The simple answer to this question is it is never too early. Whilst planning for retirement may not be at the forefront of people’s minds as they earn their first ‘wages’ one could argue it should be!
Whilst there are some people who are fortunate to become a member of a Final Salary (or Defined Benefit) scheme they are in the minority. Generally speaking, with the advent of automatic enrolment, people are now enrolled in to a work place pension which is typically a Group Personal Pension (GPP). The objective of this being that it will ‘force’ people to save for their retirement, though without getting in to too much detail, people still have the option to opt out and the minimum contribution levels can be quite low. This means it is still up to individuals to save and plan for their future and subsequent retirement.
There is also a misconception that the State will help, the current basic state pension is around £8,730 per year. It is possible that individuals will qualify for other benefits but the question to ask yourself – would I be able to live off this?
Making what could be seen as a relatively small contribution in their younger years can make such a difference to an individual’s overall wealth and therefore potentially a more enjoyable retirement.
Whilst under a GPP (or a Personal Pension), we can’t guarantee the level of pension that will be received in retirement, we can use sophisticated software (cash flow planning) to help us to build a picture of what the pension income may be in retirement. We can ‘model’ different levels of contributions to provide some guidance as to the difference this will make to the pension funds at retirement.
Our cash flow planning software not only takes account of pension contributions/benefits but also looks at a client’s entire financial situation to help us build a financial plan for our clients. This can be very empowering as it helps to identify actions that can be taken to help meet a client’s financial objectives if any shortfalls are highlighted.
This works well for clients who are approaching retirement as we can work out whether the estimated level of expenditure is sustainable against their projected level of income, allowing a chance for last minute contributions to be made!
We do not charge a fee for our initial conversation so if you are interested in hearing about how we help clients build a financial plan or wish to undertake some last minute planning, please do not hesitate to contact me.