Why you need to give your pension a health check if you’re aiming to live longer

You may have read that scientists have identified eight measures that you could take which might help to slow the process of aging by up to six years. According to an article in the Guardian, keeping your body weight and blood sugar in check are two of the ways you could extend your life span.

The findings are of course welcome, as it means you might be able to enjoy a longer and healthier life. If this is something you’re hoping to achieve, it’s important not to forget the financial implications of living longer.

Extending your lifespan by six years could mean that you need to increase the value of your retirement fund to ensure that you can maintain your lifestyle for the additional period. Not doing so could mean you have to reduce your standard of living, or even worse may result in your retirement fund running dry.

Interestingly though, another piece of research suggests that working with a financial adviser could mean that your pension lasts for six years longer.  In other words, a professional adviser could help ensure you can continue to enjoy your dream retirement for as long as you live, if you do manage to extend your longevity.

Whether you intend to take an annuity – which may be more appropriate as it could guarantee an income for the rest of your life – or whether you see yourself accessing your pension more flexibly, discover how a financial adviser could help you to ensure your financial security if you live to a ripe old age.

1. Assess whether your pension will provide the lifestyle you want

A study by Standard Life makes for sobering reading. It revealed that in 2023, half of UK consumers feel overwhelmed by their pension information, with 41% saying they don’t know what to do with the information they have.

Small surprise perhaps, that MoneyAge reveals that 64% of Britons are not confident about their retirement. Working with a financial adviser can provide clarity about your pension and wider retirement fund, and whether they’re on track to provide the lifestyle you want when you finish work.

If it won’t, an adviser can provide options that could help you to get your pension to where it needs to be. This could include boosting your contributions or exposing the investments within your pension pot to greater growth potential.

In addition to this, an adviser can also look at different retirement scenarios to ensure you can sustain your standard of living, and potentially draw an income from it in a more tax-efficient way.

2. Help you find to locate lost or dormant pensions

According to Pensions Age, an estimated 1.6 million pension pots worth £37 billion have been lost or are lying dormant in the UK. If you have lost pensions, finding them could provide a significant boost to your retirement fund, which in turn could provide the retirement lifestyle you want no matter how long you live.

A financial adviser can help you to locate any lost pensions that you might have, such as workplace schemes from a previous employer. Once found, the adviser can then help you to understand the options available and which are best for you.

Alternatively, you could locate any lost pensions you may have free of charge by using the government’s tracing service.

This might include, for example, consolidating the pension with others that you have, which could improve its growth potential. Furthermore, it might make your retirement fund easier to manage and could reduce fees.

If you’re thinking about consolidating your pensions, always speak to an adviser who can confirm whether it’s right for you, as well as the potential risks involved with doing so.

3. Help you to maximise your pension’s tax benefits

One of the biggest advantages of saving into a pension is the tax relief the government normally provides on contributions. This means that every £100 contributed typically costs:

  • £80 if you’re a 20% basic-rate taxpayer
  • £60 if you’re a 40% higher-rate taxpayer
  • £55 if you’re a 45% additional-rate taxpayer

While you can contribute any amount into your pension, the amount that receives tax relief is limited to your Annual Allowance. In 2023/24 this is either £60,000 or the amount you earn, whichever is the lower. If you’re a high earner, your Annual Allowance may be significantly lower.

According to Standard Life, however, an estimated £1.3 billion was not claimed by higher and additional rate taxpayers in the five years leading up to 2023. One reason for this is likely to be that high earners typically have to claim some of their relief back using self-assessment.

This means that while taxpayers usually receive basic-rate tax relief (20%) on their contributions automatically, if you’re a higher-rate payer you’ll have to claim the remaining 20% via self-assessment. Similarly, if you’re an additional-rate taxpayer, you will need to claim the remaining 25% using self-assessment.

The hassle of filling in a self-assessment could be why many people in these tax brackets don’t claim back their full allowance. If you’re one of them, there is good news, as a financial adviser could help you to fill in your assessment and claim back all of your relief, which could boost the value of your pension pot over the long-term.

Get in touch

Working with a financial adviser when planning your retirement could not only boost your retirement fund, it could also allow you to rest easy about your financial future.

If you would like to discuss how we could help you get more from your pension, assets or wider wealth, please call us on 01527 577775 or speak to one of our advisers, as we’d be happy to help.


Friday 15 December 2023