2019) per week so it is very difficult to live off if you have not made any additional provision. The ratio of those in retirement to those in work is getting greater; therefore fewer people are supporting the state pension through National Insurance Contributions. This means it is getting too costly for the taxpayer so state benefits are likely to reduce.
Most people therefore need to supplement the state pension to maintain a reasonable standard of living in retirement. Saving for retirement does not have to be through pension schemes but their accompanying tax benefits make it worthwhile for pensions to be included in your financial planning. Pension schemes are available either through your company, by taking out a personal pension or both.
So if you are reviewing your Pension arrangements…
The value of your investment can go down as well as up and you may get back less than you have invested