Are you heading for retirement? Have you gone through a divorce, separation, or a bereavement and you need to think about financial plans for later life? Do you have elderly relatives who are worried they might not have sufficient income to see them through retirement? It is almost a year since our last retirement blog, and along with potential personal economic impact following the pandemic, some interesting research findings around pension planning theory have been released, so we thought this might ease your concerns. To put it very simply, whenever you start saving for retirement it is never too late!

You might think you need to start planning and making pension contributions as soon as you start work, and it could be too late for you if you have eaten into your savings, without considerations for a pension pot. Indeed, that was what we were taught by the older generations. And we always did what we were told, didn’t we?!

But research from the Institute for Fiscal Studies (IFS) shows that investing in pensions in later life is still possible. In fact, a much more viable option than you might think.

Retirement savings and lifecycle patterns

We may not consider ourselves as holding the same mindset as the economists, but their concept of pensions as ‘deferred pay’ is somewhat logical. Their pension planning theory is that, instead of income ceasing on retirement, a lower income is taken before retirement (the blue line), allowing for some income after retirement (2/3rds shown here by the orange line in the graph below).   


Although it leaves inflation out of the equation (and assumes that employee contribution is at least the minimum level to reach employer contribution), it reflects income as being ‘smoothed’ throughout life, continuing into retirement.

Where the graph shows the income the same, the difference is how it is utilised throughout the lifecycle. At times when a higher income is not so crucial, the benefit can be gleaned as a pension in later life and retirement. That point in time when you can enjoy your spare hours, without the pressure of running low on funds in the process (remember, those “golden years”).

The IFS research was based upon families with children tending to make more than the minimum pension contributions before the children arrive, and then again once they have left home i.e., when they have greater expendable income. And other research has similarly highlighted that a more flexible approach to employee pension contributions might be more beneficial as the lifecycle continues. Most employees would expect an increase in salary as they progress through employment, so a higher contribution could be introduced as their salary rises; employment status may change, so reducing hours may leave them in a more negative financial situation; family circumstances change – with additional costs in the home, childcare, school fees, clothing, etc. it is likely that a reduced contribution during this period would be welcomed, assuming it could be increased again once the children have grown up and left home; clearing the main residential mortgage will also free up funds so could be added to pension planning at this stage too.

It also suggests that as outstanding student debt in England and Wales is written off after 30 years, after the age of around 52, many graduates’ net income will increase, enabling increased contributions towards retirement from that point. And although this reflects higher pension payments towards later working life, around 80% of contributions made between the ages of 45 and 66, it still works as an effective ‘catch up’ process, providing around 75% of retirement wealth.

So, what do your plans for retirement look like?

Working beyond retirement

Earlier in this blog, I mentioned divorce, separation, and bereavement as they are life changing experiences that could impact your plans for saving for retirement. Indeed, could even result in you going back to work if you have already reached retirement age, or continuing to work if you are heading towards retirement.

It is not always possible to plan for these things, yet they cause immense pressure and change to the lifestyle you may have had planned for retirement. And sadly, we see many clients who are in one or other of these circumstances, asking for our assistance in reviewing their financial situation, helping them prepare for later years.

Acknowledging that others return to work or continue working beyond retirement through choice - to keep them feeling young and busy, to retain a social circle, or with a specific financial goal in mind - official statistics from the Department of Work and Pensions predict that by 2025, over half of the working population will be over 50.   

Women, in particular, are increasing the numbers within the older working population, with blame partially being put at the door of career breaks to raise their family, bringing a temporary pause or complete halt in National Insurance contributions.

But with flexible working offered by some of the better-known businesses, such as Barclays, Nationwide Building Society, Tesco, and Asda working into your 50’s, 60’s and even 70’s is being encouraged. And it is giving an opportunity for older workers to build back their retirement pot.  

However you have been brought up to view your retirement and consider pension planning, no matter how much you have already managed to put aside for your future, it is never too late to start saving for retirement. And although there is plenty of information out there to start surfing through, we would strongly recommend speaking to an expert in pension and retirement planning. It will save you an awful lot of time and will also ensure you are in the best possible financial position when your final working days are done!

Simpson Financial Services retirement planning and advice

Although this blog refers to market research in relation to retirement planning and practices, when considering your own plans for saving for retirement your specific circumstances should always be considered separately from general trends and should not be reliant on any past investment performance.

This is the reason our Independent Financial Advisers are on hand to take your queries, discuss your current financial situation and future goals, and can assess your entire financial portfolio rather than each individual element.

We can tailor your private pension contributions, to suit your income at specific times of life.

And as our Retirement Planning experts have access to, and can advise on, a full range of products, you will have the most up to date guidance from Lifetime Annuities to Capped Drawdown, relevant ISAs, savings plans and investments, and we can include Estate Planning within your overall financial review.

So, if the time is right for you to consider saving for retirement or you simply want some expert financial guidance, access our pension calculator, and contact one of our team today, so you can be confident to continue working or approach retirement with extra peace of mind.