What Is A Good Pension Pot At 55? | Pensions I TT Wealth IFA (2023)

At this age it’s common to start panicking about what is a good pension pot at 55 and what might happen after you leave the routine security of full-time work. Especially if you haven’t given much thought to it previously. Indeed, since the recent introduction of pension freedoms, you are now able to access your pension savings from the age of 55, whether you are still working or not.

It’s around this age that the thoughts and images of what retiring looks like starts to transform into real plans and people often ask ‘how much pension do I need to be able to retire at 55’?

In this article:

• So, What Is A Comfortable Retirement Income UK?
• Planning For Retirement In Your 50s
• So, What Is A Good Pension Pot At 55?
• State Pension Entitlement?
• Do I Need A Financial Adviser For My Pension?

If you are in your 50s and still unsure how to plan for retirement, or what a comfortable retirement income is in the UK, then you are not alone! There are plenty of people in the same position. Though it is something that you should start to change as soon as you feasibly can.

A comfortable retirement income is one that allows you to maintain your standard of living after you stop working. This includes being able to pay for essential living costs such as housing, food and healthcare, as well as having enough money left over for leisure activities and unexpected expenses. The amount of income needed to achieve this will vary from person to person, depending on their individual circumstances.

Click on the pension calculator button to find out your likely retirement income.

It’s also worth noting that life expectancy is always increasing. We are now expected to live to the age of 81 whereas in 1990 life expectancy was 75 and the longer you live, the further your pension fund has to stretch!

It is strongly suggested that you pay off any short-term and usually expensive debt (such as credit cards and overdrafts) before you retire if possible, as taking your debts into retirement with you is a guaranteed way to cause unneeded stress. Long-term debts such as a mortgage are easier to manage, although you would hopefully be well on the way to becoming mortgage-free once you’ve retired.

Reconsidering any investment strategies you already have in place is an intelligent move to make at this point in your life.

You might want to contemplate moving any current investments into lower risk assets such as cash – although it should be noted that lower risk assets offer a lower return for understandable reasons. The other risk with low risk assets – such as a low-interest savings account – is that because of the low interest rates of such assets, they may not keep up with rising inflation rates, which would mean that the value of your money would decline – i.e. it would have lower buying power.

For the self-employed or run your own business, then pensions are a little more complicated as there are more options available and avenues to go down, and this is where an IFA can be invaluable.

No matter what route you’ve taken in terms of contributing to your pension, by the time you reach your 50s, you will have most likely have multiple pension pots and wondering what is a good pension pot at 55 should look like?

How much pension do I need to retire at 55?

It is advisable to consolidate pensions where possible, as not only will it probably be easier to manage, but you will likely benefit from lower fees as well.

It depends on how you are going to spend that money and how long it needs to last you.

How much income you’ll need to live comfortably will depend on your expectations and unique personal circumstances. How much you’re willing to compromise, if needed? It’s estimated that you’ll need around 65-70% of your final salary to maintain your lifestyle once you retire.

According to consumer group Which? a couple needs a joint household income of just £26,000 per annumto cover living expenses and up to £39,000 if you include luxuries like exotic holidays and a new car every five years.

Other calculations suggest that for an individual to retire at 55 and receive a £20,000 pension for life, they’d need a £700,000 pot, plus a full state pension.

This is a long way, away from theaverage pension potof £71,342 held by most people aged 45-54.

You can obtain a state pension forecast online:

https://www.gov.uk/check-state-pension

or

by downloading and completing the BR19 form below:

https://www.gov.uk/government/publications/application-for-a-state-pension-statement

This form should be should be sent to:

Newcastle Pension Centre, Futures Group
The Pension Service 9
Mail Handling Site A
WOLVERHAMPTON
GREAT BRITAIN
WV98 1LU

You can take a DIY approach, but do you have the knowledge, time and research tools to make the right decisions about such an important matter?

An IFA can assess your current situation with regards to your pension, and help you make informed decisions about what next steps to take. This is especially important if you are considering pausing or stopping your pension contributions (click to read article).

An IFA can assess your current situation with regards to your pension, and help you make informed decisions about what next steps to take.

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