Are you relying on the state pension?

Jul 25, 2016 | Tony Byrne's View

The state pension, the one benefit we tend to assume is a given. Have you actually checked to find out your entitlement? Have you even considered the possibility that you may not be entitled to the full state pension? Are pensions something that you have even thought about?

It is now compulsory to have a minimum of 10 years of National Insurance contributions in order to start qualifying for any state pension payments. You also need at least 35 years for the full state pension payments. You can request a state pension statement to find out how many qualifying years you currently have, regardless though, is it really enough money to survive on in retirement?

Despite the importance of retirement planning being highlighted by the government, particularly of late following the introduction of auto enrolment (the automatic enrolment into an employer pension plan for those who are between 22 and state pension age, earning over £10,000 per year and working in the UK), it still seems to be a topic that is put on the back burner. The issue for many is that they do not want to cut back on their spending or on luxuries, but burying your head in the sand doesn’t
mean it’s going to go away. The reality is we are all living longer, and many people are not even considering how they are going to fund their retirement. The fact that the government have introduced auto enrolment and are issuing non complying employers with such harsh penalties, highlights their concern surrounding future generations retirement plans and the very clear income shortfall that a lot of people will face when they hit retirement.

Without careful planning, retirement could mean an overnight drop in your standard of living, just at the time that you really want to enjoy life, perhaps do some travelling or even buy that dream car or retirement home by the sea.

So in essence, you should not rely on your state pension. However, it is certainly never too late or indeed too early to start saving and planning for your retirement. If you are self-employed, have you considered the fact that carefully planned annual pension contributions could mean a smaller tax bill each year? If you are employed are you taking advantage of your employer’s contributions into a pension scheme, are you even aware of what your employer currently offers? In either of those cases have you taken some retirement planning advice to project forward to find out what you need to save to achieve your target retirement income? If not, ask yourself why not, and perhaps it is time to start seriously considering your plans for retirement.

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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