Personal Finance

Transitioning into retirement so it’s not a cliff-edge

The traditional approach to retirement has changed, dramatically so, in recent years. In fact we rarely talk about overnight retirement with clients these days instead talk about the day work becomes a choice.

What used to be viewed as a cliff-edge has, for many retirees, become more of a gradual transition into a different lifestyle.

Where retirement used to involve a complete break from work – one-day clocking in at 9 am, the next with no employment commitments to fulfil – it’s now increasingly common for retirees to work part-time, or volunteer in some capacity.

Many of our clients at Juniper Wealth go on to take up positions as Charity Trustees or fulfil voluntary roles in organisations they are passionate about such as Sport Clubs or Community Projects.

New research from Fidelity International has found that more than half of UK adults plan to work at least part-time during their retirement.

The retirement trends research found 52% of people intend to continue working in later life. This still represents ‘retirement’, as on average people expect to step back from their primary job at 66 years old.

However, a significant 45% of those surveyed expect to continue working in some capacity well into their 70s, and almost one in ten expect to be still working in their 80s or beyond.

An expectation of having or wanting to work for later could be linked to improvements in longevity.

Average life expectancy at birth in the UK is now 79.3 year for men and 82.9 years for women, with a child born today expected to live for a decade longer than a child born in the 1950s.

Because we’re living longer, on average, it’s natural to expect to work longer. Alternatively, the amount saved during our working lives would need to be significantly higher, to last for longer in later life.

Already, this improved life expectancy is feeding through into different lifetime working patterns. The latest official figures show the proportion of over 70s in full-time or part-time employment has doubled in the past decade.

“With 60 now widely seen as ‘the new 40’, today’s so-called retirees are healthier, living longer, and retiring at different ages. So, it is unsurprising that people have no desire to retire and are defying traditional expectations.

“The economic power of those who were once considered ‘past it’ can now be felt everywhere. This will transform the jobs market as more people work into their late 60s or even early 70s and they will have a growing influence on consumer spending as pension reforms allow them to cash in their lifetime savings and spend the money as they wish.”

Maike Currie, director for workplace investing at Fidelity International, said:

The research also found that higher-income households are more likely than lower-income families to plan to work into their retirements. The financial choice could, therefore, play a role in this decision.

58% of people from higher-income households had this intention, compared with 50% from lower-income families.

Higher earners do however expect to step down from their primary career an average of two years earlier. Households with income exceeding £50,000 a year expect to retire at age 65 on average, while families with income of less than £50,000 plan to retire at age 67 on average.

What this research shows is that, for many of us, retirement is no longer the one-off event it used to be. Instead, retirement increasingly involves a gradual transition from work to leisure.

As well as financial, there are many benefits to working in retirement. The sense of purpose and identity that comes with continuing to work can have positive mental and physical health outcomes when compared with retiring fully from all work.

What matters is having a clear plan for retirement and having choices when it comes to continuing work.

Sometimes, it’s not possible to work in our 60s, 70s or 80s, due to poor health (for ourselves or a loved one who needs our care), or the lack of suitable employment.

To create these choices, having a fully-funded retirement plan, that can kick in should work become impossible, is a must-have. Working with a financial planner to identify how much you need to save and how to best structure your retirement wealth is a valuable step.

Jon DoyleTransitioning into retirement so it’s not a cliff-edge
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24 hours to lose 22 years’ worth of pensions savings

Years of hard earned pension, investment and ISA savings could be lost to scammers in the space of 24 hours.

According to a new report by the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR), victims of scams can lose 22 years’ worth of their savings in a day.

The analysis, which forms part of the regulators’ joint ScamSmart campaign, found it could take a pension saver 22 years to build up a pension pot of £82,000. This is the average size pension pot lost by victims of scams last year.

Despite the length of time it takes to accumulate pension savings, it can all be lost to scammers within the space of 24 hours; the time it takes for 24% of those surveyed to make up their minds on a pension offer.

