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Six top tips for retirement planning

06 April 2023

3 minute read

We discuss ideas on how to ensure you have enough set aside for the retirement you want.

Who’s this for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

Please bear in mind that tax and pensions laws can change and that their effects on you will depend on your individual circumstances. We don’t offer personal advice.

Retirement planning isn’t half as scary as it sounds. In fact, it can be very straightforward – especially with our help.

Here are six ways to help with making sure you have accumulated enough for the standard of retirement you want.

1. You’re never too young to start

The earlier you start to put money aside for your retirement, the more time it has to grow. By investing over a long period of time, your money has time to benefit from potential long-term stock market gains. It also means it could benefit from compounding – which is where your income can earn returns.

Over time, the impact is that even small contributions towards a pension can make a huge difference.

It really is never too early as even a baby can have a pension. Currently up to £2,880 can be put into a pension (like a Stakeholder pension or Junior SIPP1) for under 18s each year to which HM Revenue & Customs adds £720, making a useful £3,600.

2. Take control with a SIPP

The self-invested personal pension (SIPP) is one way of boosting your retirement savings, however, if your Employer offers a pension scheme it is usually better to join their scheme. A SIPP offers all-important tax relief on contributions. It will also provide access to a wide range of investment funds. You have complete control on how your money is invested, so you get to choose how and where your SIPP money is invested within the options available.

You can either start your SIPP from scratch with money that hasn't been held in a pension, or you can use it as a new home for other pension schemes you hold elsewhere. (You’ll need to check you’re not giving up any valuable guarantees or benefits attached to pension schemes by moving the money). It’s also crucial to consider any difference in annual charges before taking any action.

For the self-employed who are without a workplace pension scheme in place, a SIPP can help to build a pension pot and save on annual tax bills.

3. It’s never too late to save in a pension

If you’re in your forties or even fifties and wanting to turbo-boost your retirement savings, the tax breaks on pension contributions can still be really worth having. You can continue paying into a SIPP until age 75. Then typically in retirement you drop into a lower tax band, so you'll save money when the time comes to start drawing on your savings. Plus you can typically take 25% of the pot as tax-free cash in retirement.

4. Maximise tax allowances

There is a unique opportunity offered by pension tax rules to make up for unused annual allowances from previous tax years. Provided you meet certain conditions, you could potentially carry forward any unused allowance from the previous three tax years, as long as it doesn’t exceed earnings in the current tax year. Up to £60,000 a year can be put into a pension. If you go over the limit you won’t get tax relief on further pension contributions.

5. Don’t forget about ISAs

While pensions offer attractive tax breaks on contributions, you can also use your ISA as a place to save for retirement.

The tax perks work differently saving via an ISA – yet they are still compelling. You won’t pay income tax, tax on dividends or interest distributions classed as savings income, or Capital Gains Tax (CGT) on any investments you hold in an ISA.

You also have the opportunity to save for retirement in a Lifetime ISA2. You can save up to £4,000 a year from your ISA allowance into a LISA, which will be supplemented by a government bonus of 25% (up to a maximum of £1,000 a year) up until age 50.

After your 60th birthday you’ll be able to take out all your savings from your LISA tax-free, for use in retirement. A LISA can be accessed like a normal ISA at any time for any reason, but if not used as above, you’ll have to pay a 25% charge.

Alternatively, money held in a LISA can be used to buy a first home valued up to £450,000. You must be 18 or over but under 40 to open a Lifetime ISA.

And when you die your SIPP can be left to any beneficiary (or number of beneficiaries) that you choose, free of Inheritance Tax (IHT), so using income from an ISA in retirement – and leaving your SIPP untouched - could work for IHT planning.

6. Keep saving

When household finances are squeezed it might be tempting to cut payments to savings and investments. Yet it’s important not to neglect long-term goals. And remember, you can keep hold of a bigger portion of your earnings by maximising tax reliefs you're entitled to, such as those from pension contributions.

Before you take any money from your pension you can book a free appointment at the government-sponsored advice body – MoneyHelper. Savers receive free and impartial guidance about the options available when they access their pension savings.

It’s also possible to get guidance on pension planning from MoneyHelper. This organisation is planning to launch the pensions dashboards to enable individuals to access their pensions information online, securely and all in one place, thereby supporting better planning for retirement.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

Investment ISA

A simple and tax efficient way to start investing

Boost your savings by investing up to £20,000 in our Investment (Stocks & Shares) ISA per year completely tax-free.

If you've used your ISA allowance this tax year, you can open a regular Investment Account or transfer in another ISA to us.3

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Self-Invested Personal Pension (SIPP)

A tax-efficient way to save for retirement

Our award winning Self-Invested Personal Pension (Best SIPP award 2022 at the Shares Awards) is designed to help you prepare for retirement.

Let us help you build your retirement pot and make your own investment decisions.