Approaching your 60s can be exciting but also daunting as you begin to consider the type of retirement you want, how you will afford to live on your pension, and how you'll make the most of your time.
Everything comes with a cost, whether it’s taking that holiday of a lifetime or just having the freedom to enjoy each day as you please. So, one of our official charity partners for the 2013 Virgin London Marathon, Age UK has the following tips for how you can make your money go further in later life.
Think about how much you spend now and work out your outgoings. When you retire some costs, such as your mortgage, may reduce. Others may increase including what you spend on leisure activities.
This list will help you work out how much money you’ll need to retire comfortably, and have the lifestyle you want. Most people find they need less income in retirement – around two thirds of your pre-retirement income is a good starting point.
Call the Pensions Service on 0800 731 7898 for an update on what you can expect to receive in retirement from your State Pension. If you have a private or work pension, then ask the scheme manager for a forecast. By adding this to your expected State Pension you can see whether you will have enough income for the retirement you hope to enjoy. Check out Age UK’s pension calculator to see how much you may need for your retirement plans.
Many people will have accumulated a number of pensions over their working lifetime and it can make sense to consolidate the various funds but this will be subject to the value of the various schemes. This is a complicated process and is best conducted by a pension professional or independent financial advisor (see our link to advisors in the section below). As you approach retirement it is important to make sure pension funds are converted to cash or low risk funds to limit any impact a volatile stock market can have on your final pension pot.
If you have a money purchase (also known as a defined contribution) pension, you’ll have to decide what to do with the pension pot you’ve built up. The most common option is to buy an annuity.
As you only have one opportunity to convert your pension pot to an annuity, make sure you get the best value annuity for your needs by shopping around. Many people think you have to purchase an annuity from your pension provider. This is not the case and your income in retirement can be significantly improved by shopping around for the best annuity for your circumstances.
This is one time when poor health can have a positive impact on your retirement income by purchasing an enhanced annuity.
Many retired people don’t claim all the benefits they’re entitled to. Arrange a benefit check via your local Age UK, or call Age UK advice on 0800 169 6565.
You have the right to carry on working past 65. Think about all the options. A part-time position may fit well around your other commitments. You can also claim your State Pension at the same time as working, although it counts alongside any salary as taxable income.
It is also possible to draw a pension and a salary from an employer at the same time. Alternatively, you can put off drawing your state or private pension to build up extra pension later on. For Age UK’s free ‘Working Past Retirement’ guide, call Age UK advice on 0800 169 6565.
For more information on money matters or to download Age UK’s free ‘Worried you can’t afford to retire?’ guide, call 0800 169 6565, or visit Age UK, where you can find a wealth of advice on other topics affecting older people, such as health care and home help.
Age UK was formed by the merger of Age Concern and Help the Aged. It strives for a safer, healthier, more fulfilling life for all older people in the UK. Age UK and the UK’s first exclusively online charity YouthNet are joint official charities for the 2013 Virgin London Marathon and are also Virgin Money’s charities of the year. The two charities have joined forces in a bid to reduce loneliness and isolation by using the internet to bring generations together both offline and online.
Links to external websites are for information only. Virgin Money receives no income from them and accepts no responsibility for the website content. The information in this article is correct as at 15 August 2012.