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Pension savings timeline

Are you starting your first job, mid-way through your working life, approaching retirement or retired? Then this timeline will help you understand the benefits of long-term pension saving and managing your money. 

 

Starting out

Pensions offer a way to grow your money in a tax efficient way, and get tax relief. 

This helps to boost your savings and build up a pot of money which you can use to live off later in life.

The sooner you start a pension, the more you’ll save in tax and for the future.

Start a pension

If you’re employed, saving into your employer’s workplace pension is the easiest way to start.

If you’re self-employed, you can set up a pension yourself.

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Decide how much to save

Think about how much you can afford to save. Base this on your current budget, and how much you might be able to save if your circumstances change – for example, if you get a pay rise.

Think about how much you’re likely to need in retirement to fund the lifestyle you want

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You get tax relief on your pensions savings at your usual tax rate. So, for every £100 you pay into a pension, you get £20 tax relief from the government if you’re a basic rate taxpayer.

Higher rate taxpayers can claim back the extra – so it pays to save more.

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Throughout working life

Remember to keep an eye on your pensions

It’s important not to forget about your pension. It’s best to check regularly whether you’re on track to meet your needs – and make changes if not.

If you’re saving into a defined contribution pension scheme, you (and maybe your employer) will be making contributions, which are then invested.

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So it’s important to check your pot regularly to see how it’s performing, and get advice if you’re concerned.

As your salary goes up, it usually makes sense to save more into your pension. This is the case as long as you have enough money to live on and you’ve got any debts under control.

Save more into your pension

You can generally get tax relief on pensions savings of up to 100% of your relevant earnings each year – subject to a maximum of £40,000 each tax year. If your earnings are £200,000 or more you might have a reduced allowance.

So it’s worth topping up when you can afford it. The sooner you top up, the faster your pension pot will grow.

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Manage your debt

It is a myth that you can’t have a pension or other savings if you have debt, but it’s important to stay in control.

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Manage your money

You’ll have lots of other commitments during your working life.

Find out how to budget and make your money go further while keeping pension saving in the mix.

Get guidance and advice

Major life changes will affect your finances – for example, moving home, getting divorced or losing your job. If you’re worried, make the most of the free information and guidance that’s out there or speak to a financial adviser.

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Thinking about retirement – ten years out

Retirement might seem a long way off. But now’s the time to check whether your pension pots look set to provide the income you want, and to understand your options for accessing them.

It’s also a good time to review your debts, make a will if you don’t have one – and to get advice if you need it.

Review your pensions

It’s important to check whether your pensions are on track to give you the income you want. If there’s a shortfall, you might need to look at ways of boosting your savings.

Understand your retirement income options

To help you plan ahead – read up on your options for taking your pension in advance and how they might affect your tax and any State benefits.

Review your debts

Now is also a good time to take stock of your debts, such as your mortgage, to make sure they’ll be paid off by the time you plan to retire.

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Make a will

If you haven’t made a will yet, it’s a good idea to do it now.

This will help make sure your money, other assets and any unused pension pots are passed on according to your wishes.

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For your pension savings, you should complete a ‘Nomination of Beneficiary’ form – often called an Expression of Wish form. You need to register it with your pension provider(s), rather than relying on what’s included in your will.

When you die, if your pension is paid out at the discretion of the Trustees, this won’t normally form part of your estate for Inheritance Tax purposes.

Getting free guidance

You can get free, impartial guidance from the government’s Pension Wise service. They’ll tell you about the options for using your pension pot, and the effect on tax and benefits.

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Getting financial advice

A financial adviser will recommend ways to adjust your current pension savings to maximise growth. This will be based on your personal circumstances and preferences.

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Thinking about retirement - five years out

This is the time to:

  • gather all your pension paperwork together
  • review all your pensions and make last-minute adjustments to help maximise your retirement income.

Get a State Pension Forecast

A State Pension forecast will show you how much you’ll get when you retire. You might be able to increase it by topping up your National Insurance contributions.

