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Are you ready to retire?

We all know we need to save more for retirement but how do you plan when you don't know how much you'll need?

4 hrs

People typically spend almost 6hrs planning a holiday but less than 4hrs planning their retirement*
33%

The average pension pot of a woman in her 60s is around a third of the value of a man’s***
1.4m

Well over one million people in the UK now have a SIPP**

Let’s start with some basics

Few of us will escape the reports that we all need to save more for retirement but how is it possible to plan when you don’t know how much you’ll need or how long you’ll be retired?

What income am I likely to need in retirement?

Typically, pension companies suggest you will need two-thirds of your current annual salary in retirement but how useful is that as a guide?

Looking at feedback from retirees of today, couples enjoying a comfortable retirement spend around £27,000 each year, a survey from Which? found.

And to secure that, as a rule of thumb, research from Aegon suggests that people should aim to build a pension pot of £300,000.

Now for the reality check

Currently, on average, a woman accrues a pension worth £51,100 by her 60s, significantly less than the average man at over £156,000.

If you want to enjoy your retirement, it is never too late to invest in it. And the earlier you start, the better.

At EQi, we offer products that allow you to invest for the long-term either through ISAs or Self-invested Personal Pensions.

These investment options are flexible, tax-efficient and put you in control.

Investment Risk Warnings

The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.

EQi does not provide investment advice. If you are in any doubt as to the risk or suitability of an investment or product you should seek advice from an independent financial adviser.

The extent and value of any ISA tax advantages or benefits will vary according to the individual's circumstances. The levels and bases of taxation may also change.

Tools

Pension calculator

Plan your retirement by assessing how much you should be investing each month to reach your pension pot goal.
- Pension calculator
Tools

Growth calculator

If you don’t have a sum in mind yet but know how much you can invest upfront or put aside each month, our growth calculator sets out how much your money could be worth over any given time period.
- Growth calculator

What are my pension options and what do they offer?

The good news is that you won’t necessarily need to save £300,000 in a single pot in order to enjoy your retirement.

For most of us, pensions are made up of more than one component - the State Pension, a personal pension, employers’ pensions and perhaps topped up with equity from a property if you plan to downsize.

Here’s a summary of typical types of pensions so you can make decisions about how to mix and match options to retire comfortably.

When can I draw a pension?

Since 2015, pensions become more flexible and you can access all but the state pension when you reach 55 (rising to 57 in 2028).

However, perhaps unsurprisingly, there are plenty of rules that apply, for example, you can access a 25% tax-free lump sum from a pension but the rest will be taxed as income.

The main thing to consider is making sure you will have enough to live on.

TYPES OF PENSIONS

What is a pension drawdown?

A drawdown allows you to take a lump sum from your pension, with 25% tax-free. You can then arrange for your pension to pay you a regular amount, every month or quarter for example.

You can continue to withdraw one-off sums but bear in mind how long you will want your retirement pot to last.

Or you can take ‘uncrystallised funds pension lump sums’, usually shortened to the acronym UFPLS, which also allow 25% as a one-off amount paid to you tax-free, with the remaining 75% taxed as income.

You are not limited to one method when it comes to accessing your pension and many retirees choose to ‘mix and match’ how they withdraw money from their pension pot.

Resources

What do pension annuities offer?

Some retirees opt to convert their pension into a taxable income for life called an annuity as they want the certainty of knowing what they will receive each year.

What income you will get when you buy an annuity varies a good deal which is why it is essential to shop around for the best rate. Once you buy a guaranteed income you can't change your mind, so understanding what to look for is vital. The money advice service has more information.
- Money advice service