Overconfidence was highlighted as one of the factors leading to missed warning signs of a pension scam.

The research found that nearly two-thirds of pension savers are confident to decide on their pension, but the same proportion would trust someone offering pensions advice out of the blue.

An unsolicited approach to talk about your pensions is one of the biggest red flags of a scam.

Another interesting finding within the research was a correlation between education and falling victim to a scam. The more highly educated the person, the more likely they were to become a victim.

University educated graduates were 40% more likely to accept the offer of a free pension free from a company they haven’t dealt with before. 21% of more educated savers were expected to take up an offer of early access to their pension pot.

Free pension reviews and the offer of early access to a pension pot are further red flags suggesting a pension scam.

The FCA and TPR pointed out in their report that pension scams can have a devastating impact on their victims.

“We know many people have big plans for their retirement, whether it’s seeing new places, learning new skills or helping their families out financially. Pension scammers destroy those dreams, often forever. So be ScamSmart. Reject unsolicited approaches offering ‘help’ with your pension and get advice from an FCA authorised firm before making big changes to your pension fund. Make sure your lifetime savings stay yours.”

Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, said:

The consequences of falling for a pension scam can include being left with limited income in retirement, and little or no opportunity to work and save to rebuild pension pots.

For this reason, the regulators want pension savers to be aware of the warning signs of a scam and check who they are dealing with before making important decisions about their pension savings.

“Pension scammers ruin lives, stealing away decades’ of savings with professional-looking websites, ‘expert’ advice and an easy manner making it tough to spot the fraud. But once you sign on the dotted line, often there’s no second chance. Scams can happen to anyone, so before making any decision about your pension, take your time, be ScamSmart and always check who you are dealing with.”

Nicola Parish, Executive Director of Frontline Regulation, TPR, said:

The FCA and TPR recommend four easy steps that pension savers can take to protect themselves from the scammers.

  1. Reject unexpected pension offers whether made online, on social media or over the phone.
  2. Check who you’re dealing with before changing your pension arrangements – check the FCA Register or call the FCA helpline on 0800 111 6768 to see if the FCA authorises the firm you are dealing with.
  3. Don’t be rushed or pressured into making any decision about your pension.
  4. Consider getting impartial information and advice.

“Scammers employ clever techniques, such as seeking to establish ‘social similarity’ by faking empathy and a friendly rapport with their victims. They can win your trust in a short space of time and by engaging with them you leave yourself vulnerable to losing a lot of money very quickly. People need to know how to spot the signs of a scam so they don’t fall for psychological tricks.”

Honey Langcaster-James, psychologist, added:

If in doubt, or if an offer seems too good to be true, proceed with caution and get a second opinion before making a lasting decision about your pension.

There’s never a need to rush into decision making when it comes to such a valuable financial asset. Don’t fall victim to pension scams and risk losing a lifetime worth of savings in a short space of time.

Jon Doyle24 hours to lose 22 years’ worth of pensions savings
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Don’t make financial decisions when you’re hungry

I think we all know by now what tends to happen when we visit the supermarket on an empty stomach or have felt the effects of a ‘hangry’ partner, child or friend?

If you are browsing the supermarket aisles when hungry, it can result in a trolley or basket full of less than sensible purchases.

But what happens when the same hungry state is applied during times of making financial decisions?

Thankfully, scientists have been pondering this question, and they have come up with an answer.

The new study from the University of Dundee, published in the journal Psychonomic Bulletin & Review, concluded that making any decision while hungry can result in making poorer long-term choices.

“This work fits into a larger effort in psychology and behavioural economics to map the factors that influence our decision making. This potentially empowers people as they may foresee and mitigate the effects of hunger, for example, that might bias their decision making away from their long term goals.”

Benjamin Vincent, Author of the study

The study considers a heuristic known as ‘delay discounting’.

This says that we tend to prefer smaller rewards today instead of more substantial rewards tomorrow.

