The UK private pension landscape is arguably changing for the better.
However, this does not help those close to retirement age today with an average saving of only around £50,000 saved.
On the whole, we are living longer and with retirement stretching on for possibly over 30 years, this money will not go very far – but with careful planning, retirees can still possibly make this small pot work.
Be well organised and seek advice
Before starting out, do your research and collect as much information on your current pension as you can, look at all the alternatives and seek advice wherever possible.
It maybe that you have a number of pensions, and with a few years remaining before retirement, it may be worth consolidating them into one using a Self-Invested Personal Pension (Sipp).
Alternatively, if you have a few years left, you might also want to consider saving more and increasing the pot.
Our experts can help advise the best plan and options available to you.
Do your sums
What do you need your pension to do for you? This should become a lot clearer once you have a clear understanding of exactly how much money you’ve got.
Remember, the new full state pension is currently set at £164.35 per week (£712.18 per month, or £8,546.20 per year).
If you’re a home owner and no longer paying a mortgage, this may cover the bulk of your bills.
It may be that in combination with the state pension, you have other income or savings in which to draw on, leaving your smaller pension pot to be used in other ways.
If this is a better option for you, make sure that you minimise your tax liability – all retirees can take 25 per cent of their pension pot as a tax-free cash lump sum, but amounts after this may incur a tax charge of up to 40 per cent.
However, should you need to take an income from your pension, work out exactly how much you need.
Currently, the personal income tax allowance is set at £11,850 – if you can manage on this (remember this doesn’t include a partner’s income), then you won’t have to pay any tax.