Retirement planning in five key points

Here Wealth at Work outlines five simple steps employees can take to assess their current position and come up with a workable retirement plan.

1. Employees need to work out what they want from retirement

The consultant said this included thinking about what they would like to do in retirement, how much it would cost and when those costs would be incurred.

Employees, it said, should be aware of different income needs in retirement - specifically, the U shape scenario where the first ‘active' phase is the most expensive. Spending drops off in the ‘passive' phase and then ticks up again during the ‘supported' phase, when things such as long-term care might be needed.

2. Gather information in all assets

The firm said this should include finding out how much they are expecting fro pension or pensions and the value of any other savings such as ISAs or shares, for example.

3. Are savings on track?

Some may find that they will need to save more, or work a little bit longer than they thought.

Research has found that most people live longer than they expect, so employees should keep this in mind when doing their sums. For example, a 65-year-old man now has a 50% chance of living to 87 and a 65-year-old woman has a 50% chance of living to 90, it explained.

4. State pension forecasts

The new state pension depends on people having 35 qualifying years of National Insurance contribution. In reality, many people will not be eligible for the maximum amount of the new state pension however. 

The business said it is important for employees to check state pension record and National Insurance contributions history early. The easiest way to do this is to go to www.yourpension.gov.uk

5. Work out income options

Employees approaching retirement need to think about how best to use their savings to generate an income. Guidance from Pension Wise can help those with defined contribution pensions (but not final salary schemes). However, many may want to consider getting financial advice. 

An adviser will look at all of their assets such as pensions, ISAs, other savings and investments and work out the most tax efficient way for them to fund their retirement income, and put a plan into place for them.

Wealth at Work director Jonathan Watts-Lay said: "A well-structured retirement plan can help employees understand what they need to be doing now, so that they can enjoy a comfortable standard of living once they stop work.

"It can also help them think about the key considerations once they reach retirement, so that they can make the most of their hard earned savings."

He added: "Many employers are now leading the way and providing employees with access to a breadth of services from specialist retirement companies to help them achieve financial security at-retirement.

"This includes the provision of financial education, guidance and advice to help drive informed decisions that result in good outcomes for employees."

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• Topics
• Pensions
• wealth at work
• employees