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Looking at the bigger picture

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Pensions are not usually at the forefront of most people’s minds, even as retirement approaches. But with a bit of careful planning, you can avoid nasty surprises that might otherwise throw your plans out of the window.

How much state pension will you get?

It’s important to get a clear idea how much your total income will be when you retire, which means thinking about the state pension as well as any private pensions you may have. State pension makes up more than two-fifths⁽¹⁾ of the average household income of pensioners, and understandably, most people can’t afford to retire until they get their state pension. So, knowing how much state pension you will get and when you will get it is important.

You can get a forecast of your state pension online on the government’s gov.uk website, or by calling the Future Pension Centre helpline on 0345 3000 168.

A further increase in state pension age has just been announced – the planned timetable⁽²⁾⁽³⁾ for state pension age now looks like this:

When born	State pension age
6^th April 1954 to 5^th April 1960	66
6^th April 1960 to 5^th March 1961	Between 66 and 67
6^th March 1961 to 5^th April 1970	67
6^th April 1970 to 5^th April 1978	Between 67 and 68 (transition details still to be announced)
6^th April 1978 or later	68

What could you expect from your private pensions?

Moving onto your private pensions, using an online tool such as Aviva’s My Retirement Planner will give you a rough idea of the regular income your private pensions are likely to provide. You can also see whether you are on track for the sort of retirement you are planning, or whether you may need to save a bit more.

Use My Retirement Planner>

Once that you have got a handle on what you are likely to get and when, the next stage is to prepare the investments within any defined contribution pension you have. Defined contribution pensions are pensions where you build up a pot of savings, usually by paying regular contributions as part of a workplace pension. These are usually known as ‘personal pensions’ ‘stakeholder pensions’ or ‘money purchase pensions’.

The preparation that you undertake will depend on what you plan to do with your money at retirement (from age 55 or later). You can find out more about each of the three main options:

Take an income from your fund, either for the rest of your life or for a defined period. This is also called ‘income drawdown’.
Buy a guaranteed income for life from an insurance company.
Take your whole pension as a cash lump sum.