You might have heard of the famous marshmallow test, where children who could resist the temptation of eating one marshmallow immediately, to receive two marshmallows as a reward for their patience, tended to have better life outcomes.

If you haven’t heard of the Marshmallow Test I can highly recommend the book.

Patience is, indeed, a virtue.

From a financial perspective, delay discounting tells us that we often prefer to receive £100 now instead of getting £200 later.

But back to feeling hungry and its impact on our decision making.

The researchers asked study participants whether they would prefer food, money or music now, or a greater amount of the same in the future.

One group of participants were hungry after fasting for 10 hours. The other study group were well fed.

Unsurprisingly, feeling hungry made people less likely to want to wait for more food in the future; they wanted it now.

It’s the translation of this result when it comes to money that we found especially interesting.

Hungry participants were prepared to wait 40 days to receive double the money, compared to a 90 day wait for those who had recently eaten.

The researchers concluded there was a carryover effect of hunger on money, which was moderately strong.

Being hungry focuses our minds on short-term rewards, across multiple areas, including food and money.

What this means for making financial decisions is simple; eat first!

If you’re going to choose a mortgage, make decisions about your retirement income, or change the allocation of your investment portfolio, doing so on an empty stomach could result in making poorer long-term choices.

Jon DoyleDon’t make financial decisions when you’re hungry
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How much is enough to make work a choice?

What’s your retirement savings target? How much pension will you need? How much will you need to have saved, invested and put aside for your financial future?

Don’t worry if you can’t answer these questions quickly. A considerable number of people don’t have a ready answer to this critical question.

According to new research, around 40 million UK adults could be taking their chances when it comes to retirement, admitting they either have not or did not set a savings target.

The research, as part of Sanlam’s “What’s Your Number?” report, is highlighting how a lack of basic knowledge about retirement planning could be damaging our ability to reach future financial goals.

Within the report, it found that more than half of UK adults don’t think they can save enough money to retire when they want to finish work.

Only 12% of under-55s have a specific target for the size of their pension pot.

This lack of knowledge around retirement planning is brought into sharp focus by the fact that four times as many people know their lottery numbers off by heart.

It’s the 45-54 age group who are mainly at risk from this lack of explicit knowledge and goals. Only 18% in this age group, which should be saving at a significant rate, have set retirement goals.

Applied across the UK population, that means that 8.2 million adults are heading into retirement without a clear set of goals. They could be failing to make the most of some of their most lucrative years of career earnings, undermining the opportunity for a financially secure retirement.

Within the research, there’s a significant gender gap. Women are particularly exposed to a lack of precise retirement planning.

Only 18% of women have set a financial target for retirement, compared to 29% of men. With women already facing a gender pensions gap, this lack of clear retirement objectives could be especially harmful.

Knowing your number and, more importantly, understanding what it means for your current and future lifestyle is really important.

The gap between what people think they need and what they actually require in later life is huge, and sometimes life-changing.

When taking clients through this it becomes very clear. We paint it out in pictures and it very quickly highlights the important issues. Blue and Green is good, red is bad.

Despite years of industry effort to turn the tide, engagement with longer term savings, as highlighted in this report, is shockingly low.

Jon Doyle, Financial Planner, Juniper Wealth Management

The research discovered that the main aims for retirement were not having to worry about money, maintaining a current living standard, and being free from debt.

Other retirement planning goals include having a regular income and repaying the mortgage before retiring.

So why are we failing to plan for retirement? Around two-fifths of UK adults don’t see setting targets as being essential for their long-term financial planning, which could explain the complacency.

This report suggests that we are about to see a significant number of people approaching retirement who will be ill-prepared and severely disappointed when faced with their retirement reality.

By taking some very simple steps, setting clear financial goals, and identifying a clear path to get there, catastrophe can be avoided.

When setting goals people can often get stuck on not having big, inspiring or ambitious goals but I think it can be much simpler than this.

Sometimes that goal can be a simple as knowing what your don’t want to have happen.

