UK consumers received good news recently, as the rate of inflation surprisingly dropped to 2.6% in June. The official rate had increased to 2.9% in May, while the sudden decline represented the first of its type since October of last year.
Despite this light relief, the cost of living continues to rise at a disproportionate rate to earnings, as the savings ratio in the UK plummets to a record low.
This is particularly concerning for those approaching retirement, and in this article we will provide a brief guide on how to ensure that you have enough money to sustain your pension fund.
Start By Calculating Your Likely Retirement Income
It is almost impossible to make viable financial plans without first understanding your precise financial circumstances. Most importantly, you need to determine how much money you are likely to have accrued by the time you retire, with the optimal time to do this approximately two years before you retire.
You should start by accessing State Pension statement, which will provide a breakdown of your entitlement and can be found at the Gov.uk website. You can add this to the value of any private funds, savings and other assets, while also tracing any lost pensions (either state or commercial) to ensure that you receive the maximum amount you are owed.
If you find that you have a number of private pension schemes active, you may also want to consolidate these into a self-invested personal pension (SIPP) through a reputable provider such as Bestinvest.
Consider Additional Ways to Boost Your Pension
At this stage, you have hopefully consolidated your pension funds and have a clear idea of how much you can expect to retire on. This may be a little less than you had hoped for, of course, but regardless it is always better to seek out ways of boosting your pension and optimising any future income streams during your retirement.
The obvious way to achieve this is to increase your contributions, as this has a direct impact on value of your fund. If you are in relatively good health and have a marketable skill, you could also extend your career by freelancing, as this affords flexibility while maximising your earnings and ultimately reducing the length of your retirement.
Budget for Changes in Your Daily Spending
While your retirement may be a little while away yet, you can still make adjustments to prepare for this eventuality. After all, regardless of how you access your pension funds, it is likely that you will need to get used to an alternative pattern of income that forces you to augment your spending habits.
In short, you are likely to have less money to live on during retirement, so minimising the amount that you spend (without compromising on your overall quality of life) can help your fund to stretch further.
The key is to calculate your estimated daily spend and budget for fluctuation, such as the elimination of work-related costs (such as lunch, petrol and travel fares) and an increase in heating, leisure and healthcare costs.