3 Things Between You and Your Dream Retirement Lifestyle

How far will your pension help you in funding your dream retirement lifestyle? According to the Pensions and Lifetime Savings Association, individuals would require £43,100 per annum (or £59,000 per annum for couples) to achieve a ‘Comfortable’ living standard in retirement (PLSA 2024).

When it comes to pension planning, there are three main factors that contribute to how much you save towards retirement: contributions, investment growth, and charges. Understanding these factors is crucial in building a sustainable level of retirement income that covers the cost of your lifestyle and individual needs.

Contributions are the foundation of your pension pot, and the more you put in, the more you will have in retirement. Consistency is key when it comes to making regular contributions, as it allows your money to compound over time. Even small, regular contributions can add up to make a significant difference in the long run.

Therefore, when times are tough and you are looking to make cost-cutting decisions, it is wise to stay invested in your pension if you can afford to. Furthermore, not contributing into a workplace pension scheme will mean that you miss out on added employer contributions.

Consider increasing your contributions as your income increases, or take advantage of employer-matched schemes to boost your savings further.

Investment growth is a powerful force when it comes to building your pension pot. A 5% annual growth rate may seem modest, but over the long term, it can have a significant impact on your retirement income. If you can afford to take more risk, or wish to take less risk then you could average a growth rate higher or lower than this.

It is important to consider your risk tolerance and your investment timeline as well. For example, young professionals may have more of an appetite for higher-risk assets, mid-career individuals may want a more diversified approach, and those nearing retirement age may want more reliable, low-risk solutions. Therefore it is important to regularly review your pension investment strategy to ensure it reflects your current needs as well as your future retirement requirements.

Charges are an often overlooked aspect of retirement planning, but they can significantly reduce the amount you have in retirement. It is important to be aware of the charges associated with your various pension schemes, including administration fees, management fees, and exit fees. Perhaps you have a scheme with lower charges that you wish to consolidate some of your other higher-charging pots into.

Understanding how these three key factors can impact your pension savings is an important step in visualising your income and lifestyle at retirement. To discuss your pension plans to create a comfortable retirement income that meets your needs and lifestyle, please do not hesitate to get in touch with an Integrity365 Independent Financial Adviser on 0117 450 1300.

To hear more from Nicola on pensions and retirement planning, watch our latest podcast episode ‘Managing the Modern Day Pension’ below: