Whatever age you are, it’s worth thinking about what you’ll need in retirement to have the standard of living you want. The following information might help you in the years leading up to your retirement. It’s also worth noting that in addition to your Scheme pension, you may also be entitled to the State Pension.
Now is the time to look at what your retirement might look like, including potential outgoings. Think about how your spending will change when you retire, for example:
Holidays
You may choose to go on more holidays
Car
You may have a smaller car when you retire
Hobbies
With more spare time you may spend more on day trips or hobbies
Are you saving enough?
If you would like more guidance around setting a retirement target, then the Pension and Lifetime Savings Association (PLSA)’s Retirement Living Standards are there to help. The information below is for you to consider and might help you plan for your retirement.
The PLSA examined a range of goods, services and activities that people tend to buy or do when they retire. By adding up the typical costs for all these things, they arrived at three standards:
Minimum
Would cover all your needs, and you’d have a small amount left over for social activities.
Moderate
You’d be able to afford some luxuries.
Comfortable
Would give you a lot more flexibility on how you could spend your money.
If you’re single/living alone (income each year)
If you’re in a relationship/cohabiting (joint income each year)
Minimum
£10,900 (£13,200 if you live in London)
£16,700 (£21,100 if you live in London)
Moderate
£20,800 (£24,500 if you live in London)
£30,600 (£36,200 if you live in London)
Comfortable
£33,600 (£36,700 if you live in London)
£49,700 (£51,500 if you live in London)
Retirement Living Standards give you an idea of how much income you might need - but are you saving enough to achieve the standard you want? If you don’t think you’ll have enough in retirement, there are a number of things that you can do.
Review your retirement date
Normal Retirement Age (NRA) is usually 63 for shore staff and 60 for sea staff. However, your NRA could be different depending on when you joined the Scheme and who you worked for. If you are unsure of your NRA please check with Mercer, the Scheme administrator.
You can delay drawing your Scheme benefit until after your NRA if you remain in employment with the Company .
You can also consider taking your pension from age 55, see early retirement for more information.
Benefits for your loved ones
It’s important to let the Trustee know who you’d like to receive any benefits payable in the event of your death.
The Trustee isn’t legally bound by your expression of wish form but will take your wishes into account when deciding who should receive any benefits due. Under the current law, this normally means that any lump sum can be paid free of Inheritance Tax.
In addition, if there any changes (at any time) to your beneficiaries you should complete a new expression of wish form to ensure that they receive the correct benefit in the event of your death.
Are you on target to achieve the retirement you want at your Normal Retirement Age? You should also start to think about your retirement options:
1
Income for life from the Scheme
You can choose a regular income for life. You can take up to 25% of your benefits for a tax-free cash lump sum. If you do this, your pension will be lower.
2
Transfer your pension out of the Scheme
You can choose to transfer your account to another pension arrangement. If your account is worth more than £30,000 you must take financial advice from a regulated financial adviser. You can find one near you at unbiased.co.uk.
You may be able to access the new flexibilities by transferring your benefits. However, this is a significant decision and may result in you losing out on valuable benefits. You will also lose any right to a regular income from the Scheme.
What about your AVCs?
If you have AVCs, it’s worth thinking about how you’d like to take your AVCs when you retire. You have the following options:
Flexi-access drawdown
This is a drawdown arrangement that lets you take as much as you like when you like. You can still take 25% tax-free. This would suit you if you’d prefer:
Flexibility around how you access your savings.
To keep your savings invested in retirement, giving an opportunity for
further growth.
Cash lump sum
You could take the whole of your account as a cash lump sum. The first 25% would be tax free, with the remainder being taxed at your marginal rate of income tax for the year (20%, 40% or 45%).
This might be suitable if you want to pay off your mortgage, for example, or the value of your AVCs is low.
Annuity
You could also buy an annuity which would guarantee you an income for life or a fixed period. There are a number of annuities on the market, designed to suit different needs. From single-life policies which pay an income to one person, to joint-life which pay an income to your dependant after you die.
There are also annuities which increase in payment each year, and those which will pay the same each year.
An annuity would suit you if you’d prefer a regular income in retirement.
If you would like financial advice, you can find an independent financial adviser at unbiased.co.uk
Trace other workplace pensions
It’s easy to lose track of your pension, especially if you’ve worked for a number of employers, moved house or changed your name. You may also have built up savings in more than one workplace pension. To enable to you to effectively plan, it’s important to know what you’ve saved. The Pension Tracing Service helps trace and locate any missing pensions you may have in three steps:
Authorisation
To satisfy data protection regulation, you’ll need to give the Pension Tracing Service written authorisation to search on your behalf.
Search
The Pension Tracing Service is authorised to access information relating to more than 200,000 pension schemes through the pension tracing register. It will write to various pension providers to locate any lost pension you may have.
Report
A pension specialist will report back any findings. The Pension Tracing Service can’t give you any advice. For more information, visit pensiontracingservice.com
If you would like financial advice, you can find an independent financial adviser at unbiased.co.uk
Benefits for your loved ones
Remember to keep your expression of wish form up to date. If there are any changes (at any time) to your beneficiaries, you should compete a new expression of wish form to ensure that they receive the correct benefit in the event of your death.
If you’re less than five years from your Normal Retirement Date, it’s time get a more realistic picture of how much money you’ll need. Things might have changed over the last few years. It’s at this time that you should start thinking again about the options you’ll have at retirement.
Financial advice
If you need help with your planning, you can talk to a financial adviser. There will usually be a charge for this but any decisions you make will affect you when you retire, so it’s worth thinking about. You can find an adviser in your area at unbiased.co.uk.
Benefits for your loved ones
It’s important to ensure that your expression of wish form is up to date, especially if your personal situation has changed.
If there are any changes to your beneficiaries, compete a new expression of wish form to ensure that they receive the correct benefit in the event of your death.
