Are you saving enough for your long term retirement goals?

An independent financial adviser can help you work out what age you could comfortably retire at, but a good place to start is a pension calculator from a reputable source such as the Money Advice Service. You can stop working whenever you want to but this is likely to depend on your financial situation and whether you can support yourself without regular income until you can access your pension or other retirement savings such as a Lifetime ISA. You can find out more about Beehive Money's Lifetime ISA here.

If you are planning to retire at State Pension age, you can find out all about it on the Government’s website. You will be able to claim the new State Pension if you’re:

• a man born on or after 6 April 1951.
• a woman born on or after 6 April 1953.

If you were born before these dates you will be eligible for the basic State Pension. Find out more here at gov.uk.

Retirement funds can be made up from multiple sources.

• Workplace and private pensions

If you are not enrolled in a workplace pension scheme, talk to your employer as it is a requirement for them to provide you with one and to contribute to your retirement fund.

There are a number of different types of private and workplace pension schemes, but the most common are investment-backed otherwise known as money purchase schemes (MPS). As these are the most common, this article will only cover this type of pension plan; however, a financial adviser will be able to discuss other types of employer run retirement schemes with you. At retirement, the value of your pension will depend on how much you have invested, investment performance and how you access the money from your MPS pension.

Normally, you receive tax relief on a personal arrangement and may get tax relief on employee contributions depending on how your employer has set up your pension. Read more about tax relief on pension contributions at gov.uk as it can change depending on your income and your marginal rate of tax (currently either 20, 40 or 45%).

• State Pension

You'll probably have access to a State Pension when you reach State Pension age which will differ depending on your gender and date of birth. The amount that you receive will depend on how many years of National Insurance contributions you have paid. This starts at 10 years of National Insurance contributions for any State Pension at all up to 35 years for the full amount. You can check your State Pension age here.

• Lifetime ISA

A Lifetime ISA is a savings account that can be used as a top up for private and workplace pensions; it is not a replacement for either. You can start to withdraw money from a Lifetime ISA for retirement purposes at age 60. We will visit the Lifetime ISA in greater detail further on in this guide. 

How much you will need in retirement is based on your personal retirement goals and your earnings. 

• These savings are based on private and workplace plans.
• A general rule is that you will want half to two-thirds of your at-retirement income.
• The sooner you start saving, the longer you will have until you retire and this could mean that you may have to contribute less each month to achieve this amount, as these calculations show.

The table gives some idea of what someone would need to save annually into a private pension plan for a retirement income of £20,000 per year, as reported in the above mentioned BBC article. This £20,000 amount assumes that this is made up of a full state pension of approximately £8,000 per year and £12,000 from a private or workplace pension.

This assumes that the pension plan achieves investment growth of a typical default investment strategy (which may not be appropriate for everyone), and assuming the eventual pay out increases annually with inflation, as well as granting a 50% income to a surviving partner. However, as this projection is based on a number of assumptions (including a default investment strategy and mid-range investment performance) an annual income of £20,000 is not guaranteed and professional advice should be taken in relation to pension advice.

Use the Money Advice Service pension calculator to work out how much you should be saving if your goal amount is different to the £20,000 per year in the example. If you are expecting a very modest retirement then you will not have to save as much. Your personal pension goal may also depend on when you are going to retire as the cost of living is increasing.

If you already have a pension, check how much you and your employer are currently contributing and see if this is on track with how much you’d want to live on when you retire based on your goal that you have worked out from the pensions calculator. Wren Sterling independent financial advisers can also help you with this forecast.

If you have multiple workplace pensions already, read our guide on what to do if you have multiple pensions as it could potentially be beneficial to consolidate them into one total plan. However, professional advice should be taken from an IFA such as Wren Sterling before making a decision.

If your long term goal is to retire early, you will have to fund yourself from your workplace or private pension (as benefits may be available from these arrangements from age 55) or from your savings from when you retire until you can access your State Pension. As before, a pension calculator could help you to work out when you could retire, or if you have more complex finances, you could ask an independent financial adviser to help you maximize your current savings and assets, and work out how much your pensions and other investments could be worth at retirement.

If the age of 60 seems like early retirement to you then using Lifetime ISA savings could supplement any pension income you receive from your private and workplace schemes until you receive your State Pension or another pension, depending on when you come to retire.

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits. Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement, before embarking on any course of action.

The short answer is yes, alongside pension savings. A Lifetime ISA is a supplement to a personal or workplace pension scheme and should not be seen as a replacement for these arrangements.

• If you are under the age of 40 (you must be 18-39 years old to open one of these accounts) preparing for retirement could be boosted by using a Lifetime ISA alongside your pension to fund your retirement.
• You can save up to £4,000 a year with the Lifetime ISA.
• When you save, the Government will give you a 25% bonus on your savings, up to £1,000 a year. 
• A Lifetime ISA can either be cash, such as our product, or a Stocks & Shares Lifetime ISA*.
• Can save and receive the Government bonus up to age 50 and the funds will be accessible from the age of 60.

For example, if a Lifetime ISA was used to save for retirement and savings were started at the below ages, these are the potential funds.

These tables are based on the assumption that all deposits and bonus are received on the 1st of the month. You will also receive interest payments on these savings and bonuses, paid annually. View our current Lifetime ISA savings rate here.

The only other use of a Lifetime ISA is to purchase a first home. There is a 25% Government withdrawal fee if you withdraw your savings for most other reasons (there are a few exceptions) than a first home purchase or at age 60 for retirement, or if you withdraw within 12 months of opening the account. Any other withdrawals made from your Lifetime ISA will incur a 25% Government withdrawal charge which means you could get back less than you paid in.

If you are looking to improve your retirement income or retire early then utilising all of your personal allowances may assist you. A financial adviser such as a Wren Sterling independent financial adviser could help you to understand what allowances are available to you.

Visit your nearest branch or call us on 0344 481 0912 to find out more.