Important information - the value of investments can go down as well as up so you may get back less than you invest. Before transferring a pension, compare all the benefits, charges and features and always seek advice if you are unsure.

A lot has changed in the past year and a half so, as we pass the mid-way point of 2021, it’s a good time to take stock.

All of us are likely to have seen our personal finances change in some way since the first lockdown was imposed last year. Perhaps you’re spending more in some areas but less in others. Or maybe you’ve been able to save a bit more each month and need to put that money to work for your future.

With life slowly returning to normal, it’s a great time to perform your own mid-year financial review. Like an annual MOT for your car it will help you make sure your savings are ticking over nicely.

Here’s how you can do it.

Set your targets

Saving towards your eventual retirement should be a central plank of any financial plan. But to reach the retirement you want requires a plan and realistic saving targets for you to aim for.

And that’s true whatever age you are. If you’re still in the early years of your career you’re unlikely to spend much time thinking about life after work, but a little bit of planning now could be of real benefit in the future. The younger you are, the more time you have to build your retirement savings and let any investment returns you get roll up for the future.

Use your pension MOT to draw up your own target with the help of Fidelity’s Retirement Calculators. They allow you to enter details of your expectations for income in retirement, as well as your current levels of saving, to help you understand the progress you’re making.

Target 1 - How much do I need to retire?

One target to look at is the income you’ll need to generate in retirement. Fidelity’s research has shown that you need to have saved an amount worth 7 times your household income by the time you retire in order to enjoy no material fall in your standard of living in retirement. That’s based on various assumptions, including retiring at age 68 and achieving investment returns after costs of 4.75% a year.

But you can also work out how much income you think you’re going to need in retirement based on the lifestyle you want. Here’s where Fidelity’s Retirement Calculator can help. Just enter some assumptions about the thing you hope to spend money on in retirement - like holidays, eating out, home improvement and the occasional new car - to give yourself an idea of how much you might need.

None

Target 2 - How much should I be saving to get there?

You’ve now identified how much you need for the retirement you want. To understand if it’s realistic, you’ll need to consider how much you already have saved across all the pensions you may have, as well as your current level of contributions, to see if you’re on track. You can then see if you need to increase your contributions to meet your target.

Take a few minutes to check your current progress with MyPlan. It’s an online tool that lets you enter details like your age, current savings, contributions and investment mix to let you know, based on certain assumptions, if you are on track to meet your targets. You can tweak those details to see the effect it has on your projected pot at retirement.

Check on your progress

You should be able to check the status of your existing pension savings with your pension company. This could be a company that administers your current or former work pension, but also a  SIPP - a Self-Invested Personal Pension - which you control.

You could use your pension MOT to consider whether you should  consolidate your pensions in one place - including any pensions your may have saved into while working in previous jobs. This can be done by moving workplace pensions into a SIPP. The great benefit of consolidating pension pots is that they become far easier to look after. You can view your account online so that you always know the value of your total savings, meaning you have a better idea of the level of pension you’re heading for in retirement.

Making the most of the help on offer

Remember, you’re not in this alone. If you have an employer who also contributes towards your pension, check how much they contribute. They may offer to increase their contributions to match yours, so it’s worth taking the time to check your employer’s policy. If they do offer to match your contributions, it’s worth seeing if you can increase what you contribute to make the most of this.

None

On top of that, the Government also help with pension tax relief. We know that understanding how tax relief works on your pension may feel like a foreign language. To try to put it simply, a £1 contribution today typically costs you 80p if you live in the UK and are a basic-rate taxpayer, as little as 60p if you’re a higher-rate taxpayer and 55p if you pay additional-rate tax. Exactly how it works will depend on the way your pension scheme operates its tax relief. Rates of tax relief for Scottish Residents may differ to the rest of the UK. If you want to find out more about how tax relief works read our guide.  

Once you’ve set your pension savings objectives, make sure you regularly review how you’re tracking against them. You should also review the objectives themselves to make sure that they still meet your needs and dreams for your retirement. 

Taking the time today, this week, this month or even this year, to conduct a pension MOT and work out what you’ll need for the future is an investment worth making.  

Important Information: Withdrawals from a pension product will not normally be possible until you reach age 55. Tax treatment depends on individual circumstances and all tax rules may change in the future. It’s important to understand that pension transfers are a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered. To find out what else you should consider before transferring, please read our transfer factsheet. If you are in any doubt whether or not a pension transfer is suitable for your circumstances, we strongly recommend that you speak to a Fidelity adviser or an authorised financial adviser of your choice. Please note that this information and our guidance tools are not a personal recommendation in respect of a particular investment. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals.

Share this article

Latest articles

Market news today - 20 September 2021

What’s driving your investments this week?


Tom Stevenson

Tom Stevenson

Fidelity International

Where next for Kingfisher shares as Screwfix-owner gives update?

Can the lockdown DIY frenzy sales boom persist in a re-opened world?


Emma-Lou Montgomery

Emma-Lou Montgomery

Fidelity International

Stop worrying about a crash: the bull market has further to run

Should investors really worry about inflation, Covid and US tapering?


Tom Stevenson

Tom Stevenson

Fidelity International