By the time you reach your 50s you may have a pretty good idea of what you want later life to look like for you. Retirement doesn’t probably feel like a distant concept anymore and you’re starting to give it a lot more thought these days.

If you’re only just embarking on your pension saving journey, you still have a good few years to prioritise retirement planning and to save up for a decent life after work.

Whatever your situation, your 50s is the ideal time to up your saving game and to make the most of the opportunities available to you. Here are a few ideas to help you enhance your pension saving journey and to make sure your retirement savings are on track to provide you with the sort of lifestyle you hope for when you stop work.

Define your retirement goals

If you haven’t yet given later life a thought, do it now. How do you imagine your lifestyle? You’d probably want to enjoy some treats now and then like a holiday abroad, meals out and taking up new hobbies. Will you have any caring responsibilities or will you want to support a family member financially?

Crystallising your retirement goals now you still have a few years to save up may be just what you need to ensure you have enough to fund them when the time comes.

The Retirement Living Standards* can help you with that. They have been developed to help us to picture what kind of lifestyle we could have in retirement. The standards show you what life in retirement looks like at 3 different levels, and what a range of common goods and services would cost for each level. For example, a single person will need approximately £37,300 per year for a comfortable standard of living when they finish work.

If your current level of saving isn’t on target to pay for the standard of living you hope for in retirement, you may need to think about saving more. One way to do this is by paying Additional Voluntary Contributions (AVCs).

Consider boosting your savings with AVCs

You may want to consider paying extra into your pension, if you can. Paying even a little more in to your pension savings now could eventually add up to a lot more to enjoy when you stop work. AVCs provide a real opportunity to build up your savings and make up for lost time.

There are two different ways to save more towards your Fund pension depending on the section you're contributing to. 

The main AVC arrangement for 1970 Section members who joined the Fund before ​1 April 2007 is called BRASS. There’s a maximum you can pay in each year – usually 15% of your gross earnings.

The main arrangement for the 2007 Section and CARE members is called AVC Extra. It is also open to members of the 1970 Section who are already ​paying ​maximum pension and BRASS contributions. You can choose how much you want to pay into AVC Extra, but you should be mindful of tax limits. 

There are many benefits to saving extra with AVCs:

• you can save as little as £2 a week
• you don’t need to save a set amount every month
• you can pay into AVCs with money from overtime and bonuses, which don’t qualify for your main scheme pension
• you get tax relief on what you put in (up to Annual Allowance tax limits)
  

To see how much your Fund income will be, log in to (or register for) your myFund account. Use our online tool called MoneyFit to understand your current financial circumstances and figure out what practical steps you need to take to improve the way you manage your money.

You should also bear in mind that for the 2023-24 tax year there’s an annual pension savings limit that can benefit from tax relief of £60,000 or the value of your taxable earnings, whichever is lower. Read more about this limit below.

Are you making the most of your Annual Allowance?

Annual Allowance is the limit on the total amount you can save towards your pension in a single tax year before you pay any tax on your pension savings. It is currently either 100% of your annual earnings or £60,000, whichever is lower, unless the Tapered Annual Allowance** applies to you.

The Annual Allowance renews at the start of every financial year (in April) so it may be worth paying in as much as you can over the next few years to make sure your savings are benefitting from tax relief. Saving tax free for your future is one of the most valuable benefits of paying in a workplace pension and it’s worth taking advantage of all the pros that come with it. That doesn’t mean paying in the full allowance, but paying in as much as is realistic and possible for you at this moment in time.

You may also be able to carry forward any unused allowances from the last 3 years.

Your pension savings are invested so compounding is a big plus!

We’ve covered compounding in previous articles from the pension planning series but we can’t miss to highlight its valuable role in making your money grow, especially now you’re approaching the end of your working life. It’s a key factor when it comes to investing and one of the most significant benefits of having your money invested in a pension.

It is essentially the process of your investments achieving growth not just on the original sum invested but on the growth of it as well. It’s especially powerful if your money has been invested for a while but even if you start saving for a pension now, it will help your money grow.

Compounding only applies to members who pay in Additional Voluntary Contributions (AVCs) towards their pension.

Re-evaluate your attitude to risk

If you’ve been paying AVCs for a while, you may want to consider reviewing your investment fund choices now you’re on a down track to retirement. You may have had a riskier approach so far, but it’s perhaps time to reduce your exposure to higher risk funds to ensure you’re not taking any unnecessary risks. The value of money invested can go up as well as down so it’s important to ensure the savings you’ve accumulated to date are ‘safer’ being invested in more ‘stable’ funds which have lower risk of losing value over time.

Turn to Pension Wise for free guidance

Pension Wise, a government-backed service helping people to understand the pension options available to them, offers free, impartial guidance for over 50s. You can book an hour-long appointment with one of their pensions specialists and they’ll talk you through the options available to you and any other things you may need to keep in mind in the run up to retirement.

Speak to a financial adviser

You may want to seek expert financial advice if you have little or no experience of managing your pension and extended finances and don’t feel confident in making decisions about them. Go to https://www.unbiased.co.uk/ to find an Independent Financial Adviser (IFA) who could help you take control of your financial future.

*Retirement Living Standards – the Standards have been developed by the People and Lifetime Savings Association (PLSA) and provide a rule of thumb guidance on common costs for three different levels of expenditure in retirement to help pension savers understand how much money they will need to live the lifestyle they want in retirement https://www.retirementlivingstandards.org.uk/

**Tapered Annual Allowance - the Tapered Annual Allowance (TAA) generally applies to those on the highest incomes. This allowance gradually reduces the amount you can save into your pension plan annually depending on your income. It may affect you if your income is over £260,000 (previously £240,000) from 6 April 2023.