A pension is essentially a pot of cash that you and your employer can pay into. You get tax relief on it, so it’s the perfect way to save up for retirement. You can either take money from the pot, or exchange the cash with an insurance company for a regular income until death. Express.co.uk chatted to Maike Currie, director for workplace investing at Fidelity International to find out when you should be retiring and taking your pension.
When can I retire?
You will only be able to claim your State Pension at State Pension age, but that doesn’t mean you can’t retire before then.
However, this option is risky and you will need to be in a secure financial position to fund your retirement years.
Maike said: “The age at which you’re able to claim your state pension will depend upon when you’re born, and is currently under review in line with increased life expectancy.”
Gov.uk has a State Pension age calculator that calculates the earliest age you can start receiving your Pension.
It may be different to the age you can get a workplace or personal pension. Find out here.
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When should I retire?
Even though you can retire whenever you like, you should consider your financial stability first.
Make said: “You may wish to work beyond State Pension age, either to boost your retirement pot or simply because you want to.
“Research by Fidelity International shows that 45 percent of people expect to work into their 70s.
“This doesn’t change the age at which you’re able to draw upon your state pension, but is something that if claimed while working, may impact your tax position.
“This is something you should communicate to your employer to understand how it affects your workplace pension.”
How much State Pension will I receive?
There is no set Pension amount, it all depends on your National Insurance record.
If you claim the basic State Pension, the most you can currently get is £134.25 per week.
The basic State Pension increases every year, thanks to the triple-lock system, based on whoever is the highest of the following:
• earnings – the average percentage growth in wages (in Great Britain)
• prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
If you claim the new State Pension, the full amount you could get is £175.20 a week.
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How do I prepare for retirement
A pension is the first step to planning your retirement, but there are other things to consider.
Maike explained: “When it comes to retirement planning, the state pension is one form of income but many will require far more in order to meet their desired standard of living in retirement.
“Therefore it’s important to consider others means of saving for the future, such as a Self-Invested Personal Pension, or a Workplace Pension.
“Auto-enrolment means that many people in work will benefit from their employer contributing to their pension on their behalf, ensuring that at least 8 percent of their salary is put away each year.”
She added: “We have developed three ‘retirement rules of thumb’, to help people to think about their future addressing questions such as:
- How much do I need to retire?
- How much should I be saving?
- How can I make my retirement savings last?
“These are very much guidelines, but can help people to plan ahead by considering their various sources of income, and what their retirement needs might be.
“While the state pension should be included as part of their calculations, these rules can help people to understand how much more they might need to be saving now.”
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