Four steps you should take to keep retirement on track – state pension, savings and more
Martin Lewis advises on savings accounts and premium bonds
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Retirement is lasting longer as life expectancy increases, and people will be planning for decades of life after work. It creates a problem for those lagging behind in savings, an issue which is often palpably felt by women.
In fact, insight from The Centre of Economics and Business Research (Cebr) showed more than a £180,000 gap between the pension savings of men and women over the age of 55, on average.
Express.co.uk spoke to Shona Lowe, Financial Planning Expert at abrdn, who explained there may be steps for women to take to close the gender pension gap, but they could be equally applied by anyone worried about their retirement income.
Perhaps the one of the most important actions, according to Ms Lowe, is to pre-plan the state pension.
While people can easily take the state pension as a foregone conclusion and put it on the back burner, it is vital to understand how it works.
Namely, Britons should get to grips with what their entitlement is, and when they are set to receive it – even those who plan on retiring very soon.
Women in particular are more reliant on the state pension according to research, and therefore a failure to understand this could prove even more devastating for retirement.
Ms Lowe therefore encouraged individuals to check their pension forecast on the Government website well in advance to provide the opportunity to correct any errors, and offer leeway when planning.
She added: “It is also possible to buy back years of National Insurance contributions to make up for gaps in your payment history.
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“This applies if you’ve had time out of the workplace in the last six years, say to care for children or an elderly relative.
“The cost of doing this is effectively subsidised by the Government which means it can be very good value for money.”
The second tip put forward by Ms Lowe is to boost pension savings as the “power” of this should not be underestimated.
Individuals may consider topping up their contributions as the return on this saving is likely to be better than any other vehicle, due to the favourable tax treatments pensions have.
For this reason, Ms Lowe said the earlier a person can top up their pension and the bigger the increase in their contributions, the better.
She continued: “It may not just be the additional money from you that can help build your pension – by increasing your contributions you may also increase the contributions your employer makes too.
“Plus, you get tax relief on your contributions so a small increase in what you put in may make a much bigger difference than you thought.
“Even if your income falls, it’s worth continuing your pension contributions if you can afford to. Otherwise, the contributions your employer makes will drop too or may even stop completely.”
Next, Britons should always check their cash flow, as saving and planning in advance is key.
While a pension is one form of income in retirement, it may also be worth looking at alternative options to drive forwards later life goals.
Other than the state pension, this may include workplace pensions, savings pots, investments and other sources of income such as rental properties.
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Britons should always be aware, however, that investment comes with risk and they could get less than they originally put in.
Finally, Ms Lowe urged people to take advantage of their Individual Savings Account (ISA), as this has tax-free benefits on growth or interest.
She explained: “You’ll be able to save up to £20,000 each year which can really add up over time.
“There are cash ISAs and Stocks and Shares ISAs for you to consider but if you go for Stocks and Shares, keep a close eye on it, as the value of your investment will fluctuate with the stock market.”
Ms Lowe stated it is understandable to feel daunted by the prospect of retirement, but considering these points can go a long way towards helping.
Britons are also encouraged to seek financial advice if necessary, as experts can often help with creating a tailored plan.
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