Preparing to retire; some homework for the hopeful

Preparing to retire; some homework for the hopeful

Part of the fact finding process for most IFAs is asking “when would you like to retire?” Often the answer is “Tomorrow!”.  More often than not, the client expects retirement to be a little time away. For most people in the UK, State Pension age will be as soon as they are able, as retiring early is unaffordable.

Currently a full State Pension is £159.55 per week or £8,296.60 per year, but the UK poverty line is around £12,000 per annum, so this is not a comfortable retirement.  

If you have no debt, own your own home, do not mind applying for Council Tax Relief and do not have expensive hobbies, then £8,296 per annum is just about enough to live on but for peace of mind some additional resources would be a good idea. Research by the BBC suggests that retirees feel comfortable with over £15,000 per annum, so another £7,000 of sustainable income every year would be a minimum target.

The first thing to do at this point is find out when you can claim the State pension; too many people still believe it is 65 years of age for men and 60 for women, when it has been flagged for moving upwards for some time. Head for to get a definitive answer. For any man retiring today, (31/05/2017), it was 65, so his date of birth is 31/05/1952. For a woman born on the same date, (31/05/1952), her State Pension Age is 62 years, 1 month and 6 days, so she retired on the 6th July 2014. Now you see why you need to check!

For both women and men, the State retirement age will be 67 shortly; a man born on 31/05/1955 will need to wait for 66 years. A woman born the same day, (31/05/1955), will have the same retirement age, so there are big changes over a short period. For me, born in 1963, and my wife, born in 1962, we must wait to age 67.

So how much do you need to save to generate £7,000 per year realistically? As a rough approximation about 20x the income you would like, so £7,000 a year would need a pension pot at retirement of about £140,000. This makes no allowance for inflation, so you would need more to be sure.

If you have access to a workplace pension, then use it! More importantly, get advice to ensure that you are contributing enough, as the default level is most likely to be too low. If you do not have access to a workplace pension, then get yourself a private pension and get advice on the investments to use and the contribution to make. 

The most common mistake I see with new clients is that they set up a pension 20 years ago and have not looked at it since, so they have no idea of its worth, little idea of its cost and no idea of the investments they are relying on. The world does not stand still, so a good investment in 1997 could be a bust in 2017; a good deal in 1997 could be too costly today and £50 per month is not likely to be enough for a castle in Spain!

If you would like to know more about how we can help you plan and realise your financial goals then contact us at or call us on 01223 792 196.

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.