Retirement Planning – Frequently Asked Questions

There are two main types of types of pension schemes a defined benefit scheme and a defined contribution scheme.

A defined benefit scheme (commonly known as final salary schemes) is where your employer promises to deliver you an income in retirement based upon the number of years you have worked for them and your salary. It may be a non-contributory scheme, or you may be required to contribute each month into the scheme.

The other type of scheme is a defined contribution scheme. If you have this type of scheme, you will be expected to contribute a percentage of your salary as will your employer. The money is invested to build a pot which will then fund your retirement.

In retirement, your outgoings are likely to be lower. For instance, most people will be mortgage free and not supporting children. The general rule of thumb is that someone currently aged 40 would need around 50% of their current net income to maintain their standard of living in retirement.

You should also factor in the state pension. Under the new rules this could be worth £175.20 per week (£9,110 per year) but the actual amount you receive will depend on your national insurance record.  So, someone targeting a retirement income of £23,000 per annum would need to contribute £14,000 pa.  from their own pensions.

You can check what you qualify for online here.

Naturally, the amount you need to save depends on the size of the pension you want. However, it also depends on your age.

For instance, putting 12% of your salary towards your pension might be enough if you start in your 20s, but if you leave it until you’re 40, you might need to pay in closer to 20% to get the same level of income.

It’s sometimes said that a general guide for working out what percentage of your salary needs to be going into a pension is half the age from when you started saving. So, if you started at age 30 it would be 15%. However, this will depend hugely on your circumstances and what you are looking to achieve in your retirement.

Variation in salaries and personal circumstance will very much influence how much you can save. It is a good idea to put a financial plan in place with a financial adviser to plan your finances ahead as early as you can. 

Speaking to a knowledgeable and experienced adviser about your retirement plans can help you get both a clear view of your current situation and the changes you could make, so that your money works harder towards your goals.

That is a reason for planning with a financial adviser. Most people face changes through their lives either of their own decision and accord or through external factors out of their control. 

You can work with your adviser as your life changes so that you adapt your pension plan accordingly.

Many people are reconsidering their retirement plans as a result of the financial implications of the pandemic. Some want to carry on working for longer and others are considering an earlier retirement due to forced circumstances or more immediate opportunities. The best way to really work out the most suitable and affordable options for you, are to work with our adviser who can map out different scenarios with you, so that you can make informed decisions