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Pension planning tips according to your age

Date: 24 October 2023

Embarking on the journey to a comfortable retirement benefits from an early start. But whatever your age, there are things you can do to help ensure your pension is on track. Here are some opportunities and tips to make the most of your pension whether you’re in your 20s, 60s, or anywhere in between.

In your 20s

The exhilaration of earning your first paycheque may mean planning for the future feels a long way off. However, seeing your 20s as the cornerstone of your pension saving journey can present fantastic opportunities.

  • Beginning your contributions as early as possible can help you to benefit from the magic of compound interest (earning interest on your interest).
  • You also have the maximum amount of time for your investments to potentially go up in value, allowing your money to grow exponentially over time.
  • If you benefit from an ‘automatic enrolment’ pension scheme through your employer, the minimum total pension contribution is 8%. However, boosting this contribution to 12% can significantly bolster your pension pot.
  • In addition, it's wise to make the most of any employer pension schemes that offer to match what you pay into your pension, essentially providing free money towards your retirement.

In your 30s

As you sail into your 30s, a closer look at how your pension is invested can be beneficial. Holding well-diversified investments in your pension can help achieve a balance between growth and security. Plus, because you still have a long investment horizon, typically, you can afford to take a bit more risk with how your pension is invested.

  • With your career progressing and your earnings potentially increasing, gradually increasing your pension contributions can further fuel the growth of your retirement savings.
  • This phase may also introduce the joy of a growing family, in which case it’s important to adjust your retirement plans to ensure a secure future for your loved ones too.
  • Particularly during your early career, you may move jobs more frequently. If each job offers a pension, you may end up with more than one. The UK pension system has a lot of flexibility, and most company pensions can be moved from provider to provider, if that’s something you choose to do.
  • It may be worth consolidating your various pensions, as it’s easier to keep track of your retirement savings. It’s worth comparing the costs of each provider and any other relevant factors, to help decide what is your preferred option. When moving pension pots, a key factor may be to look for a new provider that offers a selection of investment funds that will help you spread the risk.

In your 40s

Your 40s often herald a time of financial maturity and possibly higher earnings potential.

  • To help maximise your pension, it may be worth channelling a portion of any pay rises, bonuses, or inheritances you receive directly into your pension pot.
  • Determining your retirement age and ensuring it aligns with your savings trajectory and retirement aspirations is crucial at this point.
  • This decade is also an ideal time to seek professional financial advice to ensure your retirement strategy is robust and on track, because you still have plenty of time to make adjustments if needed.

In your 50s

As the golden years of retirement approach, your 50s are a critical period to maximise your pension savings.

  • As you now have less time to ride out any periods of economic uncertainty, reviewing your investment risk profile with a financial adviser and possibly reallocating your funds can provide a cushion against stock market volatility.
  • To make your retirement as smooth as possible, often is appropriate to aim to retire debt-free. Prioritise paying off high-interest debts as well as trying to pay off any mortgages.
  • It is also wise to check that your pension will go to the right beneficiary when you die. When you set up a pension you can nominate who will benefit from your pension pot when you pass away. However, this might change over your lifetime and making sure your nominations are up to date can ease the burden on your loved ones.

In your 60s and beyond

The arrival of your 60s begins the chapter of meticulously planning your pension income to increase the chances that your pension pot will last through retirement. Getting advice at this time is invaluable because if you set the wrong withdrawal rate, you risk your money running out during retirement.

  • It’s important to ensure that you are entitled to the full state pension which is something you can plan for along the way. However, if for whatever reason, you have not made the required National Insurance contributions, you should consider making additional contributions to boost your income in retirement.
  • With help from your financial adviser, you may need to decide whether you want to completely retire or simply reduce your hours. This will have a bearing on your retirement strategy. If your pension is not quite big enough yet, you may choose to work a few more years to ensure that you can live the retirement lifestyle you have aspired to.
  • Don’t forget to plan for healthcare costs and long-term care needs to provide a safeguard against unforeseen medical expenses.