Will you be able to afford the retirement lifestyle you want?
If you’re still working, what kind of life would you like to lead when you’ve said goodbye to the 9-to-5? Saving for your retirement is essential if you want the financial freedom to enjoy your later years. After all, you’ll still want to do all the things you love now – and probably a few others too.
With that in mind, it’s a good idea to consider how big an income you’ll actually need. But at the heart of today’s challenge is rising longevity. UK life expectancy continues to rise, and a longer retirement means your savings will have to stretch further. Pensions and Individual Savings Accounts are popular ways of saving tax-efficiently, but they are very different from each other – particularly in how they are taxed.
PENSIONS – CRUCIAL, BUT CURTAILED
Pensions should play an important part in everyone’s long-term financial planning, so ensure that you make the most of any employer’s contributions. Your own contributions are typically
also tax-free on the way in, making them a very tax-efficient way to save. However, when planning long-term savings, savers with big aspirations for their retirement need to bear in mind the lifetime allowance and annual allowance.