Jon Doyle, Financial Planner

It’s hard to understate the importance of having clear goals for retirement savings.

Knowing how much you should be saving each month, and your clear financial goals to maintain the desired lifestyle in later life, are critical to a successful retirement.

To find out more about our Financial Planning process do get in contact or you can book in an initial meeting at our offices or over video conference completely at our expense here

Jon DoyleHow much is enough to make work a choice?
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Little known benefit available for Grandparents who help with Childcare whilst save families £22bn a year.

Grandparents play a significant emotional and financial role in the lives of their children and grandchildren

According to new research from insurer SunLife, four in five grandparents are providing some form of childcare for their grandchildren.

As a result, grandparents save a collective £22bn in childcare costs for UK families.

The poll of 2,000 grandparents found that 85% provide some form of support.

45% of grandparents provide babysitting for their grandchildren, and 34% provide childcare during the school holidays.

A quarter of grandparents provide childcare during the working week, with one in five taking care of the school run.

The research also found that more than 29% of grandparents are relied upon to look after grandchildren when they are sick, while one in six grandparents provide a taxi service, taking their grandkids to after school clubs, activities and hobbies.

What would all of this childcare provided by grandparents cost if the role was paid?

With an average of eight hours a week devoted by grandparents towards childcare, this would equate to an annual salary of £4,027.

For grandparents who provide childcare for five days a week, eight hours a day, it would equate to an annual salary of £22,651.

With around 14 million grandparents in the UK and 5 million of these providing regular childcare, it means a cost-saving to families of approximately £22.5 billion each year in childcare costs.

“Grandparents are often the unsung heroes of the family, spending hours helping with childcare and offering practical and emotional support, not to mention saving parents thousands of pounds in childcare costs. The research suggests most are happy with the amount of support they give, getting to spend time with their beloved grandchildren and staying fitter and healthier in the process!”

Ian Atkinson, marketing director at SunLife

It’s worth noting that grandparents who provide regular care and support for their grandchildren could be entitled to receive childcare credit.

Childcare credit is a National Insurance credit introduced in April 2011, available if you’re a grandparent or another family member who cares for a child under 12, usually while their parent or the main carer is working.

Specified Adult Childcare credits work by transferring the National Insurance credit attached to Child Benefit from the Child Benefit recipient to the family member who is providing care to the child.

Credit is available for each Child Benefit recipient, rather than each child, so care must be taken to decide who receives any credit.

Once in receipt of this credit, a grandparent can receive a Class 3 National Insurance credit for each week or part week they care for the child. These Class 3 National Insurance credits can help build entitlement to the State Pension.

The credits can also help to stop gaps in your National Insurance record.

Jon DoyleLittle known benefit available for Grandparents who help with Childcare whilst save families £22bn a year.
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Why underestimating life expectancy in retirement is a costly mistake

One of the biggest challenges associated with financial planing in retirement is accurately forecasting life expectancy.

Using a reasonable estimate for life expectancy is important when calculating how much you need saved in pensions, ISAs and other savings and investments, in addition to the State Pension, to fund the lifestyle you want to live.

If you underestimate your life expectancy, you risk failing to save enough for retirement or spending your savings too quickly and running out of money in later life.

Overestimate your life expectancy, and there is a genuine risk of saving too much, working longer than you had to or spending too little in your golden years and failing to live the life you want.

It’s the equivalent of setting off on an adventurous road trip without knowing if you have enough fuel to get to your destination. Except there are no petrol stations, there is no can of fuel in the boot and nobody can give you a lift.

According to some new research, we have a habit of underestimating our life expectancy. As a result, we could face an average £80,000 shortfall in our retirement savings.

Here’s how we arrived at these numbers:

The research from insurer Scottish Widows found that one in five people are using the age to which their grandparents lived as a yardstick for their life expectancy.

Referring to the lifespan of a previous generation is an flawed methodology when longevity improvements mean we can expect to live, on average, 11 years longer today.

