If you’re already working and paying into your pension, you might feel there’s no need for further retirement planning in your 30s or 40s just yet. However, seeking advice now could help set you up for a more comfortable retirement when the time comes.
A survey featured in IFA Magazine reveals that many workers tend to delay planning for retirement, a common yet avoidable mistake.
The survey found that only 5% of Brits aged 35 to 44 had sought financial advice to prepare for retirement. Even among older age groups, the numbers remain low, with just 10% of 45- to 54-year-olds and 21% of those over 55 seeking professional guidance.
Here are five compelling reasons to start planning for retirement now, even if it feels like it’s still a long way off.
1. Setting a goal can keep you focused
Without knowing how much you need to save for your desired retirement, it’s hard to gauge whether you’re on track. Establishing a clear goal can encourage regular contributions and may even motivate you to increase your pension savings.
The final pension target might feel overwhelming, but it’s important to remember that it’s not solely reliant on your contributions. Employer contributions, tax relief, and investment growth all play a significant role. Understanding these factors can make your goal feel far more achievable.
2. Spotting a gap early gives you more options
When you compare your pension to your retirement goals, you may discover a potential shortfall.
The advantage of identifying this gap in your 30s or 40s is the range of options available to address it. You could consider adjusting your planned retirement date or lifestyle expectations.
Alternatively, with years left until retirement, increasing your pension contributions now can make a significant impact. Since pensions are typically invested, even a modest increase in contributions today could grow substantially over time, making a big difference to your retirement fund.
3. Discover if you’re making the most out of your pension savings
Reviewing your pension today could help you uncover opportunities to make the most of your savings.
To incentivize retirement saving, pension contributions often come with tax relief, meaning some of the Income Tax you’ve paid is added back to your pension. In the 2024/25 tax year, the total amount eligible for tax relief—including employer contributions and tax relief—can be up to 100% of your annual earnings or a maximum of £60,000, referred to as the “Annual Allowance”.
Your pension provider usually claims basic rate tax relief on your contributions automatically. However, if you’re a higher- or additional-rate taxpayer, you’ll need to file a self-assessment tax return to claim the additional tax relief. Remember, you can only claim tax relief from the past four tax years, so delaying a pension review until retirement could mean losing out on valuable benefits.
It’s also important to note that high earners or those who have already taken a flexible income from their pension may have a reduced Annual Allowance. If you’d like to explore how much you can contribute to your pension tax-efficiently, please get in touch.
There may also be other ways to boost your pension that you haven’t considered. For example, some employers match or increase their contributions when you raise yours, offering an easy way to grow your savings.
4. Review how you invest your pension
Your pension is typically invested, giving your retirement savings the potential to grow over time.
With decades of investing ahead, the performance of your pension investments can significantly influence the income you’ll have in retirement. Seeking financial advice in your 30s or 40s can help ensure your pension aligns with your risk tolerance and long-term goals.
While investment returns aren’t guaranteed, we can work with you to explore how they might contribute to your financial security in the future.
5. You might find that you can retire earlier than you anticipated
Would you choose to retire five years earlier if you knew you’d still be financially secure?
A key challenge in retirement planning in your 30s or 40s is determining how much you need to save to ensure financial stability throughout your life. Concerns about running out of money or being unprepared for unexpected expenses can make this a daunting task.
An early pension review could highlight that you’re in a better financial position than you expect and give you the confidence to retire sooner.
Contact us if you’d like to talk about your retirement plans
Whether retirement is just around the corner or decades away, we could help you with retirement planning ni your 30s or 40s. With a tailored plan, you could find you’re in a better financial position and have more freedom when you’re ready to give up work. Please contact us to arrange a meeting.
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 performance.
The tax implications of pension withdrawals will be based on your circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Recent Comments