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4 valuable pension lessons younger generations can learn from the regrets of the over-50s

Those nearing retirement have plenty of lessons to teach younger generations. A survey asking over-50s how they feel about their pension and retirement plans has highlighted some regrets workers could learn from.

When you’re in your 20s, 30s and 40s, retirement can still seem like it’s a long way off and it can lead to “pension apathy”. You may believe it’s something you don’t need to think about until your retirement date is near. However, engaging with your pension sooner means you are far more likely to enjoy a comfortable retirement.

So, what can you learn from those nearing their retirement date?

1. Almost half of over-50s regret not saving into a pension sooner

If you’ve been putting off saving into a pension, keep in mind that 49% of over-50s wished they had started sooner, according to an Aviva survey.

A quarter said they didn’t start saving into a pension until after they had turned 30. The biggest reason for not starting sooner was that they didn’t feel financially stable enough.

Another reason was understandably prioritising other areas of their life, like raising children (42%) and paying off their mortgage (40%).

Auto-enrolment has led to more people saving into a pension than ever before. Most workers over the age of 22 will automatically start saving into a workplace pension. However, you can choose to opt out.

Opting out of a pension when you’re decades away from retirement may seem like it makes sense on the surface. However, you’d also be missing out on employer contributions and tax relief.

In addition, the money you add to your pension later wouldn’t benefit from being invested for as long. Even small but regular deposits into your pension over your working life can grow into a retirement nest egg thanks to the effects of compounding when you invest.

2. 64% of over-50s wish they’d contributed more to their pension

Not only did those nearing retirement regret not starting contributions to their pension earlier, but almost two-thirds wished they’d contributed more.

If you’ve been automatically enrolled into a pension, the minimum contribution level is 5% of your pensionable earnings. However, don’t assume that saving this amount will be enough to secure a comfortable retirement.

How much you need to save for retirement will depend on a range of things, such as when you hope to retire and the lifestyle you want. In many cases, you’ll need to increase your contribution level from 5% to achieve your goal.

By looking at how your contributions will add up now, rather than waiting until you’re near retirement, you’ll have more opportunities to fill a potential gap.

3. 4 in 10 nearing retirement could be underestimating the income they’ll need

Understanding how much income you will need in retirement is crucial for effective planning and making sure you’re taking appropriate steps now.

The survey results suggest some nearing retirement could find a significant gap in their income.

4 in 10 believe an income between £10,000 and £20,000 will be enough to live comfortably. This is far below the £33,600 the Pensions and Lifetime Savings Association recommends for a comfortable standard of living.

While retirement may be years away, having a goal income now can mean you avoid a shortfall when you’re ready to give up work. Closing a pension gap is easier the sooner you spot it.

4. Don’t overlook the value of financial advice

More than 70% of over-50s said they had never sought financial advice about their pension. Yet, on hearing how working with a professional could potentially add tens of thousands of pounds to their retirement savings, half of them said they would.

When asked why they didn’t seek financial advice, 30% said they feel like they know what they’re doing. While this is the case for some savers, understanding pensions and how they’ll translate into a retirement income can be complex. Financial advice can help you identify how much you should be saving, the tax allowances you can make use of, and much more.

In addition, 10% said they relied on their family and friends for pension advice. Talking about finances with people close to you is good. However, you should keep in mind that your circumstances and goals may be very different. A retirement plan that will deliver the right outcomes for your friend may not work for you.

Financial advice can help you get the most out of your pension contributions, ensure you’re on track for retirement, and balance long-term goals with your lifestyle now.

Engaging with a financial planner can highlight where you could adjust your retirement savings now to deliver better outcomes. This way, you can look forward to a financially secure retirement when you’re ready.

Whether you’re approaching retirement or the milestone is still decades away, we can help you get the most out of your pension. Please contact us to arrange a meeting and a pension review you can have confidence in.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

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