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Your retirement

Guidance to help you enjoy your leisure time in later life

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Build a brighter future

Planning for your retirement

By planning for your retirement, regularly putting money aside and some careful planning, there are steps that you can take to ensure that you enjoy your leisure time in later life. The sooner you start to save, the more likely it is that when you retire, you will have the money you need to make the most of it. This page is designed to stress out of retirement planning so that you know where to start.

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Planning for your retirement

How much might you need?

A sensible rule of thumb is to aim for retirement income of around two thirds of your earnings when you retire.  Either way, you need to decide how much you want, so you can plan and it is often easier to think in relation to your current earnings and decide how much of your salary you would want to maintain.

You also should consider how much you can expect to receive from other sources.  This could include State Pensions, your workplace pension, a mix of investments, property and savings that you have already built up which will be available to you when you stop work.

Your State pension

How much state pension you receive depends on how many years’ National Insurance Contributions you pay while you’re working. You might also receive an additional state pension – based to your earnings. You can get more information on your entitlement from The Pensions Service.

Workplace pensions

If you’re a member of a company pension scheme you should receive an annual statement of your benefits. If you’ve been a member of a company scheme in the past it’s normally possible to transfer benefits from other schemes to your own pension plan but always take advice before you do as such action could be to your disadvantage.

Find out more about Workplace pensions
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Planning for your retirement

Why does it pay to start saving sooner?

It’s important to start saving for your retirement as soon as you can.  If you can start saving now, this will give your money more time to grow. The more your savings grow, the more chance you have of achieving your ideal retirement income.

Saving for retirement is often the last thing on people’s minds when they are in their 20s and even 30s where their priorities often tend to be saving for a property or bringing up children.

For many, it is not until people reach their 40s or later that they feel the need to put money aside for later life.  But, by that time, the amount needed to save is far greater in comparison.

Saving even modest amounts sooner can make a big difference over the long term. Leaving things until later may mean that the amount that you need to save is unaffordable.

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Planning for your retirement

Your options at retirement

There are a number of options about what to do with your maturing pension fund.  These include:

- Use the whole fund to buy an annuity
- Take up to 25% of the fund as tax-free cash and use the remainder to buy a
  smaller annuity.
- Buy an annuity in stages rather than all at once - this can be handy if you carry on
  working part-time.
- Move into pension drawdown.  This lets you take some income while your fund
  remains invested. This is usually only suitable if you have a large fund but this
  option will mean that your money would remain at risk as the value of your
  investment can go up as well as down.

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Planning for your retirement

Money Advice Service

If you need some more help when it comes to planning for your retirement, the Money Advice Service can give you some free, independent guidance that may help.

Visit the Money Advice Service

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