The typical life expectancy of UK adults saving for retirement is 87 years old.

However, the average adult is planning with a life expectancy of just 82, after retiring at 65.

These expectations mean a typical retirement is 30% longer than expected, at 22 rather than 17 years long. Those five extra years of retirement on average require an additional £80,000 in savings.

Despite this likely shortfall, the research also found that one in 10 over-50s don’t know how they will fund their retirement income, and nearly a third say they fear running out of money in retirement.

And the out-of-date assumptions about life expectancy could put retirement plans at risk. Only 9% of over-50s said they were planning to buy a retirement income product that provides a secure income for life, such as an annuity.

Failure to secure an income in retirement could be the result of a lack of knowledge. The research found that 13% of over-50s didn’t know which retirement income products guaranteed an income for life.

Emma Watkins, Annuities Director at Scottish Widows, said:

“Life expectancy has grown substantially in the last 60 years and now one in 10 people will live to be 100. As the concept of the three-stage life is becoming out of date, people facing into retirement are also facing a trade-off between saving more, working longer or having a clearer plan.

“Pension Freedoms opened the door to new opportunities and flexibility for savers, but advice on the best way to put in place a stable, predictable income for life would give some comfort to those facing a retirement that could last more than 20 years.”

As part of our Financial Planning process, we make a series of reasonable assumptions about the future. These assumptions include life expectancy, with our lifetime cash flow forecasts projecting through to age 100 unless there is a very good reason to alter from this course.

We review these assumptions with clients throughout the Financial Plan, as they change over time. By keeping assumptions under regular review, we keep your Financial Plan on track, even when external factors change.

This Financial Planning process enables our clients to be confident that they can live the life they want to live without fear of running out of money.

Jon DoyleWhy underestimating life expectancy in retirement is a costly mistake
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Private School fees on the rise again

Rising private school fees are placing an increasing financial strain on parents, regardless of Labour or Conservative party plans for Private School fees.

Many parents consider independent education to be the best choice for their children. But they are increasingly turning to alternative options to make this private schooling achievable.

That’s according to a new survey conducted by CEBR for investment house Kilik & Co.

The latest Killik & Co Private Education Index found that the average annual cost of a day school has risen by 3% since 2015. It now stands at £15,000 a year or £5000 per term

Popular Private Schools for our Lancashire clients include Kirkham Grammar at £4010 per term, AKS at £4,095 and Stoneyhurst College at £6,850.*

The total cost, including extras, of a 14-year education has risen by 15% to reach £325,600. This is the total cost from reception through to upper sixth form in a day school.

This increase in private school fees has risen faster than wage growth for professional careers, even where both parents are in full-time employment.

Annual private schooling fees, including extras, now represent 39% of an average doctor’s disposable income and 65% of an accountant’s.

But what’s the alternative, if private education becomes unaffordable?

Some parents are sending their children to a state primary school before moving to a private secondary school, as a way to keep the total costs down.

The analysis by CEBR found that around 6,000 more children enter the independent sector when they transition from primary to secondary education.

Choosing to send a child to a state school until either age 8 or 11 could result in cost savings of £63,500 or £117,900 respectively.

These cost savings are expected to continue to rise in the future, and the abolition of the Common Entrance Exam could also accelerate this state to private school trend.

It’s no surprise to see that school fees in London remain the highest in the country this year. Average fees in the capital have risen faster than those in the rest of the country since the turn of the century.

Between 2015 and 2019, fees in Wales and Scotland saw more significant growth.

Wales experienced the fastest growth in private school places in the past year, up 2.4% between 2018 and 2019.

Jon Doyle, Founder and Financial Planner Juniper Wealth, said:

“The rising cost of fees is a concern for parents looking at private schooling. Even for those parents in traditional professional careers, these findings show how important planning is in meeting the increasing costs of funding the private education of their child or children.

