It’s difficult to know whether you are saving enough to be able to stop working one day....How much is enough? How much are you building up? What if you have a gap? Working through this section should help you to understand and answer these questions, and what you can do next.
The Money Matters team, with First Actuarial, have built this Retirement Planner to help you plan towards having enough money when you stop work at retirement.
By entering your information into the Retirement Planner, you will build up a picture of what your income in retirement might be, taking into account lots of possible sources, and comparing this with what you might need. You can also see the estimated impact of making some changes to your planning in the “My Retirement Plan” section.
The aim is to give you a helpful overview of your plan for retirement.
All figures are approximate, rounded to the nearest £100 and based on assumptions. You can see what assumptions are used by following the link here. For more accurate information you should contact the Unilever UK Pension Fund and any other pension providers that you may have. Contact details for the Unilever Pension Fund can be found here.
All figures are in “today’s money terms” so the amount set out is comparable with the cost of living today.
The Retirement Planner is intended as a guide only. It does not provide any Financial Advice. You should consider taking independent financial advice before making any decisions regarding your pension or savings generally.
One way to think about what you are going to need in
retirement is to note down everything that you think you are going to need to
spend your money on after you retire. It’s important not to miss anything out.
The websites above will help you to do this. They remind you to include
everything that you would spend in a year – from TV licence fees to pet
insurance or toiletries to Christmas presents.
It is a good idea to think about what you need to live on,
and the extra you would like on top of this in order to have the lifestyle in
retirement that you would like.
You can find some tables that might help you do this here. If
you choose to have a 121 session at retirement with a pensions expert, you will
be sent an At Retirement Booklet to help you prepare. There is a section in
this booklet called “What is your target income in retirement” which contains
information about working out your target income, and an example of how someone
has already done this.
What am I building up for retirement?
When you think about your financial future in retirement you need to think about every source of income that you will have.
Getting all this information together may take a bit of time, but it is really important to do so because you can then put it all together to give you a feel for what you will have to live on when you retire. If you are closer to retirement, an "At Retirement 121 session can also help, find out more here: 121 session.
There are lots of things to consider, such as the following:
You may have built up retirement benefits with several of the employers you have worked for during your working life.
It is important that you keep in touch with all of the pension schemes you have been a member of and, as you approach retirement, contact them to find out what benefits you can expect from them. We've drafted a couple of template letters for you to use to write to your other pension schemes to request information from them, available here.
The options you have will vary from scheme to scheme, but may include the following:
Do you want to exchange some pension for a tax free cash sum?
Do you want to sacrifice some of your own pension to give your spouse or dependants a bigger pension after you pass away?
Do you want to transfer any of your pensions to a different pension arrangement.
You are likely to have also built up some State Pension as a result of paying National Insurance contributions. This will be payable from your state pension age. In the run up to your state pension age, the Department for Work and Pensions (DWP) will send you a statement to let you know what pension you will be getting, but before then you can ask for a statement in advance.
Of course you have probably also built up benefits in the Unilever UK Pension Fund. You will be provided with a statement of your benefits, setting out your choices as you approach retirement. This will be sent from the Unilever UK Pension administration team, and you can contact them if you have any queries about your benefits in the Scheme. Alternatively if you are close to retirement, you may be able to arrange a 121 session with a pensions expert, during which you can ask any questions that you have on your Unilever pension, or any other of your pension benefits.
You can use the Retirement Planner (above) to help you to summarise all of your different pensions. Remember to note down when each pension is payable from. By way of a reminder, the State Pension is only payable from State Pension Age, and other pensions can generally be brought into payment at any date (after age 55), but the amount you receive may be lower if the pension is paid early.
As you think about and plan for your retirement it’s a good idea to investigate and record what savings and assets you have built up and then think about how they could help you during your retirement.
You may have savings in the following forms:
Unilever Share schemes
Stocks & Shares ISAs
Cash in the bank or deposit accounts
Maturing endowment policies
Other savings vehicles
If you haven’t already done so, now is a time to put together a list of all the savings and assets you have. You can do this by completing this form for you and your partner. The value of some of your savings and assets may go up and down – e.g. Unilever share schemes, stocks & shares ISAs and shares but you need to get an idea of how much you have, so a recent value will be sufficient.
If you choose to have a 121 session at retirement with a pensions expert, you will be sent an At Retirement Booklet to help you prepare. There is a section in this booklet called “Your savings and assets” which will help you to think about your savings and assets.
After you are retired it is likely that you won’t build up as many savings because your income will probably be lower. Instead the income you get from your savings and assets may form an important part of your total income in retirement, and at some point you may need to sell an asset or use your savings to top up your income, or to meet a particular expense.
You might have some assets where the value of them is less certain, or it is less clear when you will have them, for example:
Equity in your own home
The value of / income from other properties
These may be very significant sources of finance but you won’t necessarily know how much they can provide for you in retirement, until you actually receive them.
Potential inheritance – you do not know when you will get this or how much you will inherit. The costs of long term care can significantly reduce the amount of an inheritance from, perhaps, a family member;
Equity in your own home – you may feel confident that you know the value of your home but the key point about your own home, is that until you decide to sell, and have found a buyer prepared to pay what you ask, you do not have this money. You will also need to think about where you will live after you have sold your home.
Nonetheless it is still very important to consider what might become yours and available to spend, at some point in the future. Think about the timing and availability of these assets. Many people consider the particularly uncertain assets as a bonus providing for additional extras rather than money they are relying on to live on during retirement.
Life Expectancy Modeller
You can get an idea of how your savings might help you in retirement by working out your total savings and dividing this by how long you think you might live in retirement. This will give you an idea of the amount you could take out of your savings each year to add to your other income.
It’s impossible to know how long you will be retired, but assuming somewhere between 20 and 25 years will give you an idea (if you are retiring early then something longer than this would be sensible). Remember this is intended to give you a very rough idea of how your savings could help you.
To see how long you might expect to live, you can use our 'Life Expectancy' modeller which can be found here.
Ensuring you have enough
Once you have gathered information on all the sources of
your expected retirement income you can put these together. You will then be
able to see how this compares to
what you need in retirement.
You can do this on a chart like the one here – that has been
completed for someone who has gathered all their information together.
This chart below shows:
The income this person thinks they need in retirement to cover the essentials.
The income this person would ideally like to enable them to do all the things they plan to do in retirement.
The various different pensions that the person will be getting, shown as starting at the relevant age.
This doesn’t show what additional income this person might be able to get from their savings and assets – so for this person, he or she can think of their savings and assets as being used to fill any gaps (see below) or to cover one off items, additional spending, special holidays and/or longer term care cost.
If you choose to have a 121 session at retirement with a pensions expert, they will help you to think about whether you are expecting to receive enough in retirement.
You can use the blank chart here to try to do this for yourself.
Note about inflation:In this chart we have ignored the effect of inflation or future pension increases. Of course as prices rise during your retirement, you will need more income in order to afford to buy the same things - but increases to your pensions in payment will help. If you concentrate on the amount of income you'll need at the point of retirement and the amount of pension benefits you will receive at that time, then these can be easily compared.
Filling in the gaps
Doing this will show any gaps between what you need and what
you are going to get, and this can then help you to identify if you need to do
anything to fill the gap. For example this may be where you could use your
savings and other assets. In the example above, the person won’t be receiving
their State Pension from 65 to 67, and while their expected income is enough to
meet their needs, it isn’t as much as they ideally want. So savings could be
used to fill the gap.
Alternatively you might decide that you need to continue earning
some money for a while.
Either way, it is very good to be aware of these things as
early as possible, so that you can make appropriate plans.