In the back
48 / 49
IMPACT OF EARLY RETIREMENT ON YOUR PENSION POT
(£2,750 drawdown per month)
£640,000
The last few years
of your working
life can have a
big impact on the
money you have
in retirement
£500,000
Pension
pot (£)
Age
Retire at 62,
money runs
out at 75
The most common misconception
is, “I’ve got a pension, so I’m alright”.
This may be a hangover from the
days of defined benefit pensions,
where companies provided their
workers with a sum typically
equating to two-thirds of their final
salary as income until death.
These have all but disappeared in
the private sector now, having been
replaced by defined contribution
schemes. These sound similar, but are
effectively just a big savings scheme,
usually invested in the stock market,
with a final value that will depend on
its growth and the amount you put in.
Having a pension confers no
guarantee as to how much you will
FE TRUSTNET
Retire at 65,
money runs
out at 79
Retire at 67,
money runs
out at 84
receive in retirement. Whatever you
have amassed over your working life
will have to be budgeted over the
years until you die.
Making it last
Given the average UK pension at
retirement is around £100,000 and
the average life expectancy has
stretched to about 89, retirees are
expected to make that sum last for 22
years – or £4,545 per annum.
Most people should qualify for the
full state pension as well from the age
of 67, which is £8,060 per annum on
top of what you have saved.
The average UK retiree is going to
receive an income of £1,050 a month.
That might be enough, but it’ll be a
modest lifestyle for sure.
[ PLATFORMS & PENSIONS ]
To be able to choose when you retire For most people, retiring
requires some thought as to how to
is about squeezing every
achieve your goals.
last drop from the money
And there are options. You may
choose to retire at 60 – a full seven
you’ve saved so you can
years shy of the official retirement age
maintain the lifestyle you
(by 2028). You will be able to do this in
are used to
one of two ways.
First, you may have saved like crazy
into a pension over the years, sold
your collection of wine and classic
If you live like this, then you don’t
cars, downsized the mansion and sold need much of a pension, so you can
that Verbier ski chalet. Money is the
eke out a living.
least of your worries, so you can pretty But for most people, retiring is
much carry on as is.
about squeezing every last drop
from the money you have saved so
The good life
that you can maintain the lifestyle
Or, you have a decent pension, let’s
you are used to, even though you
say £250,000, and you want to get
may spend a little less in retirement
in touch with mother nature. You’ve than you did as part of an active
always had a hankering to go self-
working family.
sufficient, so it’s off to Wales to buy a
sheep, goat, pig and some chickens.
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