A recent FTAdviser report claims that 22% of UK workers aren’t confident about planning for a comfortable retirement. 

Around 10%, meanwhile, have “no idea” whether they are in line for a comfortable retirement or not. 

Worryingly, those closest to retirement were the most likely to lack confidence in their pension provision and the most unsure about the type of lifestyle they could afford to live post-work.

Retirement is a huge milestone and a brand new stage in your life, so careful planning is key.

At The Pension Planner, our expert advice and long-term approach mean that you could be just a few simple steps away from your dream retirement.

5 simple steps to your dream retirement lifestyle

1. Start your retirement planning as early as possible

FTAdviser reports that 26% of UK workers over 45 are not confident about planning their retirement, compared to 20% of 16- to 44-year-olds. 

Many employees (39%) confirmed that they expected to have “just enough to get by”.

The simplest way to ensure that you can afford the retirement lifestyle you choose is to start contributing early.

This gives you longer to save, and in turn, a bigger pot, greater chance for investment returns, and longer for the effects of compound growth to kick in. You can also afford to contribute a slightly smaller percentage of your income each month, which could prove useful when you’re just starting out.

A rule of thumb suggests that you halve your age when you start contributing and then put aside that percentage of your monthly pre-tax income. Start pension saving at 30 and you’ll need to find 15% of your income. Wait until you’re 50, though, and that jumps to 25%.

2. Make the most of your pension’s tax efficiencies

Pensions are incredibly tax-efficient. The contributions you make benefit from automatic tax relief at the basic rate, so a £100 pension top-up costs you just £80, with the rest coming from the government. 

As a higher- or additional-rate taxpayer, you can claim further tax relief through your self-assessment tax return.

The amount of tax-efficient contributions you make is governed by the Annual Allowance, which increased at the start of the 2023/24 tax year. While previously you could contribute £40,000 a year and still benefit from relief on contributions, this has now risen to £60,000.

Try to make as much use of this tax efficiency as you can afford. And if you pay tax at the higher or additional rate, be sure to claim the full amount of tax relief you are due. 

A recent MoneyWeek report found that higher earners failed to claim around £1.3 billion in tax relief over the five years from 2016/17.

3. Maximise your workplace pension to take advantage of employer contributions

Under current auto-enrolment rules, you’ll likely be part of your workplace pension. If so, the minimum contribution you can make each month stands at 8%, with 5% paid by you and 3% by your employer.

You might find, though, that you can afford to contribute more. A useful strategy is to wait for a bonus or a pay rise and use that money to increase your contributions. Do it straightaway and you won’t give yourself the chance to miss the additional income.

Some employers will increase their contribution when you increase yours so it’s always worth having these conversations. At the same time, discuss the funds you are invested in and maybe even the possibility of salary sacrifice if your employer offers it.

4. Be sure to factor in your State Pension

The State Pension is unlikely to constitute your main source of retirement income but it can provide a useful foundation from which to build a solid plan.

For 2023/24, the full new State Pension is £203.85 a week or around £10,600 a year. This is set to increase from April 2024 thanks to the State Pension triple lock, which increases the amount you receive each year by the highest of either:

• 2.5%
• Inflation
• Average wage growth. 

To claim the full new State Pension, you’ll usually need 35 qualifying years of National Insurance contributions (NICs). 

If you have between 10 and 35 years, you’ll usually receive a proportion of your full entitlement. With less than 10 qualifying years you’re unlikely to receive any State Pension at all.

You can use the government’s website to check your National Insurance record and then speak to us if you’d like to explore filling in any gaps you have.

5. Stay focused on your long-term goal and seek reassurance if you need it

Once you’ve sat down to think about and plan your dream retirement, you’ll need focus and patience to get there.

While life events can alter your priorities, it’s unlikely that your long-term goals will change radically. And if they don’t change, your plan doesn’t need to either.

Professional Adviser recently confirmed that around a third of UK workers have considered reducing or stopping pension contributions during the cost of living crisis. 

While you might have been tempted to free up cash for short-term gain, the long-term consequences could be huge. 

Figures from Royal London (published by Professional Adviser) suggest that a UK worker with a £35,000 salary, contributing 10% into a workplace pension scheme (5% themselves, matched by their employer) would receive an extra £1,404 in take-home pay each year. 

The annual drop in their pension savings, though, would amount to around £4,092 pension savings a year.

Prioritising your future self is especially important when times are hard so get in touch if you need financial advice or reassurance that your plans remain on track.

Get in touch

If you’d like more confidence in your retirement plans, or you have any questions about your financial future, get in touch. Email info@thepensionplanner.co.uk or call 0800 0787 182. 

Please note:

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. 

Workplace pensions are regulated by The Pension Regulator.