Ensuring a comfortable retirement for yourself

Some quiz shows allow contestants to “stop the clock” but in real life, time marches onwards relentlessly and therefore preparing for our later years should be high on the average person’s agenda.  Even if, at the present time, you do not envisage yourself having a traditional retirement, you might find it useful to consider the possibility that you might change your mind for whatever reason or that events might force you to give up work later in life even if you would have preferred to continue.  That being so, it could be wise to consider how you will finance your post-work years while you are still working.

The state pension The simple truth about the state pension is that it depends entirely on political decisions.  Politicians can determine how much money you receive and at what age you can receive it.  They can change the level of national insurance contributions required to qualify for any given level of state pension, they could even choose to abolish altogether or to make it a means-tested benefit rather than one based on national insurance contributions.  Now, just because politicians can, in theory, do any or all of the above, does not mean that they will, however nor does it mean that they won’t.  Therefore, it could be considered a very wise precaution to take alternative steps to prepare for your retirement.

Private pensions Many people in work will now have access to workplace pension schemes due to the auto-enrolment scheme launched in 2012.  The “carrot” to remain in these schemes (rather than opting out) is the fact that employers are obliged to make contributions into the employee’s pension pot.  Those not in paid employment can still contribute to private pensions and while they are obviously not going to benefit from employer contributions, they could still, potentially, benefit from tax relief in one way or another.  For example, the self-employed are not in paid employment but do still earn taxable income while home makers may not have an income of their own but could use a partner’s income to fund their own private pension and benefit from the tax relief on that.  For the sake of completeness, it should be mentioned that, in principle, there is nothing to stop people in paid employment opting out of their workplace pension scheme and funding their own private pension instead.  While this could mean that they would miss out on employer contributions (although their employer might offer to pay them voluntarily), it would put your in control of the level of contributions you made and if you felt unable to make the necessary level of contributions required by the current auto-enrollment scheme but want to save something on the grounds that it was better than nothing, then this could be an option.

Other forms of retirement saving While pensions are synonymous with retirement saving, there are other ways of saving for retirement.  For example the (relatively) new Lifetime ISA (or LISA) was introduced for just that purpose (along with saving for a deposit).  While these may offer more flexibility than the pension saving in general and workplace pensions in particular, this flexibility can be a double-edged sword.  First of all, pensions savings benefit from tax relief and while the LISA does have a certain element of tax relief it works differently and may not be as beneficial, depending on your situation.  Secondly, pensions savings are ring-fenced, which, on the one hand means you can’t touch them, but it also means nobody else can touch them either or, to put it another way, they are ignored if you find yourself in a situation where you need or want to apply for means-tested benefits.  Savings held outside of a pension scheme, however, including in a LISA, might well need to be run down before you could claim such benefits. For pension and investments advice we act as introducers only.