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National Pension Awareness Day

Tuesday 15th September is National Pension Awareness Day in the UK, a day for raising awareness on the importance of preparing and saving for retirement, and it is important to be ready for it, as it’s something all of us will face in the future. In the UK, many people aren’t financially prepared for retirement, as it’s easy to focus on immediate expenses rather than looking to the future. On this page, you’ll find out more about the basics of pensions and saving for retirement, and why pensions might not be your only option when it comes to saving for your future.

National Pension Awareness DayNational Pension Awareness DayNational Pension Awareness Day
The rundown
  • Compared to other countries, where the retirement age averages 67 years old, the current retirement age in the UK is 65 (for now)
  • The amount of money you’ll need when you retire will depend on how much you can save now, the lifestyle you currently enjoy and the lifestyle you want when you retire
  • The average annual cost of happiness in the UK is £33,864. If you can save enough in your pension pot to retire on more than £30,000 a year, you’ll be amongst the happiest people in the UK

What is the current state retirement age?

The current retirement age in the UK is 65. It’s set to rise to age 66 by October 2020 and may rise again to age 67 between the years 2026 and 2028. Although this seems like a high retirement age, it is similar to other European countries.

How much money should I have by the time I retire?

Providing you’ve paid off your mortgage and don’t have any debt, retirees spend an average of around £2,110 per month, or £25,000 a year. This should be enough to cover necessary expenditures and some luxuries, such as hobbies, enjoying European holidays and eating out.

Of course, how much money you’ll have will depend on how much you can save now, and how early you started saving for retirement. It will also depend on how much you think you’ll need to live on, as you may require either more or less than the UK average.

 

How much could I spend on a lavish retirement gift to myself?

The answer to this really depends on what you’d consider to be a lavish gift.

If you want to indulge in an expensive treat, such as travelling the world or a new car every five years, you’ll probably need to have saved enough to spend at least £40,000 a year.

Travelling is considered important to retirees since they have more time and aren’t restricted to annual leave. Depending on how often you travel, you’ll likely spend at least £4,600 a year or more. If you’ve saved enough to spend more than £60,000 a year, you could use this to purchase other luxury items, such as a holiday home or sports car.

Where are the best places to retire?

When you reach retirement, you might want to consider moving to warmer climes. It can be difficult to choose a place that meets both your needs and expectations, so, based on our own research, here are some of the best retirement destinations to consider for Brits looking to retire abroad*:

1. Romania

Romania offers relatively low living costs, low crime rates and affordable flights to and from the UK. English is widely spoken in Romania and there are fewer tourists here than in other European countries. If you’re looking to live in a beautiful environment and have a high, yet cost-effective, standard of living, Romania might be your ideal destination.

 

2. Spain

If you want a reliably warmer climate with more than 2,700 hours of sunshine per year, Spain might be your ideal retirement destination. The cost of living is lower than in the UK, there’s a large ex-pat community and, of course, you can enjoy that fresh Mediterranean diet year-round.

 

3. Finland

Finland is considered one of the happiest places in the world, thanks to its rigid social safety network and low crime rates. Its healthcare system is recognised as one of the best in the world, and locals often attribute levels of happiness and health to the abundance of breathtaking natural scenery and proximity to nature.

 

4. Cyprus

Cyprus is usually considered a holiday destination, but it can be an excellent retirement option, too. Although Greek and Turkish are the national languages, English is widely spoken as a second language. With breathtaking beaches, a comfortable year-round climate and delicious local gastronomy, it could be the perfect place for you to enjoy your retirement.

 

5. Malta

Malta has lower costs of living than the UK and a lower crime index. English is widely spoken and there’s plenty of stunning scenery, beautiful beaches and cultural town centres to be enjoyed.

What are the rules for employee pensions?

A workplace pension is a way to save for your retirement that’s arranged by your employer. The amount you’ll pay into your pension pot will depend on the type of pension scheme you choose, how much your employer contributes and whether you’re automatically enrolled or joined voluntarily.

If you’re automatically enrolled in a workplace pension by your employer, you’ll pay a percentage of your earnings into your pension. In most workplace pensions, you’ll make contributions that are based on your total earnings, between £6,240 and £50,000 a year before tax.

If you’ve voluntarily enrolled in a workplace pension, your employer will have to make minimum contributions, which can be as much as 8%, depending on how much you earn. If you earn up to £520 a month, £120 a week or £480 over four weeks, your employer won’t have to make contributions.

What are low, middle and high-risk pension options?

Pension providers often offer different investment options, which can help you make the best decision possible for your investment strategy and your retirement. Most pension plans offer a lifestyle fund, which comprises low-risk investments that shift the balance of your investment towards low-risk assets.

You might also consider investing in a fund, purchasing shares or buying bonds as ways of saving for retirement. While they come with risks, investing ina second type of fund helps you to diversify your investments and potentially increase your retirement savings pot.

If you’re a member of a benefit scheme provided by your workplace, you probably won’t be able to make decisions on where your money is invested. These types of schemes promise your retirement income and will make investment decisions to help you reach that target. This can involve higher risks, because your money is invested in shares that are focused on acquiring high returns, and you have no control over what’s happening with your money.

How can I boost my pension with savings?

How you save for retirement depends on your financial situation. You don’t have to choose between a pension or a savings account; rather, you can grow your savings by investing in both, and enjoy the benefits that each has to offer.

The benefits of opening savings accounts include the following:

  • The flexibility to access your money
  • Competitive interest rates, with higher interest rates on long-term savings accounts
  • Quick and easy set-up and management
  • Earn £1,000 in interest tax-free per year if you’re a basic rate taxpayer
  • Higher rate taxpayers can earn £500 in interest tax-free per year

If you have a lump sum to invest, you might want to consider opening a fixed rate bond, which offers competitive interest rates that remain the same from the day you open the account until the end of your agreed term.

Are there any alternative ways of securing a pension?

Financial Independence, Retire Early (FIRE) is a movement that’s dedicated to a program of savings and investments allowing you to retire earlier. It involves dedicating up to 70% of your income to savings until you’re able to retire and live solely from your savings by making small withdrawals. However, due to the high rate of savings and commitment needed, the downside is that you might be limiting your quality of life at an early age.

Alternatively, a Save as You Earn (SAYE) scheme allows you to buy shares in the company providing the scheme at a fixed price. This could enable you to save between £5 and £2500 per month for a period of three to five years. If you complete the length of the savings plan, you’ll be rewarded with a tax-free bonus on top of the money you’ve invested.

*Retirement destinations research conducted by Raisin in April 2020. Full information and statistical analysis.

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