Pensions expert Simon Appleyard provides simple tips to help you prepare for when you want to stop working
No matter your age or career stage, it’s never too early to plan for retirement.
The day itself can feel intangible, distant – something for tomorrow. But good preparation, done early, is the key to a retirement that works for you.
The first challenge is knowing where to start. Here are three areas to review when starting your retirement planning journey.
Establish the ‘what’
It’s a simple, but essential first question. What do you want to do?
There really is no one-size-fits-all retirement plan. For some, it will be stepping back for good. But, we’re seeing more and more practice managers also choose to take a ‘flexi-retirement’ – continuing to work, even after they take their pension savings.
This could be in the same job, a new role, or even starting their own business. Each option will have its own financial implications, which is why understanding what your goals are is key.
Remember that it is perfectly natural for your plans and aspirations to change, especially if you’re planning early. Just make sure you take the time to adapt your retirement strategy accordingly.
Establish the ‘when’
Along with knowing what you want to do, it is also essential to know when you want to retire.
The date itself may be influenced by several factors.
One will be your retirement goals themselves.
Another may be when you can take your pension. If you have an NHS Pension Scheme pension, there are certain ages you can start taking benefits from without any ‘early access’ reductions – a consideration that may influence your retirement date.
In the 1995 Section of the NHS Pension Scheme this is 60 (or 55 if you’re a Special Class member). In the 2008 Section this is 65, and in the 2015 Scheme this is 65, or your State Pension age, whichever is later – which the State Pension age currently is.
Yet another may be a partnership agreement. A growing number of practice managers are now taking partnership roles. The agreement itself may restrict when partners can retire, how many partners can retire within a specific period and what working patterns they adopt.
Reviewing your agreement is essential here, as is having a conversation with your fellow partners early to balance your ambitions with the partnerships’ needs.
Establish ‘how much’
Once you know what your retirement dream looks like, it’s time think about the necessary money and savings needed to enjoy it.
A good place to start is with the money that you have now.
Think about all of your various savings, investments and pensions, including those from other jobs and other workplaces in the past. If you’re a partner, you should also think about any equity you have invested in the practice itself and how this could be released to help fund your retirement years.
You may then need to estimate how much you’ll need to spend each year of your retirement and – accounting for when you want to retire – determine a strategy for growing your retirement savings to meet you desired level of spending.
Reviewing your current financial affairs and how to grow and manage your money to get there is something a professional adviser can help with.
Some will use specialist cashflow modelling tools that look at current and future data on income, expenditure and lifestyle to show how cash requirements may rise or fall over time.
They will also be able to help you plan for the potential impact of inflation on your savings and investments, which you can model for yourself with this calculator. Remember that while investing your money can give you a greater chance of beating inflation, the value of any investments can go down as well as up.
Retirement planning can feel like a maze, but starting with simple steps, and with the right support, can make it plain sailing.
Simon Appleyard is senior area manager at Wesleyan, the specialist financial services mutual for GPs and practice managers