This is a question that our clients always ask us when we are discussing their private pension arrangements. Putting money away every month or year to benefit us at some point in the future is a major decision to make, and can feel very unreal, when you are more concerned about covering your day to day costs. Of course as advisers, we don’t actually tell you the answer! It is very much your decision. But we can tell you the things we discuss with clients when we are looking at their pension options.
How long until you retire?
The conversation about how much you should invest will very much depend on how long you have until you retire. Put simply, if you are in your thirties or forties your pension pot has longer to grow than if you have reached your mid fifties. You may also have a view about what age you want to be when you retire. Don’t forget you can currently claim the state pension on reaching 66, but this is set to increase, meaning many of us won’t be able to claim that until you are 68.
What other pension arrangements do you have in place?
Very often when we speak to clients they have had a number of previous jobs. This is likely to mean that they have a number of other pension pots in place, some of which they may have forgotten about. If you can find the details of those other pensions before you come and talk to us, this will help us advise you as to the best course of action. You may be able to transfer some of those pots into a new personal product which you then pay into regularly.
How much risk are you comfortable with?
This is a very personal decision and one we can support you with. Some of our clients want a very secure investment and others are happy to take a little more risk. Some pensions will include a combination of funds, so you can benefit from both approaches.
What are your retirement plans?
This can be the most enjoyable part of pension planning! Some people’s retirement plans include travelling the world and supporting their grandchildren. Others have ambitions simply to remain active and enjoy their garden. Whatever your plans are it is worth remembering that the basic state pension is just £129.20 a week in 2019/20. However modest your plans, we suspect you are going to want a little more than that to live on.
What pension contributions can you afford?
This is an essential question, and it would be worth considering before you come to talk to us. Ideally you would be able to put aside a sum every month to invest, so do think about a sum that is affordable for you.
Don’t forget that whatever you put into your pension, you automatically get 20% tax back from the Government as an additional deposit. So for example £200 a month from your bank account means £250 a month goes into your pension.
What if things change?
Don’t forget, we offer all of our pension clients an annual review, so if your circumstances change, you can adjust the amount you put into your pension.
If you would like to review your existing pension arrangements, contact us on 01543 410512 and make an appointment to see one of our advisers.