Planning

What the Pensions gap means to you

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See how your finances stand up to the changing face of retirement

You've probably read or heard about the pensions gap in the media. Having a gap means that your pension income could be less than you'll need in retirement.

If you're worried about your pension, you're not alone. Find out more about how retirement is changing in our Future of Retirement report.

Why is there a pension gap?

Part of the reason for the gap where one has been identified is that most people aren't contributing enough to their pensions, but even people who have been careful about saving for retirement may need to review their plans to ensure they maintain a good standard of living in retirement, this is maybe because:

  • we're living longer - meaning we spend longer in retirement. This also means many people may need nursing home care later on, which can be a big expense.
  • the basic state pension is £113.10 per week in 2014/15 - the state pension scheme alone will not provide enough for most of us to live on as it is not as generous as it used to be in relation to UK earnings.
  • pension schemes are shrinking - most of the companies that still offer defined benefit schemes are either cutting back on their scheme benefits for employees or requiring the employees to pay higher contributions, making the terms less generous.

Why are Defined benefit schemes being cut?

The answer is simple - because they're too expensive. Companies are having to pay more employee pensions and for longer, so in response they are reducing the schemes that they offer.

One of the more generous types of work pension, the final salary scheme, has almost disappeared from the private sector; a growing number of big companies are closing these schemes for new employees, or changing them to career average schemes where the salary on which the final benefit is based may be lower.

How to check your pension gap where one has been identified

To see if you're on track for the pension you need, the first thing to do is use our retirement plan simulator. It can help you find out:

  • how much money you may have in retirement
  • how things could be different if you make a few changes
  • what you can do to make your retirement more comfortable

Calculate your retirement income

HSBC Premier Financial Advice is only available to UK residents who have £50,000 or more in savings and investments (not including pension fund valuations) and who are at least 18 years old at the time of the initial consultation. If you meet these criteria, an adviser could help you to grow and protect your wealth.

Find out if you qualify - HSBC Financial Advice.

What changes can you make?

A simple way to increase your retirement income is to increase your pension contributions or the amount you set aside in other savings.

There's also the option of changing your retirement plans. You might be able to:

  • retire later
  • downsize or reduce your spending
  • start a retirement business or take on paid work, if this is available and you remain fit and healthy enough to do so

The value of investments (and any income received from them) can fall as well as rise and you may not get back what you invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets. You should aim to invest for at least five years.

Pensions are not normally accessible until age 55 . The value of tax treatment will depend on your individual circumstances and may be subject to change in the future.

* Future of Retirement Survey.

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Everyone's circumstances are different and what applies to one person may not be right for someone else. The suggestions above are based on a general assumption of each circumstance and they are not intended to provide advice or recommendation.