More on Saving for Retirement
The starting point for saving for retirement is, of course, to put some income to one side for this purpose rather than to spend now or at some other point before retirement age.
If you have made a commitment to do that, the next issue is to ensure you are aware of all the options for investing this and have taken them into account.
Many of these apply with other savings, but those below are specific to pension planning.
Help from Hector
You can get tax relief on investments put into a pension plan, but it really isn’t as simple as that. Pension tax rules are complex and, to make the most of them, you need to really understand them, or get advice from someone who does.
Unless you are an expert in the field, you should talk to someone who is. You'll find several friendly folk in that category at Atkins Bland.
Saving on National Insurance
Lots of employees pay personal payments into a pension without realising that, if they structured it differently, they could reduce their liability to National Insurance rather than just income tax. With total employer and employee National Insurance rates higher than basic rate tax on a large slice of income, the benefit from taking advantage of this can be huge and make a real difference to how much you eventually build up in your pension.
How much to put away?
This is a big question.
The answer depends on how long you have, how much you will need in retirement and how much risk you are prepared to take of failing to achieve your targets.
However, in reality, even if you know the answers to the questions above, you still can’t know in advance either:
- How much you will need in a pension fund at retirement age, or
- How much you need to save each month or year to build this up.
These are what we like to call unknown variables. They are the flies in the ointment of certainty; the grit in the grease scouring away at your differential. They are here to stay, so we have to live with them
That means the best answer to these big questions is: “as much as you can without making yourself miserable in the process”.
The more you save, the more you will have when you retire, or the earlier you will be able to give up working. That is a route to happiness.
Of course it is also true that the more you save the less you have to spend now, which might not be a route to happiness!
However, if you are reading this, you are probably someone who wishes to increase their savings. This is something we have the highest level of experience with, so get in touch if you feel we can help.