Your pension and savings can determine if you live in luxury or squalor. In the UK, the average worker holds a pension pot worth around £60,000. Annuities will provide £3,000 a year (if you retire at 67), on top of the maximum State Pension that guarantees £9,300 a year. £12,300 is barely enough to live a comfortable life — skirting on the edge of £10,200, the bare minimum to survive according to the Pensions and Lifetime Savings Association.
However, you can take steps to fortify your pension and finances with effort and planning.
Grow Your Pension
Put more money into your pension while you’re working. Monthly contributions of £500 or more can get your pension pot to well above £100,000 once you hit 55. If your current pension pot only holds £50,000 at 55, you’ll need to ramp up your contributions to £1,000 or close to it. Putting money into your pension is half the work — you’ll also need to make sure your pension is a proper one. Exorbitant fees and charges can limit the growth of your pension.
Check your pension charges and don’t hesitate to switch to new managers if you find the fees rather high. Talk to experienced investment planners on how you might restructure your pension for maximum growth while limiting risk. According to research from the International Longevity Centre UK (ILC), workers who received financial advice grew their pensions by close to £50,000.
Individuals from lower-income brackets benefit more from financial advice, boosting their pension wealth by 25 percent compared to the 11 percent of more affluent groups.
Invest in a Home
Rent takes a significant chunk of your finances every month. One-bedroom flats in England can go for over £1,000. Renting away from the urban centers can reduce the rates to £700-£800. You’ll be paying almost the same if you bought a home with a 20-year financing plan. You can find homes away from the city for around £150,000 and monthly premiums should go for around £800-£1000.
Owning a home eliminates the cost of rent and you’ll also have a proper house. You can even earn money with your property by renting out a room or using one as an Airbnb.
Work for as Long as You Can
UK retirement age has no upper limit. You can continue to work for as long as you are willing and able. Getting a few extra years of earnings is better than immediately tapping into your limited finances. Talk to your company and consider a pay cut if it is what it takes to retain your position. Finding work once you are let go can be difficult, but there are government programs that can assist you in finding a new job.
Leaving the UK might seem like a drastic choice — however, many UK retirees opt to spend their days abroad. Malaysia is a popular choice in Asia. It is a former British colony and foreigners are quite welcome. Thailand is another popular destination. Foreign retirees can easily acquire retirement visas as long as their pension exceeds £1,300 a month or if they deposit £16,000 into a local bank account.
The cost of living in both countries is a fraction of the UK’s. UK retirees are also heading to Ecuador, Panama, and Malta to enjoy the sun as well as live more comfortable lives. Closer to home you have Spain. Property prices have dropped to 40 percent of their cost in 2007 — making it easier for retirees to own homes.
Live a Healthy Lifestyle
Living longer draws out your pension funds — but staying healthy allows it to stay mostly intact. The biggest drains on retiree finances are hospitalizations and other medical treatments. In the UK, the NHS is losing funding and extended hospital stays might not remain free of charge. The NHS also covers a limited amount of medication, so expect to pay for prescribed medicine. Staying healthy can reduce or eliminate the need for hospitalization or medicine. Merely maintaining proper weight can reduce your chances of hospitalization or the need for medicine.
The majority of hospitalization in the UK is tied to being overweight or obese. Packing a few extra stones increases your risk of heart disease, strokes, cancer, kidney disease, liver disease, and arthritis. Maintaining or losing weight can ensure you don’t spend money on hospital trips and medication, as well as improve your quality of life.
Pension problems are common but they can be easily solved with planning and effort. Grow your pension with proper financial advice and limit future spending with a few lifestyle changes.