Retirement Journey stage 2 – Boost

At 40 gathering all the key information needed, then letting Guiide build you a plan is all that you need to do.

I am 40, what do I need to think about when it comes to pensions?

You could be in peak career mode now, but retirement doesn’t seem light years away anymore does it?

You can see that in 20 years or so, having a decent retirement income is something you need. So it’s time to think a bit more about it! If you are 40 now, what do you really need to do now to plan to get a decent retirement income.

You have probably built up some pensions over the first 15 to 20 years of working. For most people these will be defined contribution pensions. These are essentially just pots of money that both you and your previous employers paid into.

These pots you have now in addition to your future contributions, plus your State Pension (and if you are lucky any final salary schemes you may have been in), will likely make up the bulk of the income you need when you retire one day.

Step 1 – Understanding what you have built up already

You have probably worked for a few different companies by now.

So firstly track down your old pension statements. You need to find out which pension provider your old employers used when you worked with them. Once you know, you can then get an updated value of each of your pension pots from the provider.

These days most providers have online access. If your ones do, then set yourself up online with each provider. You can then see updated values whenever you want online.

No idea who these pension providers or schemes were? The first place to start looking is the Government’s pension tracing service. This will help you understand who the provider was at the time you worked at a previous employer.

Next step, find out if you have any defined benefit pensions (also known as final salary schemes) from any previous employers. These pensions aren’t a pot but instead pay you a set amount of money each year when you retire. They are very valuable. Look through your old pension statements to see if this is the case.

If you are lucky enough to have one you should be able to get an estimate of what your pension may be from the scheme’s normal retirement age, usually 60 or 65. Again if you have no idea, try the pension tracing service first.

Finally, understand what your State Pension may be. In simple terms, when you reach State Pension Age you get

  • The full State Pension if you have 35 years of National Insurance contributions or credits.
  • Nothing at all if you have less than 10 years.
  • A proportion of the full amount if you have between 10 and 35 years. So 25 years will mean 25/35ths of a full one.

You can check out your National Insurance contribution history up to the current date in this Government site. Then just estimate how many more years you may be working or gaining credits in future. You can then work out how many years you may end up with in total by adding the two together. Over 35 in total, great you can expect the full amount.

What should I do once I have this information?

You have found out what you have built up so far and also what your State Pension may look like. Now you need to work out what is needed to pay in future to get what you want when you retire.

Firstly think about what you may need in retirement. Like most people, you probably have no idea?

Well luckily for all of us the Pensions and Lifetime Savings Association (PLSA) produced a set of after tax incomes. These are incomes needed to have a minimum, moderate or comfortable lifestyle.

They also show what each type of lifestyle means in practical terms. By selecting the lifestyle you can realistically wish to aim for, you can see the after tax income needed now to provide it.

How do I get this retirement lifestyle I want?

You know what you have already, you know what you want and when from. The last part of the jigsaw is what else will you build up before you do retire.

Assuming, like most people, you and your employer are currently paying into a pension pot, rather than the lucky few who are in a final salary scheme, then the key question is how much do I need to pay in.

If this is an unfeasible amount, then there are only two options. Retire a bit later (do some full or part time work) or reduce what you want in retirement.

How do I work this out?

In short, use Guiide, Why? Because we do it all for you.

Once you have gathered the info above (or at least you pension pot values)

  • Go to Guiide and start the journey
  • Choose your target retirement date
  • Enter the retirement lifestyle you want. We will work out the starting income needed from when you want to retire.
  • In the Haves page enter all your current pension pot values.
  • Add the contributions you and your employer are currently paying in total.
  • Finally add any final salary pensions and other savings you may have.
  • Look in the Design page to see if you have any shortfalls. If not, great. But if there are, you can solve to see how much extra you need to pay in contributions to target what you want.
  • If this is unfeasible, you can see how much you need to reduce your target income by instead.
  • Once you have removed any shortfalls, go to the Finish page and register to save your details.
  • After registering you can set up a Dashboard of all your pension pots to see them in one place.
  • You can also refine your State Pension estimate based on your National Insurance record if wanted.
  • Every few months come back to our Dashboard page. There you can see your updated pot values and see if you remain on target to get what you want.

This should be all you need to do until you reach about 55.

At that stage you can start to think in detail about how your retirement income will be made up.

At 40 gathering all the key information above, then letting Guiide do the hard work to build you a plan to achieve your target is all that you need.