Funding retirement is something which many people will take a lot of time to consider, and there are a whole host of options. For some, it may be that they want to boost how much they will have in retirement, and there may be a number of ways in which they can do so.
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It’s something which Simon Stanney, SunLife’s equity release director and independent financial expert James Daley have looked at.
It comes as Sunlife’s Finances After 50 research revealed that a third of over 50s don’t think they have enough in their savings, investments and pensions for the retirement they want.
Speaking exclusively to Express.co.uk, Mr Stanney and Mr Daley have suggested some ways people may be able to boost their pension pot.
First up though, the pair propose that those looking to up their retirement funds should first work out what they’ve got.
“You need to get the details of any private and workplace pensions you have – if you’ve worked for a number of different employers over the years, you may have a few,” they said.
“Once you know where you are with your private and workplace pensions, you need to find out how much you are on track to receive from the state pension. You will need 35 qualifying years of NI payments to get the full state pension, which in 2020/21 is just over £175 a week.
“Once you have the details of all your pension schemes and any savings and investments, you should be able to get an idea of the level of income you are on track to receive.”
Then, it’s a case of considering the retirement lifestyle that one may want, and take into account any changes in spending that could come with this.
“For example, if you’re on track to pay off your mortgage before you retire, that will cut your overheads, and you may spend less on transport costs if you are no longer commuting.
“However, you may want to spend more on holidays and travel or in pursuing new hobbies.
“If, once you have listed out all your outgoings and compared this with your projected pension income it looks as if you may not be able to enjoy the lifestyle you were hoping for, there are some actions you can take.”
So, what are some ways in which it may be possible to boost retirement funds?
From health to care requirements, there are a whole host of reasons why a person may make the decision to retire.
However, SunLife research shows 85 percent of retired people think that they retired too early – by two and a half years on average.
“So, if you don’t think you have enough income for retirement and you’re fit and healthy, it is worth considering working for a bit longer because it could make a significant difference,” Mr Stanney and Mr Daley said.
They went on to detail an example of how deferring claiming the new state pension could increase the payment in the future.
“For example, if you defer taking your pension at your state pension age, when you elect to take your state pension you will get one percent more for every nine weeks deferred, which works out at just under 5.8 percent more a week for every 52 weeks you defer.
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“The state pension for 2020/21 is £175.20 a week for anyone retiring on or after April 2016. This is annual income of £9,110.40.
“So, using 2020/21 entitlements, if you defer for a year, you would get £10.16 extra a week when you do take it, bringing the weekly amount up to £185.36 and the annual income up to £9,638.72.
“If you were to defer another year, you would get another 5.8 percent extra a week.
“If you deferred taking your state pension until you were 70, the amount you’d receive would go up to just over £12,000, which is still under the current annual allowance of £12,500 so you wouldn’t pay income tax, but is a significant increase on the £9,110.40 you’d be getting without deferring.”
These broad calculations look only at the state pension and don’t take into account increases to the state pension or changes to personal tax thresholds.
“If you don’t want to carry on working full time, you could also think about dropping to part-time, or doing something else; SunLife’s research reveals that 15 percent of over 65s are still working, but most are either part-time or working for themselves.
“For example, the National Living Wage is £8.72 per hour.
“So, if instead of retiring, you had a job paying the NLW, you’d only need to work around 20 hours a week to earn £9,110.40 – the equivalent of the state pension if you don’t defer.
“You could think about doing some part-time work that is related to a hobby rather than your career.
“For example, becoming a local tour guide, or doing some part-time shifts in a café or garden centre.”
For those who have got a private pension, they may want to consider making contributions to boost their funds for retirement.
“Adding to your regular pension savings – even by just a small amount – can really add up,” Mr Stanner said, “especially because of the tax relief from the Government.
“Lower rate taxpayers get £1 for every 80p paid in, higher earners get £1 for every 60p paid in. Plus, if you increase your contribution, your employer may increase theirs too.”
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