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It's still possible to enjoy the lifestyle you want in retirement but you'll need to plan your finances carefully

A quarter of Britons expect to be much worse off than their parents' generation in retirement, according to an HSBC survey carried out this year. Despite this, the number of people in the UK who have financial plans in place to deal with the issue is below the global average.

Nevertheless, HSBC's The Future of Retirement The power of planning survey, which was produced by Cicero Consulting in May this year, found that people across the country remain optimistic about life in retirement, with 48% viewing it as an opportunity to start a whole new chapter in their lives and 22% saying it will be a time of rest and relaxation.

The fact is, however, that with an increasing number of pensioners stretching the resources of the state to care for them, people may have to take matters into their own hands if they want to enjoy a comfortable income in their later years.

Mark Twigg, Director of Cicero Consulting, who carried out the research, says: "There is a concern that people are not going to have the kind of retirement that the previous generation enjoyed. A person's age has a major influence on how people perceive this issue. Those already in retirement are fairly optimistic but as you look at those further away from their retirement the uncertainties become greater. These people are less experienced at buying financial products generally and may not have previously discussed what is involved in saving in a pension."

Developing a financial plan that will help you enjoy your retirement, however, is not as hard as it sounds.

  1. Prioritise your financial planning
    Not everyone prioritises retirement planning as an immediate action within their financial plans. For example, younger people with families or those looking to pay off debts may choose other financial targets first. This is because interest on loans can be high so paying off debt first may be more cost effective. It's also important to consider the insurance protection you might need. While many people take out life insurance to protect their loved ones they are often ignorant of the appropriate level of cover. And fewer people take out insurance to cover them if they are unable to work through ill health, which can affect their long-term savings. The effect is two-fold, as they'll not only struggle to put money aside when they are not earning but, also, they'll be eating into what money they already have saved.
  2. Benchmark yourself
    Having set your goals you need to evaluate your current financial status. Are you on track to meet your targets? How do you compare to your peers? A good rule of thumb is that the total contributions into your retirement savings should be equivalent to a percentage of earnings, equal to half your age – for example, when you are 36 years old, you should pay 18% of your earnings into your retirement savings. However, you also need to take into account the value of existing pension funds and the income you require in retirement.
    Phil Sellers, Head of Marketing for Group Insurance at HSBC, says there are many web-based tools that can help you assess whether your plans will support your retirement.
  3. Develop a comprehensive financial plan
    This needs to cover your own financial needs as well as the needs of the people who rely on you. The Future of Retirement survey found that 23% of people globally who didn't have a plan in place didn't know how to go about it, but professional advice could be available.
  4. Implement the plan
    Putting the plan into action may be less costly than you think. Consumers often overestimate the average insurance premium by up to three times and even small changes, such as saving a small amount each month, can make a big difference in the long run. For example, putting a small amount of money into a Stocks and Shares ISA on a regular basis can be beneficial as returns are free from any personal liability to UK income tax and capital gains tax.
  5. Keep your finances under review
    Having made a plan that meets your needs, the chances are that those needs will change with each life event. You should see these events as important triggers to take action that could change your tax or savings position. Set yourself a target date each year to go through your plans.

Phil Sellers, Head of Marketing for Group Insurance at HSBC says: "Everyone should participate and take advantage of whatever state and employer pension schemes you are eligible for but this may not be enough. You need to take responsibility for your own future. The research showed that those who have a financial plan are generally better prepared for the future in terms of how much money they are putting aside. This of course means, emotionally, they feel more optimistic and less worried about coping financially in retirement."

And who wouldn't want this peace of mind?

All data used is from HSBC's The Future of Retirement: The Power of Planning report.

Please be aware that the value of tax benefits will depend on your individual circumstances, and tax rules may change in the future. The value of investments, including those within a pension, and any income from them, can go down as well as up. This means you may get back less than you originally invested. Investments should be seen as a medium to long-term proposition, for example at least five years in the case of equity investments. You can normally only access money that you put in to a pension when you take your retirement benefits.

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