Your retirement
This factsheet provides you with
factual information only - ReAssure
does not provide financial advice
Keeping your
pension on track
We all want to be comfortable when we retire. For many of us, expenses will reduce
as mortgages are paid off, and children become self-sufficient. On the other hand,
we have more free time, and want to make sure we can make the most of it.
Don’t regret missed
opportunities...
It’s important you keep track of your pension and how it is performing. ReAssure will write to
you every year to let you know how much it’s worth, and may also give you an idea of how
much you might receive when you retire. This figure will be adjusted for inflation, which can
reduce the real value of your money. You should always take inflation into account when
planning for your retirement.
Many people wait until they
reach retirement to realise
they don’t have enough
money to live comfortably.
We all work hard and
have busy lives, but don’t
miss your opportunity
to review your pension
arrangements.
We’ve picked out some of the key questions you should consider whilst you’re still paying in
to your pension below.
How much money will I need when I retire?
You can ask us for an estimate of how much your pension will be worth when you are due
to retire. You then need to decide if this would be enough to allow you to meet your living
expenses, and pay for any other plans you may have for your retirement.
One way of doing this is to make a list of what your regular expenses might be, and
consider how much you’d want to spend on holidays, hobbies etc.
We’ve included a budget tool in our Retirement Planning Toolkit which you can find at
www.reassure.co.uk/plan
Even small increases in
pension contributions can
have a positive impact on
your retirement income.
Paying more into your
pension earlier could mean greater freedom to do the things you want when you retire.
What can I do to boost my retirement income?
If your estimated retirement income will not be enough to support your retirement plans, then increasing your pension
contributions could be an option. If you have a private and a workplace pension you should think carefully about which
scheme you pay more into, especially if your employer matches the money you pay into your workplace scheme.
ReAssure has provided a useful retirement planner which can help you decide whether you need to increase your
contributions, which you can find at www.reasssure.co.uk/plan
There are different ways you can increase your pension payments. It’s possible to increase regular payments or make lump
sum contributions, depending on what your personal circumstances are. See page 2 for more information on how much you
can pay into your pension.
Are there any other advantages to saving into a pension?
You currently get tax relief on your pension contributions. The way this happens depends on the type of pension you contribute to.
If you pay into a personal pension or a group personal pension, your provider will claim tax relief at your basic rate from the
Government. For each contribution you make, we claim tax back from the Government. Assuming your basic rate of tax is 20%,
this means you end up with £100 in your pension pot for every £80 you pay into it. Someone with a retirement annuity
(a personal pension that started before July 1988) will normally claim all their tax relief through their tax return.
For workplace pensions other than group personal pensions, your employer will normally deduct your contribution from your
salary before you pay tax. This means you pay tax on a smaller amount of pay and get the full amount of tax relief you are
entitled to straight away. You can find out more about tax relief on the HM Revenue & Customs (HMRC) website at www.gov.uk/tax-on-your-private-pension/pension-tax-relief or from www.reassure.co.uk/annual-allowance
Your retirement
This factsheet provides you with
factual information only - ReAssure
does not provide financial advice
Are there limits to the amount of money I can pay into my pension?
https://www.gov.uk/tax-on-your-private-pension/annual-allowance
https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance
There is a limit on the total amount that you can save into a registered pension scheme each year without incurring a tax charge.
This is known as the Annual Allowance and it’s currently set at £40,000. However this amount will be reduced to £10,000 for
defined contribution pensions if you take any flexible withdrawals using pension flexibility rules that came into effect in April
2016. Flexible withdrawals can also include taking all of a pension as cash. If your income is more than £150,000 the amount
that you can pay into a pension and still receive tax relief will be reduced too.
There is also a limit placed on the amount of money you can build up across all your registered pension schemes throughout
your lifetime without incurring a tax charge (not including the State Pension).
This is known as the Lifetime Allowance which in the tax year 2016/2017 is set at £1 million.
Are there any other options for saving for retirement other than a pension?
Pensions are the most common way of saving towards retirement as they offer attractive tax breaks. However, there are other
ways in which some people save additional money to help support them in retirement, such as a tax-efficient ISA.
If you are interested in boosting your retirement savings, then it’s important that you explore the best option for your
circumstances and seek independent financial advice where required.
How could increasing my contributions affect the amount of money I get when I retire?
The table below shows the possible effect of paying £50 per month into a pension pot for a period of 30, 20 or 10 years.
Remember returns on investment are not guaranteed and can go down as well as up
Contribution
Period
Extra amount in
pension savings
Extra annual income
(annuity) you could buy
Assumptions used in table
10 years
£6,791.48
£393.21
20 years
£15,433.58
£893.56
• this person buys a retirement income, which
pays the same amount each year, based on rates
available from ReAssure on 22nd August 2016.
30 years
£26,430.56
£1,530.25
When calculating these figures we based our
projections on someone who is 68 years old when
they retire. We’ve also assumed that:
• the person’s pension fund grew by 5% each year
for the periods shown.
Notes: Quotes provided are intended to give an indication of additional retirement income that could be achieved by increasing pension contributions, and are not
guaranteed. Actual returns will depend on your individual circumstances. Historically, many people took a guaranteed income for life (also known as an annuity).
However for many types of pension there are more options available than just buying an annuity.
What if I can’t afford to increase my pension contributions?
Delaying when you will start taking your pension could boost your pension in a number of ways, for example:
•
It allows more time for you to contribute to your pension pot, and more time for it to grow, so you may have built up more
savings by the time you retire. You should be aware there is also the potential for your investment to go down in value.
•
The same amount of pension fund buys a bigger annuity for an older person than it would for a younger person.
As you get closer to your selected retirement date you may need to think about changing the way your pension is invested to
reduce your exposure to a fall in investment values - find out more in our Managing the risks to your pension pot factsheet
Where can I go to get help?
ReAssure is unable to provide financial advice, but we can give you factual information. If you want independent financial
advice then you can find a Financial Adviser in your area by visiting www.unbiased.co.uk or by calling 0800 020 9430.
You may need to pay for any advice you receive.
You can also get help from The Pensions Advisory Service by visiting www.pensionsadvisoryservice.org.uk,
or calling 0300 123 1047.
You may wish to find out what your state pension will be and if you can increase it. Visit www.gov.uk/check-state-pension
or call 0345 3000 168. If you need to track down lost pensions you can use the government’s free Pension Tracing Service by
visiting www.gov.uk/find-pension-contact-details or call 0345 6002 537.
ReAssure Ltd is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority. Firm reference number 110495.
Member of the Association of British Insurers.