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Don't wear a blindfold when it comes to your pension planning

Don't be wearing a blindfold when it comes to your pension planning
Don't be wearing a blindfold when it comes to your pension planning Don't be wearing a blindfold when it comes to your pension planning

PENSIONS Awareness Week took place earlier this month, and as usual it proved how ‘pensions UNaware’ we really are.

The good news is that people have more confidence about their pensions than they used to, but the bad news is that many have no idea what state their pension provision is in.

A new survey by Aegon entitled “The Retirement Confidence Survey”, conducted in July, has identified that we fall into these four main groups:

:: Group One - over half of us (52 per cent) feel confident that we can retire comfortably. This is an improvement since the 48 per cent recorded in 2017.

:: Group two - one in 10 of us have no pension savings at all.

:: Group three - a quarter of those of us who do have a pension have no clue where we stand, or how much we have saved so far. It’s classic ‘bottom drawer’ syndrome – we put it in an envelope, and we forgot about it.

:: Group four - over a third of us (36 per cent) are ‘saving blind’ in that we have never given any thought, much less asked an expert, about how much we will need in retirement.

All this information is fresh off the presses just two weeks ago, but if you have a feeling of déjà vu here, there’s a good reason. It’s because we’ve discussed several surveys earlier this year, one by Wealth at Work, another one by The Just Group, plus some analysis by former pensions minister Steve Webb - all had similar findings.

The Just Group’s report told us that a single pensioner spending just the average amount to live, and with just the state pension, would have used up their year’s state pension by the end of August, leaving them skint and £4,500 short with four months to go. If you are expecting the state pension alone to be enough, you are the very definition of over-confident.

Now, at this stage most of us are familiar with the term ‘auto-enrolment’, where eligible workers aged 22 or over, and earning at least £10,000 a year, are automatically placed into a company pension.

Auto-enrolment is great, but in its own way it has contributed to the national outbreak of over-confidence. I’m referring to the self-employed, who as independent workers do not have auto-enrolment available to them - or not yet, anyway, although three-quarters of business leaders are now in favour of giving it to them, and also to employees earning less than that magic figure of £10,000.

Another point is, you can’t borrow to fund your retirement. It’s not like buying a mortgage or finance for a car. Banks generally aren’t that keen on lending you large sums, once you’re at the age when you could pop your clogs any minute.

Which brings us back to our four groups above. If you are one of those 52 per cent who are confident of a comfortable retirement, bully for you. But that leaves 42 per cent who are not, and the rest of us who have nothing saved, or don’t know how much we’ve saved, and have even less clue about how much we might need.

As I say, you can’t borrow – you have to plan ahead, and in order to plan ahead, there are three crucial rules. First, work out where you are now; second, work out where you want to get to; and third and most important, get started today.

I’ll leave the last word to Aegon, who have wisdom for those wanting to plan their way out of groups two to four, and get themselves into group one.

“Planning a retirement income, and when to start taking it, requires careful consideration, and a financial adviser can provide tailored advice to meet your personal needs and circumstances.”

Praise like that just makes us financial advisers feel warm all over.

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at www.mkennedyfinancial.com