Doctor Who has finally returned to our screens, and while you’re watching Ncuti Gatwa’s fresh new take on the time-travelling protagonist, you may start thinking about things you’d do differently if you could turn back time.
While this may be a privilege reserved for the Doctor, a recent study by Standard Life reveals some valuable insights from retirees looking back on their financial journey.
The research found that, on average, retirees fell short of their desired pension pot by a significant amount. They had hoped to have around £250,000 saved, but the reality was closer to £131,000 on average. This shortfall translates to a potentially reduced income in retirement by £480.
These retirees likely regret not saving enough, and worryingly, this trend is ongoing with savers, as CNBC reports that almost 90% of Brits aren’t saving enough for retirement.
Thankfully, you don’t need a TARDIS before entering the next phase of your life. Instead, you can learn from some of pensioners’ greatest regrets and make the necessary changes now to improve your chances of achieving the financial future you want.
Continue reading to discover some of these regrets, and some actionable steps to ensure a smooth transition into retirement.
1. Not saving enough into a pension while still in work
Research from Canada Life reveals that 17% of retirees said they would have increased their pension savings while still working.
This makes sense, as full-time employment typically provides a more considerable disposable income to contribute to your pension while also allowing you to benefit more from tax relief.
It’s important to note that retirement might seem like a distant prospect in your younger years, and you might not fully appreciate how long it could last.
In fact, a survey from IFA Magazine found that most people expect to retire between 65 and 69. But, the Office for National Statistics shows that the average life expectancy at 65 years was 18.3 for males and 20.8 for females.
This means you could potentially spend two decades or more in retirement, which, as you can imagine, would require a substantial pot.
Tax relief while you’re working could give your pension fund a considerable boost
The good news is that it’s never too late to start saving towards retirement, regardless of the stage of life you’re at.
Furthermore, increasing contributions while you’re still working can considerably boost your pension pot, partly thanks to tax relief.
As of 2024/25, the Annual Allowance means you can benefit from tax relief on contributions up to £60,000, or 100% of your earnings, whichever is lower. Your Annual Allowance may be lower if your earnings exceed certain thresholds.
Tax relief sees the government “top up” your pension when you contribute, so a £100 contribution would only “cost” basic-rate taxpayers £80. Meanwhile, it would only “cost” higher- or additional-rate taxpayers £60 or £55, respectively, so long as they claim it through their self-assessment tax return.
Just remember that typically, once you start drawing from your pension, you may trigger the Money Purchase Annual Allowance (MPAA), which limits the amount you can tax-efficiently contribute to £10,000 in 2024/25. So, if you access your pension while still in work, you may not be able to make as many tax-efficient contributions.
Taking proactive steps now while you’re still working to increase contributions – even by small increments – could make a significant difference later down the line.
2. Not starting saving soon enough
The survey from Standard Life mentioned above states that a staggering 53% of respondents wished they’d started saving for retirement much earlier than they did.
As you progress through your career, it’s likely that you will have more disposable income as your earnings increase. So, you might imagine that it’s far easier to save for retirement later on when your earnings are greater.
However, contributing towards your retirement savings as soon as possible could boost your pot considerably, and give you peace of mind knowing that you’re on track for your desired lifestyle during the next phase of your life.
Conversely, delaying contributions, or even halting them for a short period, could ultimately result in a shortfall.
Indeed, Standard Life shows the effects of a career break on your pension, as someone who takes five years away from work could potentially have £27,000 less in their pot than someone who doesn’t take time out.
The power of compounding growth could help you accumulate more in your pot
To avoid having this regret yourself during retirement, you could simply start contributing more to your pot now. The earlier you start, the better, as the power of compounding growth can give your fund a considerable boost. Nest provides a fitting example of this.
Imagine two people start saving £200 each month to their pensions, including tax relief and employer contributions.
Both people pay in for 10 years, totalling £24,000. Though, Person One makes their contributions between 22 and 32, while Person Two makes theirs between 32 and 42.
Assuming both people receive yearly growth of 5% (net of any charges) until the age of 60, Person One would have nearly £125,000 saved, while Person Two would only have £77,000. In this example, compounding growth means that the person who started saving earlier would have more in their fund when they retire.
Of course, while the effects of compounding increase with time, you’ll still notice the benefit if you start saving later in life.
If you are still concerned that you’ve left your saving too late, it’s worth noting that you can benefit from tax relief until the age of 75, giving your pot a further boost.
3. Not retiring as late as they could’ve
Nearly 1 in 10 respondents to the Canada Life survey above expressed regret about retiring as early as they did. Granted, deciding when exactly you should retire can be challenging, especially considering the ever-changing cost of living.
While there is an appeal to retiring sooner, there are also some benefits of delaying your retirement. Indeed, doing so could mean that you have longer to build a more substantial fund, and you’ll keep your mind busy while you continue to work.
If you continue working, you can contribute more to your pension pot
To figure out the right time to retire, it’s worth asking yourself what sort of lifestyle you ideally want.
If you’ve already accumulated sufficient savings to comfortably maintain your desired lifestyle, then you may not stand to gain anything from working for longer. However, delaying retirement may be sensible if you haven’t saved enough.
Working for a few extra years will require your pension pot to support you for a shorter period of time, which is especially important considering the rising life expectancies.
What’s more, the longer you contribute to your pension, the more you’ll have the chance to benefit from tax relief, ultimately boosting your pot.
On top of this, deferring your State Pension can actually make it more substantial. Indeed, the new full State Pension, which is worth up to £221.20 a week in 2024/25, can be claimed at 66, rising to 67 by 2028.
For every nine weeks you defer the State Pension, it increases by the equivalent of 1%, working out to a rise of just under 5.8% across a year. This means you could receive an additional £12.82 a week if you defer for an entire year after the State Pension Age.
Even if you want to slow down your work as you age, you could consider a “phased retirement” in which you continue to work in some capacity, such as part-time, as a consultant, or even at the helm of your own business.
This could allow you to continue earning money and contributing to your pension, while maintaining your wellbeing and improving your work-life balance.
4. Not accessing advice
In the Standard Life survey, nearly half of retirees (42%) expressed regret about not seeking financial advice or guidance during their working years.
Planning for retirement involves making complex decisions and asking yourself questions. This could include:
- How much do I need to save?
- When is the best time to retire?
- How will I fund later-life care?
- How can I tax-efficiently pass on the remainder of my wealth to loved ones?
These questions can often become overwhelming, especially when life’s other complexities keep you occupied.
Having a qualified financial planner in your corner can help you navigate some of these challenges and provide invaluable support as you approach retirement and beyond.
Seeking help from a financial planner could offer numerous emotional benefits
A sensible way to avoid regretting a lack of support is simply by seeking advice, perhaps from us. The benefits of doing so are clear, as a Royal London survey shows. Respondents said that having access to financial expertise gave them:
- More confidence in their plans (34%)
- A feeling of control over their finances (34%)
- Peace of mind (32%).
Not only could a planner help you start saving enough for retirement, but they could also support you in identifying your desired lifestyle goals for the future and developing a strategy for you to achieve them.
On top of this, a planner could also assist you with inheritance planning, ensuring you’ve considered this crucial aspect and are passing wealth to your loved ones tax-efficiently. The same survey states that people who work with a financial planner are twice as likely to understand inheritance planning well, helping them feel confident for the future.
As you can see, you don’t need a TARDIS to travel back in time and change the past. Instead, proactive preparations and the help of a financial planner could ensure you have a comfortable retirement filled with the experiences you deserve.
To find out how GPFM could help you, please call 01992 500261 or fill in our online contact form to organise a meeting and we’ll be in touch.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
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