Pensions can be extremely difficult to wrap your head around, but they’re nonetheless often a vital component of a contented retirement.
Preparation is key, and it’s never too early to start managing your pension to maximise your savings. After all, you’ve spent long enough building your financial buffer. You deserve to make the most of it.
In order to make sure that you’re able to live the life you want in retirement, here are some top tips to help you prepare your pension to the best of your abilities.
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Locate Your Pensions
There’s every chance you’ve picked up more than one pension throughout your working life, and there’s also a likelihood they’re not even on your radar.
It’s worth attempting to track down any pension pots you might have to lurk around just in case; you may be pleasantly surprised.
You can do this by using the government’s pension finder tool on their website or by reaching out to old employers directly.
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Consolidate Your Pensions
Many people choose to consolidate pensions to make them easier to manage. This involves combining them all into one pot, potentially maximising plan benefits, and getting the most out of your tax relief opportunities.
This can be a great way to get your finances organised, and it may make them easier to invest in the future.
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Work Out What You’ll Need in Retirement
To avoid a shortfall (where your actual pension pot falls short of your projected savings), you’ll first need to work out how much you’ll need to live the life you want.
This can be done with the help of a handy pension calculator, and you can find these in a few places, like the government’s website and moneyhelper.org.
When you know how much you need, you know how much you have to save to hit your ideal target!
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Check Your State Pension Status
Your state pension can be a great addition to your retirement income, so it’s worth checking out how much you’ll receive thus far.
There’s a section on the government’s website to help you with this should you need to work out an exact figure.
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Think About When You Want to Retire
You can take your pension once you reach 55 in most cases. You don’t have to stop working either, but it’s worth noting that the earlier you retire, the more money you’ll need to get you through retirement.
Remember to check your schemes for the specifics, e.g., when you can access the money, whether or not you can take the whole lot as a lump sum, and what benefits they offer you.
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Consider Your Withdrawal Options
You can choose to take out your entire pension as a lump sum, 25% of which will be tax-free, you could buy an annuity which would guarantee you an income for life, or you could take lump sums as and when you need them, leaving the rest invested.
It can be tricky to understand which one works best for you, so it’s always worth consulting a financial advisor to help you make the right decision.
Ultimately, a little preparation goes a long way, and it’s never too soon to get started!
