In Focus: Retirement Income  

Advisers urge early planning for pensions

Advisers urge early planning for pensions
Photo: Julia Cameron via Pexels

Advisers have urged savers to take action while working to save more into their pension or risk ending up with an income shortfall after retirement. 

Roy McLoughlin, associate director at Cavendish Ware, said it was important for people to 'keep a close eye' on pension provision and not ignore it.

He said: “In arguably the good old days there were final salary pensions which were effectively a ‘promise’, so people didn’t really have to keep a close eye on pension provision.

"It’s demographics as to their demise but the radical mind set is that people now have to keep a much closer eye than previously.

"This is extremely difficult without guidance and education and that’s where the advisor becomes crucial. Proverbial heads in the sand on pensions will not work and while there are some excellent planning tools there is no substitute for good advice.”

Other advisers agreed that people needed to grasp the proverbial nettle and start getting to grips with their pension provision, including the need for professional advice. 

Jonathan Cooper, head of paraplanning for Drewberry, said it was important for clients firstly to understand what they are aiming for, otherwise "how do they know whether they are on track?", and to start as early as possible.

He gave the following pointers to help set people on the road to boosting retirement income:

  • Set your goals - There are plenty of simple and free tools out there to help you project your retirement savings forward and will then show you how long those savings are likely to last in retirement.
  • Start early - Compound interest (or compound investment return) is the most powerful force in the universe, or as Einstein put it, "The 8th wonder of the world". 
  • If you work for a company, ask HR if they run a pension scheme where if you pay in more so do they (this is often called matched contributions). This could enable you to take advantage of higher employer pension contributions. 
  • Use your allowances - Tax is effectively a cost drag on investment returns, making sure you use all available allowances and reliefs as far as you can reduces this drag and helps you reach your goals.

Their comments echoed the findings of the LV Wealth and Wellbeing monitor, which found earlier this year that only 41 per cent of non-retired UK adults were confident they had saved enough for retirement.

However, 65 per cent of those who had approached an IFA said they were confident they will have saved enough.

The research, which was carried out among 4,000 consumers and is conducted every quarter, also found that those who were more confident about retirement were also more likely to have increased pension contributions and discussed their plans with partners.

Clive Bolton, managing director of savings and retirement at LV, said: “The research highlights the enormous value and benefit financial advisers provide for their clients.

"It’s striking to see how consulting a financial adviser makes them become much more confident about their finances and retirement plans.  

“Saving some money in cash and keeping it aside for emergencies makes sense but too much money means people can miss returns from rising investment markets.

"A good financial adviser will help clients make the most of their savings by creating an investment portfolio to match their attitude to risk."