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Making sense of your retirement

When you’re in your first job, retirement can seem a long way off. In truth, it probably is. But starting early gives you longer to save and the best chance of a financially secure retirement.

It makes sense, the longer you have to save, the more chance your money has to grow. The longer you leave it, the more of a struggle saving will be. Once you’ve got the savings habit, you’ll feel more comfortable about your financial future.

Don’t worry if you’re confused about where to start. With our help, you’ll be able to build a better picture of your future.

Why plan for your retirement?

Find out why retirement planning makes sense.

The state pension is not enough
In 2009/10 the basic state pension is only £152.30 a week for a married couple or £95.25 a week for a single person. How does this compare with what you earn today? Is it enough to enable you to survive financially let alone enjoy your retirement?

Your company pension might not be enough
A company pension scheme will give you some income when you retire. But will it be enough? If your company pension benefits aren’t enough, you can top them up with your own pension.

You'll want to enjoy your retirement
Retirement is a time for enjoying yourself, not worrying about money. With all the spare time you’ll have on your hands, you’ll want to do all the things you couldn’t when you were busy working. Travelling the world and taking up a hobby both need money.

Some things you need to consider

A few things to consider to get you started.

What will you do when you retire?
It’s always helpful to have some goals to aim for – it makes it easier to make them happen! What will you do when you retire? Work part time, play more golf or start your own business?

You might not have made up your mind today but as you grow older you collect more ideas about how to spend your retirement years. When you have a clearer picture of what you want to do, you'll be closer to understanding what you need to do to afford it.

How much money will you need?
It’s easy to underestimate how much we need. Your mortgage may be paid off but if you’ve had a mortgage for many years the payments will gradually have become a less significant part of your outgoings. Think about the things that will change when you stop work.

If you have a company car today, you might need to buy your own car when you retire – and pay for maintaining it as well. You won’t travel to work every day, so you’ll probably spend less on transport.

A sensible rule of thumb is to aim for a retirement income of around two thirds of your earnings when you retire.

Do other people rely on you financially?
Are you the breadwinner? There could be other people, such as your children, who you support financially. Does this affect how much money you’ll need?

Don’t ignore inflation
Over the next 20, 30 or 40 years you can expect your income to rise and prices to rise as well. So base your target retirement income on what you’ll earn in the future, not what you earn today.

More on the effect of inflation

It’s never too late to change
Retirement planning needs you to make a financial commitment. But if your circumstances change in the future, so should your retirement plans.

Your retirement savings options

A quick look at some of the financial plans available.

Pensions
Pensions have generous tax advantages that no other savings products can match. They’re great for retirement savings and can give you access to a wide investment choice. Pensions are the cornerstone of many peoples’ retirement strategy.

More on pensions

Savings and investments
If you’re a regular saver or have a lump sum to invest, you can use savings and investment plans to supplement your pension.