Figuring out how much you’ll need to see you through retirement can be a complicated business.
If you’re nearing retirement age and looking for ways to make your money go further, we’ve put together a few ideas to help.
Defer your pension
One action that will have a big influence over your future income is if your circumstances mean you can defer claiming your pension – both private and State.
For every week that you defer your State Pension, the amount you’ll get when you do claim goes up. If you reached State Pension age on or after 6 April 2016, this works out as an annual increase of just under 5.8% 1.
With most private pensions, you’re not tied to a set retirement age. So you can leave your money invested and continue paying in if you want.
This will mean extra investment towards your future and more time for your fund to potentially grow. But remember 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
If you decide to keep working past retirement, continuing (or increasing) your pension contributions could be a smart move.
For personal pensions, assuming your contribution is within your annual allowance, factor in tax relief and you’ll be increasing the value of your net contribution by 25% - and if you continue to work, you can start to claim your pension as soon as you’re ready. Please note that tax treatment will depend on your individual circumstances and could change in future.
Reducing 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 or expected income and your outgoings. You’ll then see if there’s a gap and identify where you can cut back.
Using your home
Some people choose to use their house as their nest egg – so could you consider releasing some of your home's value as cash?
If you're able to downsize, you could end up releasing a lot of money.
Alternatively, you could take out a lifetime mortgage, which is a long term loan against your home that is repaid either when you die or go into long term care. You wouldn’t need to move out and it could give you a much needed boost to your pension income. This is a type of equity release.
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 an idea of the income you could 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.