The 1 in 3 chance your pension might fail you, and what you can do to fix it.

A recent study by the International Longevity Centre (ILC), in conjunction with Standard Life, suggested a stark reality for those born between 1965 and 1980 – also known as ‘Generation X’. That reality was that around 33% of this generation have ‘inadequate’ provisions for their retirement, meaning that through a lack of planning, inadequate savings strategies and general neglect, nearly a third of a generation not that far from retirement are staring down the barrel of not having enough money to support themselves in it.

Generation X finds itself in a unique position in the pensions market, generally having entered the workplace at a time where final salary scheme pensions were a thing of the past and auto enrolment hadn’t yet arrived. This, combined with the woeful lack of clear education on the subject and a general reluctance to consider the topic has led us to the situation we now find.

But doom and gloom isn’t really our style. Many publications have already highlighted the desperate plight of this forgotten generation of upcoming retirees, but here at Seymour we are focused on solutions, not problems. If you think that you may not have your retirement plans in order, or even if you just fancy checking them out, here’s out top ten tips to give yourself a Pension Detox and really cleanse those finances:

  • Remember it’s never too late! Whether you’re already picking out post-work life hobbies or retirement is a distant speck on the horizon, the only wrong action is inaction – get on it now!

  • Check your life insurance policies: are they still fit for purpose? Are they up to date with your current mortgage/s and other debts? When were they last reviewed? Are they written into trust? It’s the most basic step on the financial planning ladder but even those who have policies often fail to review them, meaning that they become an expensive and inadequate liability instead of a core protection.
  • Make a comprehensive review of your month to month income, expenditure and savings. Be honest with yourself; are there areas in which you could cut back if you needed to? Extra money found here (changing a phone plan, making your social life cheaper, examining your transport options) can all be put towards savings and helping to beef up that pension pot
  • Consider your tax reliefs – if you’re a higher rate tax payer for example, extra pension contributions attract tax relief at 40%, meaning more money in the pot.
  • Consider Individual Savings Accounts (ISAs) for yourself and (if applicable) your partner. Even if not working, you can contribute £20k a year into an ISA which is not limited to earnings like a pension contribution. This means that in households where one partner is a houseperson, you can effectively double the amount you can put in a tax-free environment to £40k.
  • Check your state pension forecast. For starters, you could make up extra years where you haven’t built enough. The state pension is a guaranteed index-linked pension for life. To put that in context, if you were buying an annuity to the same level it would cost you over £300k.  For married couples state pension income as a household will reach over £18k a year before the need to take pension income from private provisions, so it’s not to be sniffed at.
  • Check your work place pension contract if you have one. If you increase your contributions does your employer increase theirs to match you? If so, it’s effectively money for nothing and can have a big effect on your overall pension pot.
  • Think in detail about your income needs into retirement, and how you will realistically meet them. Are you planning to retire in full at state retirement age, carry on working full time until a later date, or get a part time job following retirement that may provide a small additional income? Regardless, it’s important to cashflow your retirement to establish what level of shortfall if any you have. We do cashflow planning as part of our wealth MOT so by following our advice, you can make an informed decision based on realistic estimates not only of what you need but how best to get there.
  • Stress test your retirement. It’s always best to plan for the worst even as we naturally hope for the best. You may think you have just enough to retire comfortably, but what would happen if there was a financial crash, a global pandemic or a personal change of circumstance? Could your plans survive this kind of external pressure? At Seymour we cashflow such events to see if your plans remain realistic in these scenarios, building in the sort of resilience that will help ensure you won’t be caught off guard at the worst possible time.

  • Explore your options realistically if you do establish a shortfall. Perhaps you could save more money now, retire at a later age or accept a lower income in retirement. Fluidity and adaptability are crucial when it comes to long-term financial planning, especially when it comes to retirement. Just remember to be honest with yourself about what’s possible versus what’s realistic – it may be possible to work until you’re 80, but is it realistic in your chosen field?

While this is no magic solution, by following these kinds of steps and being honest and realistic with yourself about what you can have, as well as what you want, you will avoid the pain the media insists is headed towards the ‘forgotten generation’ as you near retirement. For more information and to make a start on those plans, call us today. SF