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Budgeting for retirement

How to make your pension go further

Figuring out exactly how much you'll need to see you through retirement can be a complicated business.

And with 2 in 3 retirees worrying they've not saved enough before retiring, you're not alone in being concerned about your savings.

If you're nearing retirement age, we've put together a few ideas to help you make your money go further.

Defer your pension

How to budget your money in retirement

One action that will have the most influence over your future income is to defer claiming your pension – both private and State.

For every week that you defer your State Pension, it actually increases, with an annual increase of between 5.8% and 10.4%, depending on when you reach retirement age 1.

The benefit of deffering your State Pension is that you can still continue paying into any private pension you might have too.

You should remember though, that the value of investments can go down as well as up and you could get back less than has been paid in.

Continuing to work

Choosing to continue working past retirement age, whether full-time or part-time, is an increasingly popular choice.

In fact, the number of part-time employees over the age of 65 doubled between 2009 and 2015 2

If you decide to keep working, continuing (or increasing) your pension contributions could be a smart move. You’ll immediately increase the value of your contribution by at least 20% due to tax relief and you can start to claim your pension as soon as you’re ready. 

Reduce your outgoings

Whether you’re in the run-up to retirement or already claiming your pension, cutting back on some items could make a big difference to your budget.

To start, draw up a list of your income and outgoings to see how big a gap you have and where you can cut back. 

Release equity from your home

Nearly 70% of homeowners aged over 45 agree that their home is worth more than their pension, savings and investments combined 3. So could you consider releasing some of that value as cash?

With a lifetime mortgage, you can receive a lump sum payment based on your home’s value, without moving out. It could give you a much-needed boost to your pension income. 

It's important that you consider the benefits, costs and risks carefully before deciding whether a lifetime mortgage, or other equity release product, is right for you.

Calculate your retirement income

While you’re making these decisions about your future, it’s helpful to know exactly where you stand with the savings you have.

Use our retirement calculator to get a good idea of the income you can expect and plan accordingly.

A smaller-than-planned pension pot needn’t mean you can’t have a comfortable retirement – it just takes careful planning.

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