“Having a financial plan in place to assess what is manageable with a family’s financial resources is critical and pairing this with an understanding of each child’s needs. With a strategy in place, parents can work out what is most important to them.”

*All fee stated are for Secondary Years, Day only and are correct as at 24th October 2019

Jon DoylePrivate School fees on the rise again
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Proposed Capital Gains Tax increase is a concern to investors

Investors, entrepreneurs and buy-to-let landlords face substantially higher rates of capital gains tax if the government accepts new recommendations for reform of the system.

The reforms, proposed by The Institute for Public Policy Research, would result in a hike in the rates of capital gains tax, all to make the UK’s tax system fairer while increasing revenue to the Treasury.

The think tank made its proposals in a report called Just Tax.

It estimated the government could raise an additional £90bn in capital gains tax over the next five years by making one simple change; taxing capital gains at the same rate as income.

Under the current tax system, capital gains are taxed based on different thresholds to income tax. Higher earners typically pay lower rates of capital gains tax than they do for income tax.

Another proposed change from The IPPR, which could raise £15bn extra in five years, would be to remove the capital gains tax exemption on death. As things stand, a deceased’s estate is not subject to capital gains tax, instead of suffering only inheritance tax.

The driving force behind the proposed reforms is the recognition that different sources of money currently result in very different tax treatments. This anomaly in the tax system means higher earners can pay lower tax, on average, than lower earners who solely derive their income from employment.

According to the IPPR, this system is “fundamentally unfair”, distorting economic behaviour and opening the doors to tax avoidance opportunities.

Capital gains tax is charged on the profit made when most personal possessions worth more than £6,000 are sold. Excluded from this tax are vehicles, investments held within the tax-wrapper of an Individual Savings Account (ISA), and principle private residences (homes).

The tax is charged at 10% or 20%, depending on the income tax band of the taxpayer. Capital gains tax on property sales is currently charged at 18% for basic rate taxpayers and 28% for higher and additional rate taxpayers.

According to the Just Tax report:

“Taken together, we believe these proposals amount to a transformation of the taxation of income which would move us towards a more economically just system and warrant serious consideration for any government interested in raising revenue in a progressive manner.”

The proposals to reform capital gains tax have come along at an interesting time, with a great deal of speculation about a snap general election.

Despite his best efforts, Prime Minister Boris Johnson has failed to force a general election ahead of the prorogation of parliament until mid-October.

Should a general election occur around the time of the UK’s scheduled departure from the European Union at the end of October, taxation is likely to form a key battleground for the parties, as well as Brexit.

But these proposals from the IPPR serve as a stark reminder that tax policy can and does change, sometimes with little notice.

Investors would be well advised to consider the consequences of any capital gains tax hike and plan by utilising available allowances today to move taxable investments into tax-free wrappers.

Jon DoyleProposed Capital Gains Tax increase is a concern to investors
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This is why your selected retirement age matters

When do you plan to retire?

Whilst that may seem like an obvious question stick with me for some wise pension guidance that may not be so obvious.

The date you select for your retirement can have a significant impact on the value of your pension pot.

That’s because the default investment option for many pension plans, and especially company pension plans, involves reducing the risk of underlying investments, the closer you get to that chosen retirement age.

In theory, it’s a sensible strategy.

Taking less investment risk as you near your chosen retirement age should, theoretically, protect you from some of the short-term volatility associated with stock market investments.

But what if you’ve told your pension provider one date, and then continue to work for several more years?

In this scenario, your pension investments could be growing more slowly in those final few years, due to taking a lower risk.

A new analysis by insurer Aviva has found that millions of workplace pension savers are exposed to this issue.

It’s important because of two factors; recent changes to the state pension age, and changes to employment law, which mean people can continue working for as long as they need or want.

Under the old state pension rules, women would receive their state pension income from age 60. Men would get their state pension paid from age 65.

The new rules mean that men and women under age 41 will not now get their state pension until at least age 68.

