Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

How to enjoy the lifestyle you want in retirement

Cast your mind forward to the day that you walk out of your office, put on your coat and take one last look at the all too familiar surroundings. Free from the constraints of working life, retirement offers the freedom to follow whatever dream you have been building.

Elinor Bantock Elinor Bantock
10 June 2014

With most of us now expected to live well into our 80s, life after work is increasingly viewed as a stimulating and fulfilling time. It is however a simple truth that with increasingly long retirement, our quality of life will depend more on the success of our pension investments than ever.

How realistic is achieving an enduring, happy retirement?

The Association of British Insurers found that the average pension pot in 2013 was valued at only £35,600. So what does this mean for a healthy 65 year old individual in annuity terms?

At a basic level, with no protection, guarantee or inflation protection, they would receive a tax-free cash lump sum of £8,900 and an income of just £1,661 a year. Add this to the Basic State Pension which will pay £5,881 a year, and there is clearly a problem.* But is there anything you can do to give yourself a better chance of achieving your retirement goals?

The good news is that there has never been a better time to save, with tax breaks not only on pension contributions but also via simple to access, tax-efficient savings plans such as ISAs. Flexibility – the ease at which you can get at your savings – is also increasing significantly following pension reforms announced at the 2014 Budget.

It is certainly the case that the earlier you start the better, and with the right planning and support, what may seem like relatively small sums can grow to offer a substantial and tax-efficient income in retirement. While the value of your investment can go down as well as up, investing £100 per month into a personal pension over a period of 30 years for example could be valued at more than £100,000, assuming an annual return of 5% compounded monthly after fees.

Take 10 minutes to review your future

Life has a habit of getting in the way of pension planning and even those of us that do save regularly into pensions often don’t find the time to properly review the performance. Wherever you are with your investments, our free 10-minute pension checklist is here to help make sure you have the best chance of enjoying the lifestyle you want in retirement.

*Figures correct at 03.06.2014. Rates based on an Open Market Option quote:  65 y.o. single male, no guarantee, level escalation, paid monthly in advance.

The value of investments can go down as well as up, and you may get back less than you originally invested. Prevailing tax rates and the availability of tax reliefs are dependent on your individual circumstances and are subject to change. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.

SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right for you. Self-directed investors should regularly review their SIPP portfolio, or seek professional advice, to ensure that the underlying investments remain in line with their pension objectives.