Before you choose a pension scheme, try to work out how much money you'll need each year in your retirement. For most people, retirement comes at a time when they no longer have major outgoings such as a mortgage and therefore need less money to live on. However, as you get older, you need to consider the possibility that you will be faced with other expenses, such as paying for help around the home.
Determining how much pension you will need
In order to have some idea of how much pension you'll need when you retire, you need to consider the following:
- The age at which you intend to retire. In general, because pensions are payable for life, the earlier that someone retires, the lower their pension.
- How much basic state pension you will get.
- What your basic living expenses will be.
- Whether you are likely to have any dependent children.
- The lifestyle that you would like to have in retirement - eg where you want to live, whether you want to travel and what hobbies you have.
- Other assets you may have such as savings, investments and property.
If you already have a pension, how much income will it give you at retirement?
You can ask your pension provider for a statement showing how much your existing pension is likely to pay at the age you intend to retire. This will help you decide whether or not you need to increase your pension payments in order to meet your expectations for retirement.
However, it's hard to arrive at a reliable figure because the cost of living is likely to have changed by the time you retire. That is why it is important to review your pension arrangements regularly.