What do I need to do?
At this stage your retirement planning is likely to be based around assumptions rather than having a clear plan which will develop as you get closer to retirement. For example, you might know that you want to retire early, but probably not the exact age. If you’re employed, you are likely to already be a member of your workplace pension scheme.
As an example, if you saved £100 per month from age 22 would have a pension pot in today’s money of £85,494 (assuming 5% annual return and inflation of 2%) by their State Pension age of 68. This reduces to only £37,919 if they start saving at 42.
Why is this important?
In light of this, it tends to be more important for you to develop good habits rather than trying to create a goals based financial plan. Cash flow modelling can be used to simulate what income your current arrangements might be able to provide at certain ages and you might then consider making additional contributions to your workplace pension, particularly if you’re a higher rate taxpayer.
What about my other pension schemes?
You may also consider a pension switch where pensions from previous employers or personal pensions are evaluated and compared to what is available from your current employer or from the whole of market. Depending on the provider, charges, investment options and other factors, it might be beneficial for you to consider consolidating your plans into a single or smaller number of arrangements to make keeping track of them easier and to enhance the final outcome.
Are there any alternatives?
More flexible options, such as paying into an ISA, might also be considered. Money saved into an ISA can be used to pay out a tax-free income in retirement but has the flexibility to be accessed sooner if needed. Saving for retirement is great but between now and 68 a million different things might come up and if all of your savings are locked into a pension your options are limited.
Will it cost anything?
You’re more likely to take one off advice at this stage where a specific piece of work is done for a set fee. This tends to be better than paying for an ongoing service because the advantages of an ongoing review and adjustments to the plan are likely to be of less benefit so far away from retirement. The exceptions to this are business owners, people with more complicated circumstances, people with specific investment requirements or higher earners who are more likely to benefit from an ongoing service even in the early years.