In the early years of your career your retirement can often feel like a far away prospect. You may have been contributing to a work or personal pension for some time, but have not given your long-term saving much thought beyond your payslip. Yet, as you enter your 50s, the lifestyle your final pension pot could afford you comes into focus. No one wants to receive the unwanted news that their long-term savings are not going to achieve the post-work life that they had hoped. This is why the sooner you engage with retirement planning advice, the better.

first-time investors

Retirement planning

Approaching retirement planning is often a matter of working backwards from when you would like to retire. By assessing what savings you have now, an independent financial adviser can make projections of what pension pot you could achieve by your ideal retirement age. However, in reality, the lifestyle you have in mind, and when you want to retire, may not match your retirement savings. This is when you need to consider the compromises you would be willing to make to reach your retirement goals. It is worth considering if you could contribute more to your pension each month, or extend your phased retirement plans to maintain your income for longer.

Contributing more to your pension pot

Most people will reach the peak of their earnings in their 50’s, which makes this an excellent time to contribute more to your pension pot. Even if you are looking to retire in the next 10 years, the possible growth from saving more into a pension over this time could make all the difference to your retirement lifestyle.

Saving more into a pension at this point in your career can also provide a sizeable tax saving on your earnings, which are taxed after your pension deduction.

Mortgage overpayment or pension saving?

The common advice given to many people is to overpay their mortgage before contributing more to their savings. While this certainly could reduce your monthly costs in the long run by paying your mortgage off early, it may not be the most tax efficient approach you could take with your earnings.

Contributing more into your pension now can help you in a multitude of ways. Primarily, your pension pot and portfolio has longer to grow, in a tax efficient environment. In addition, saving for your own future by way of Pension Planning can help to substantially lower your tax bill and ensure you retain your annual government blessed tax breaks, which in turn, lower your taxes further.

Most pensions also offer a tax-free cash lump sum of 25% of each of your pension pots, which could be used towards your mortgage. So, if your monthly mortgage payments are manageable, and you are on a set course to pay your mortgage off in a specific time period, you may be better served by contributing that extra amount to your pension rather than your mortgage.

State pension changes and how this could affect your retirement plans

You are currently able to take a personal pension from the age of 55. As a rule, personal pensions become available to withdraw 10 years before the State Pension. With the State Pension age increasing to 67 in 2028, this could add another 2 years to your phased retirement plans. If you will be 55 before 2028, it is worth consulting an independent financial adviser to see what your options are and how these changes might affect your retirement planning.

Talk to us

There are many considerations when it comes to your phased and full retirement planning, but fundamentally, the sooner you take advice the more likely it is that you will make your retirement goals a reality. At Grosvenor Wealth Management, we’ll talk through your individual circumstances, weigh up the potential advantages & disadvantages, and advise you on all the implications and possible alternatives, so you can make an informed decision.

PLEASE REMEMBER: Grosvenor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. The value of investment can go down as well as up and you may not get back the original amount you invested. Tax treatment is dependent on individual circumstances and may be subject to change.


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