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Find lost pension pots

If you think you might have lost track of a workplace pension, the Pension Tracing Service will help you track it down.

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Review your pension investments

Check retirement dates and values for each pension pot, and whether you need to move your money into less risky funds.

If you’re in a workplace pension, this will often happen automatically. But it’s important to check your retirement date matches your plans to make sure this happens at the right time.

Equally, if you’re planning to take flexible retirement income, you might not want your pension to move into less risky assets. It’s a good idea to get financial advice if you need help with this.

Estimate your retirement income & expenditure

Work out your overall likely income, taking into account tax and benefits. Then, make sure you’ll have enough to live on. To help you do this, you can use our free and easy-to-use Budget Planner.

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Getting free guidance

You can get free, impartial guidance from the government’s Pension Wise service. They’ll tell you about the options for using your pension pot and the effect on tax and benefits.

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Getting financial advice

A financial adviser will recommend how you might adjust your current pension savings to maximise growth. This will be based on your personal circumstances and attitude to risk.

Moving into retirement

Work out how much you might get from each of your pensions

How you do this will depend on the type of pensions you have.

If you have a defined benefit (final salary or career average) pension

Contact the scheme provider for confirmation of how much you’ll get, and at what age. Plus, if it increases, and whether it has provision for any dependants you might have. 

If you have a defined contribution pension

How much you get will depend on how you access your money.

Broadly speaking, you can choose a guaranteed income (an annuity) or a flexible income (pension drawdown).

To find out how much guaranteed income you could get, you can use our annuity comparison tool.

When it comes to flexible retirement income, you can choose how much to take and how often. But you’ll probably want to try to make this last as long as you need it. You can estimate how much you could get and how long it will last using the Pension Wise calculator. 

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Make sure you’ll have enough to live on

Check that your pension and other income will give you the right mix of security and flexibility to meet your and any dependant’s long-term needs. If it won’t, you might need to retire later or make other changes to your plans.

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Understand what tax you’ll pay

The first 25% of your pension pot is usually tax-free, and you pay Income Tax on the rest and on your State Pension. Remember to factor this in when budgeting for retirement.

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Check your benefits

The age-related benefits you qualify for in retirement will sometimes depend on your income. And it might affect how you choose to use your pension pot.

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Create a retirement budget

When you have a clear idea of your likely retirement income, make sure you’ll have enough to live on. To help you do this, you can use our free and easy-to-use Budget Planner.

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Getting free guidance

If you haven’t already, get free, impartial guidance from the government’s Pension Wise service. 

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Shopping around

Like with any purchase, you can often get a better deal at retirement by shopping around. You could try this yourself, but you might choose to get financial advice before committing to anything.

A financial adviser will review your pensions as well as your income needs, and offer a recommendation based on your personal circumstances and attitude to risk. 

Getting financial advice

Unless you’re certain about which retirement income option is best for you – it’s important to get financial advice. Your choices will affect your income for the rest of your life, and might be irreversible.

Managing money in retirement

It’s likely you’ll have less to live on when you retire. So it’s important to regularly review your income sources – and find ways to make your money go further. You also need to plan for the unexpected, should your or your partner’s health change later in life.

Manage your money day-to-day

It’s likely that when you retire your income will fall, and your spending patterns will change. But there’s plenty you can do to plan for this, and help your money go further.

Review your pensions

Retirement can last over 30 years. So it’s important to check each year that any remaining pension pot or money in drawdown is on track to meet your long-term needs. A financial adviser can help you do this.

Plan for long-term healthcare needs

As you grow older, you need to think about how you would cope financially if you or your partner needed long-term care. Understanding who pays for what will help you plan.

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Appointing a power of attorney

As you get older, it’s a good idea to arrange for someone you trust to manage your affairs if you become unable to do it yourself. This is called granting power of attorney.

Reviewing your will and nomination forms

By the time you retire, a lot could have changed. Now’s the time to check whether your will and your pension nomination forms still reflect how you’d like to pass on your money and other assets when you die.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
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