A recent report from Liverpool Victoria has revealed some startling statistics on savings and retirement in the UK. Perhaps most worrying are the figures surrounding those who have nothing saved for when they finish working: over a quarter of those yet to retire have no pension pot, with one in five of over-55s included in this figure.
More than half (55%) of those approaching retirement are concerned they will not have enough saved and a similar percentage (56%) think they will need to find income from other sources.
Additionally, 15% of those aged 55 or older admitted they didn’t know how much they would need to support themselves during retirement, and 14% didn’t know how much they had saved.
Another recent study analysed the spending patterns of households once they had retired, looking at the first six years of them entering retirement. Surprisingly, nearly half of the households (45.9%) actually spent more in the first two years than they had before retiring, declining to 33.4% by the sixth retirement year. This wasn’t just seen in wealthier households either; the distribution across income levels was roughly the same.
Clearly retirement is a major life change and needs planning for well in advance if it is to be the type of retirement you will enjoy.
The good news is that as business owners, and employers, you are in a great position to be able to influence what retirement looks like, not only for yourselves but your employees too.
Pension contributions are a very tax efficient way of extracting profit from your business. As a business expense it immediately reduces the profit figure on which tax is charged effectively providing 20% Corporation Tax relief assuming your business is a limited company. In many cases you are able to pay in significant sums, making substantial tax savings.
With pensions freedoms you can now access your pension assets from age 55, in the format that best suits you. So if you are one of the 45% of households who spend more in the early years of retirement, you can take more out when you need it.
Obviously pensions are only one way to save and plan for your retirement, and ensuring you do not pay more tax than necessary on your retirement income is just as important as saving tax whilst you are still working. At WB Financial Management we can discuss a full retirement planning strategy with you, to ensure you have the retirement you dream of, and have access to money in retirement as tax efficiently as possible.
To make sure that you are ready for the type of retirement you can enjoy money worry free, call Duncan or Sally on 01925 210 000 for an obligation free chat.