These changes to the state pension age and employment retirement age have led to many people deciding to work for longer. But if they failed to update their selected retirement age with their pension provider, default investment strategies could still apply.

The analysis from Aviva shows that the average earner in an automatic enrolment workplace pension could miss out on more than £4,000 in their pension pot if they keep their default retirement age at 65, but actually intend to retire at age 68.

For someone with a default retirement age of 60, an intention to retire at age 68 would cost them almost £10,000.

Women are more likely than men to be affected by this issue, due to the way in which default retirement ages were historically set.

Of course, the opposite of this issue is also a problem. If your pension provider holds a retirement age on file which is later than your intended retirement age, they could keep your pension pot invested in riskier assets in those later stages.

Aviva reported that 47% of workers are saving into defined contribution pensions, and around 90% of these savers are invested in default funds.

Looking at how returns could differ, Aviva shared performance figures from their ‘My Future’ default solution. The five-year return for these investments, as at 31st March 2019, was 3.2% higher 30 years from retirement, and 1.1% higher five years from retirement, compared to the return at retirement age.

It’s important to note that past performance is not a guide to the future, but these figures show a general effect of gradually moving to lower-risk investments in the approach to retirement age.

The retirement age recorded with your pension provider is simple to change; it only takes a phone call or letter.

But before changing your selected retirement age, check first whether it could result in any adverse product charges or a loss of guaranteed benefits.

Also, take some time to work with your Financial Planner to decide on a suitable retirement age, which will allow you to live the life you want once you stop working.

Jon DoyleThis is why your selected retirement age matters
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Are you throwing away your pension savings?

Opting out of your workplace pension might seem like a good idea in the short term.

After all, by opting out, you get a little more in your pay packet each month, which will undoubtedly help with the ever-rising cost of living.

But opting-out comes at a significantly high cost in later life.

According to new research, the over 60s are throwing away as much as £1.75bn in pension savings, through this simple act of opting out of a workplace pension.

Often due to a misunderstanding of what can be done with the money they are saving.

According to insurer Royal London, who found that opt-out rates rose sharply for older savers, with almost one in four over 60s making this decision.

The figure, which is based on workplace pension opt-out rates for Royal London’s auto-enrolment business, shows rates remain below 10% across all other age groups.

The opt-out rates are in line with those disclosed by other auto-enrolment providers, including NEST.

But what impact could opting-out of a workplace pension have on your standard of living in retirement?

If someone age 60 on the average wage was auto-enroled into a pension scheme, paying the minimum of 8% contributions, they could build a pension pot of just under £14,000 by the time they reach their 65th birthday.

Pension contributions made to a workplace pension are made up of an employee contribution, employer contribution and tax relief from the government. These three sources of contribution mean pension scheme members only need to contribute a little over £6,000 of their own money to gain the illustrated outcome.

Opting-out of a workplace pension at age 60, therefore, could result in a loss of £7,000.

Royal London highlighted data from the ONS Labour Force Survey, which shows there are around 1.1 million people aged 60 and over in full-time employment. This means that more than 250,000 people could be affected by this loss of pension wealth.

If each of these 250,000 people are missing out on £7,000 each, that’s a collective £1.75bn in lost pension wealth as a result of opting-out.

There are lots of reasons why older employees decide to opt-out of their workplace pension. These reasons could include the perception that they have already saved sufficient amounts in a pension, or that they are too close to their planned retirement age for further savings to make a meaningful difference.

But opting-out of a workplace pension, at any age, means missing out on employer contributions, tax relief and investment growth, all three of which can significantly improve their income in retirement.

“It is understandable that someone at the age of 60 might think it is too late to save enough to make a difference to their retirement income but they are wrong. Our figures show older workers are throwing away thousands of pounds on retirement income by opting out of their scheme. We would urge anyone thinking of opting out of their auto-enrolment scheme to think twice before doing so.”

Helen Morrissey, pension specialist at Royal London, said:
Jon DoyleAre you throwing away your pension savings?
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