Getting a head-start on retirement planning: Your checklist guide

Many younger people don’t start thinking about retirement until much later in life. 

But with almost half of over-50s (47%) being unsure they’ll have enough for what they believe to be a comfortable retirement, according to our research, and 25% certain they won’t have enough to live the post-work life they desire, it’s more important than ever to start saving early. 

“You can’t start paying into your pension pot early enough,” says Moneyfarm Senior Investment Consultant Lily May Sparrow. “There’s no such thing as too soon in order to avoid the so-called ‘retirement gap’. 

“Making small changes early on in your working life is a lot easier than making huge sacrifices later on down the line when life’s financial obligations and challenges are that much greater.”

With that in mind, we’d like to focus on some key considerations for younger savers who are just starting out on their retirement planning journey with our handy checklist, to ensure you start on the right track. 

Auto-enrolment and fund awareness

The UK has a system of auto-enrolment, where eligible employees are automatically enrolled into a workplace pension scheme. It’s important to understand the scheme you’re enrolled in and the fund your contributions are invested in. Different funds carry varying levels of risk and potential returns. Take into consideration the fund’s performance history, fees and overall investment strategy to ensure it aligns with your risk tolerance and retirement goals.

Starting early and opting out

Starting to save for retirement early can have a significant impact due to the power of compounding. The longer your money is invested, the more it can grow over time. While you can opt out of the auto-enrolment pension scheme, it’s generally advisable to stay enrolled to benefit from employer contributions. 

“Paying into a pension pot isn’t just a financial responsibility; it’s a highly calculated investment in the life you want to lead during your golden years,” says Sparrow. “By planning and contributing early, you’re taking control of your retirement timeline, ensuring you can retire at your desired age with the peace of mind and financial stability you deserve.”

Considerations if you’re self-employed 

If you’re self-employed, you won’t have access to an employer-sponsored pension scheme. However, you can set up a personal pension plan, such as a Self-Invested Personal Pension (SIPP), which allows you to contribute to your retirement savings while also benefiting from tax relief.

Set clear goals

Define your retirement goals based on your lifestyle expectations and financial needs. Knowing how much you’ll need in retirement helps you set a savings target. Consider factors like desired retirement age, expected expenses, and any additional income sources. This clarity can guide your contributions and investment decisions.

Our recent research shows that people in the UK believe they will need to set aside £373k to fund their ideal retirement lifestyle. However, according to the same research, an average saver over the age of 50 has roughly £218k in their pension pot, further emphasising the shortfall in savings many don’t realise they have before retiring.

Make regular contributions

Consistency is key when it comes to saving for retirement. Set up regular contributions to your pension fund, whether through your workplace scheme or a personal pension. This helps you develop a disciplined saving habit and ensures a steady accumulation of funds over time. 

Maximise employer contributions and tax relief

If your employer offers a pension matching contribution, try to contribute at least enough to take full advantage of their match. This essentially doubles your savings immediately. Additionally, the government provides tax relief on personal pension contributions, so every contribution you make gets a boost from tax savings. Make sure you’re aware of the annual and lifetime pension allowances to avoid unnecessary tax penalties.

It’s important to remember that 2023 saw a number of important reforms to pension and tax rules that may affect you. Here, we take a look at what the new rules could mean for you.

Ready to kick-start your retirement planning?

No matter your age, financial circumstances or retirement goals, it always pays to seek specialist professional advice when planning to save for your retirement. At Moneyfarm, our team of retirement planning experts are here to help you make the most of your savings and investments, at whatever stage of life you’re at. All our advice is free and confidential and could set you on the path to financial independence after leaving work. 

To get in touch with a member of our team, you can book an appointment online here, or simply give us a call today. 

As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest. A pension may not be right for everyone. Tax treatment depends on your individual circumstances and may be subject to change in the future. If you are unsure if a pension is right for you, please seek financial advice.

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*As with all investing, financial instruments involve inherent risks, including loss of capital, market fluctuations and liquidity risk. Past performance is no guarantee of future results. It is important to consider your risk tolerance and investment objectives before proceeding.

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