7 things you need to know about planning for your retirement

The Covid-19 pandemic has upended our lives in many ways – not least our plans for retirement.

For many, dreams of long holidays, cruises, or simply spending more time with the grandchildren have had to be postponed.

But for others it’s had a more serious financial impact. On the one hand, many in their late 50s and early 60s have felt forced into taking early retirement after losing their job.

On the other, research by the Institute of Fiscal Studies found that 12 per cent of respondents were now planning to retire later. Large numbers of older workers received reduced wages while furloughed, affecting their ability to save. 

A third of respondents reported that their retirement income would be lower as a result of Covid-19 – rising to almost a half (45 per cent) among those still in paid work.

Clearly, we can’t predict or plan for everything. But to mark Talk Money Week, here are some steps to help make sure you can afford the lifestyle you want.

1. Start early!

Most of us know that the earlier we start saving for a pension, the more affordable it will be. Workplace pensions can be one of the best options, benefiting from tax relief and in most cases, an employer’s contribution.

It’s important to review your savings during midlife to make sure you’re on track. Age Scotland’s research found that most people supported the idea of a “career MOT” at around the age of 50, giving people a chance to plan their later working life and retirement.

2. Do your research

State Pension ages are changing for men and women. While those retiring today can receive it at 65, it will rise to 67 for those born after April 1970, and 68 for those born from 1978 onwards.

However, there’s no compulsory retirement age, and you can choose to continue working. It’s helpful to have an open and honest conversation with your employer, to help you both plan for the future.

3. Keep track of your pensions

The average person holds 10 or 11 different jobs before they retire, meaning it can be easy to lose track of a workplace pension. In fact, hundreds of millions of pounds of pension savings remain unclaimed in the UK.

Merging them can make them easier to manage – although it’s always best to take financial advice. And the Pension Tracing Service can help you track down an old pension.

4. Review your budget

After you retire, your income will probably be less, although some costs might reduce too, especially if you’ve paid off your mortgage.

While you might be commuting less, your heating costs might rise as you spend more time at home. Our Money Matters guide includes a budget template to try.

5. Know what you’re entitled to

Benefits such as Pension Credit can top up your pension if you are on a low income, but only four in 10 of those entitled to it claim it – leaving millions of pounds unclaimed in Scotland each year.

It can also be a “passport” to other benefits, including Cold Weather payments and a free over-75s TV licence. Universal benefits, such as the Winter Fuel Payment and a concessionary travel pass, are available to everyone over a certain age.

6. Think about flexible working

The concept of working 9 to 5 until retirement age is starting to seem outdated. More employers are embracing flexible working, helping those who want to cut down their hours or need to balance caring responsibilities.

Others might want to take on a new challenge or use their skills and experience in a different way. If you’re looking to return to the workplace or change career, then Business in the Community’s Still Ready to Work programme can help.

7. Look at the bigger picture

From legal issues such as Power of Attorney to new hobbies and taking care of your health, planning for your retirement is about a lot more than pensions. While some people can’t wait to enjoy more free time, others miss the structure and social interaction of their working lives – and can even feel as if they have lost their identity.

Preparing emotionally for retirement and planning how you will spend your time can be just as important. Age Scotland’s Planning for Your Future workshops look at four main areas – Finance, Legal Issues, Health & Wellbeing and Thinking About You – including hobbies, part-time work, and volunteering.

Picture by Hector Reyes