Retirement may seem a long way ahead when you’re under 50. There could be lots of other demands for any extra money you earn –holidays, children heading off to university or supporting elderly relatives. Putting money away now for your future is just as important.
The most popular way to save for retirement is through a pension. You can either set up a private pension yourself, or pay into a workplace pension scheme set up by your employer. When you pay into a workplace pension scheme, the amount you choose to pay in is often matched (up to a set limit) by your employer –so your savings grow even more quickly. As a part of Lloyds Banking Group, Scottish Widows offers pensions and advice. See how they can further help you understand your options.
Things may have changed by the time you’re ready to retire, but at the moment, there are a number of choices you can make when you decide that you’re ready to take money out of your pension:
Pensions are a tax efficient way of saving for your retirement. That’s because you don’t pay income tax on the money you pay into your pension or on the amount it grows. You can also take a quarter of your pension pot as a tax-free lump sum when the time comes to retire.
The money you pay into a pension is invested and investments can go down as well as up, which means you could get back less than you invested. The idea is that this pattern of ups and downs balances out over time, which is why investing for your retirement is a long-term plan.
It’s never too late to start saving for retirement, so even if life has got in the way, any money you pay into your pension fund will make a difference.
Our pension payment calculator lets you see how different levels of payment can add up and our paying more calculator shows you how increasing your payments could help you get more when you retire.
For most jobs, there isn’t a statutory retirement age any more, and many pension schemes give you some flexibility over when you can take your money once you reach 55.
Our pension options calculator can help you understand how the choices you make about taking your pension would work for you if you were to be retiring now. Although the rules or choices may change, it can give you an idea of whether you’re on track with your plans or whether it’s worth topping up your payments. Your pension provider or administrator should be able to give you an up-to-date statement of what your pension could be worth at the retirement age you originally selected. You can also find out what State Pension you may receive.
Today, the typical person will have had 11 different jobs during their working life*. If you’re part of a pension scheme at each job, it means you could end up with pension pots all over the place. If you’re self-employed, you may have different pension pots depending on if you’ve worked for a company or pay into accounts privately. You can choose to combine your pension pots or keep them separate, but it’s worth considering the pros and cons of each option carefully. Keeping tabs on your different pensions is also important, with estimates that there is almost £20bn in ‘lost’ pensions outstanding.*
*https://www.scottishwidows.co.uk/retirement/retirement-explained/approaching/combining-pensions/
* The Times -£20bn pension treasure hunt -October 2018
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