12th October 2016Pensions: Don’t put off until tomorrow what you can do today

However, figures from the Office for National Statistics show that in actual fact, workers can expect to reach their peak earning powers between the ages of 40 and 49. From then on, incomes start to fall. This should serve as a wake-up call to those who have yet to make adequate provision for their financial future.

In addition, a new survey carried out by YouGov shows that the vast majority of adults aged between 30 and 45 are putting off planning for their retirement years until well into middle age. Of those surveyed, 90 per cent had made no plans for their retirement, with most believing that 45 was the right age to start thinking about pensions and retirement, despite clear evidence that planning from an early age really pays off.

The squeezed middle
The reasons behind the widespread procrastination aren’t hard to find. Mortgages, childcare, school fees and travel costs are all likely to figure largely for those in their thirties and forties, leaving little left over for pension savings. However, the reality is that trying to make up for lost time in later years is likely to end up being more expensive over the long term. So although retirement can seem a long way off to anyone in their thirties, and saving money for retirement can feel like locking money away for decades, the reality of the situation is that it could make a considerable difference to the amount available in a pension fund at retirement.

Forced early retirement
When retirement is still many years away, it’s easy to think that simply working longer will be the way to make up any shortfall in pension savings. However, the realities are that employment opportunities might simply not exist, or illness or disability could preclude this being an option.
New data from the TUC shows that one in eight people have to retire early before they reach their state pension age due to ill health or disability. This means that almost half a million workers have to leave their jobs early for medical reasons.

Pensions for spouses
Another area of pension provision that can be overlooked is the need to plan for a spouse’s pension. With the UK’s gradual switch over from defined benefits pensions (often referred to as final salary pension schemes) to what are called defined contribution schemes, many younger workers aren’t now in schemes that provide for pension payments to be paid to their partners in the event of their death.

An early start pays off
There’s a Chinese proverb that goes something like ‘The best time to plant a tree was 20 years ago. The second best time is now.’ It makes sense to view pension planning in the same light.

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E advice@hwfisher.co.uk

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