It’s probably fair to say that, right now, many people are more concerned with getting through the present than planning for their retirement. This is understandable. The problem with this approach, however, is that the future can arrive much quicker than it seems like it should. This means that retirement planning should always be a consideration if not a priority.
Understanding retirement planning
When you hear the phrase “retirement planning”, the first thought you have might well be “saving for a pension”. It is true that saving for a pension is often an integral part of retirement planning. In fact, it’s often so important that it should be very high on your list of priorities. It is, however, not the only aspect of retirement planning.
In other words, you should usually try to save for a pension if you possibly can. If you can’t, then you should still look for ways to improve your outlook in retirement. What’s more, some of these options may help you in the present. For example, paying off debts and saving will generally help you at any time of life.
If you’re employed, see if you can use your workplace pension
Qualifying employees are now automatically enrolled into workplace pensions unless they actively opt-out. The advantage of these schemes is that employers are forced to make pension contributions for you. The potential disadvantage of these schemes is that employees have to make a minimum level of contributions.
In general, you should aim to make the employee’s contributions if you possibly can. If you really can’t, try asking your employer if they will pay the employer’s contributions into either a private pension scheme or a Lifetime ISA. Your employer is not obliged to do this but you can at least ask.
If you’re not employed, try to save for a pension privately
Even if you’re not able to make regular contributions, you may still be able to save into a private pension. You can definitely make ad-hoc contributions to a Lifetime ISA (if you’re in a qualifying age group). If you’re not in a qualifying age group for the Lifetime ISA and have issues getting a private pension, then consider using your regular ISA allowance.
Try to maximise your state pension
You probably don’t want to rely on your state pension but it does often make sense to maximise what you do receive. That could mean filling in any holes in your payment history. If you can’t afford to do so at the moment, then make a commitment to doing so as soon as you can.
It could also potentially mean claiming benefits even if you don’t get a cash payout from them. Some benefits provide National Insurance credits and these count towards your state pension. This can be worth making the effort of dealing with the necessary paperwork.
Trace your pensions
Unless you’ve very recently entered the world of work, the chances are that you have more than one workplace pension. Make a point of tracing your old pensions. Ensure that you know where they are held and that the holders have your up-to-date contact details. If you have multiple pensions (e.g. from short-term jobs), think about whether or not you should consolidate them.
Work to clear any debts you have
Ideally, you want to be completely debt-free before you retire. At a minimum, you want to be free of all high-interest debt such as credit-card debt. In fact, ideally, you want to be free of this in the present.
Tackling high-interest debt when money is tight may seem like more than you can manage. The good news is that just paying a little bit extra each month genuinely will help you to get out of debt more quickly. If you really cannot do this, then work on your credit score and move your balance to a lower-interest card as quickly as you possibly can.