Saving for retirement in your 50s

Are your retirement savings on target?

Deciding when to take your benefits and retire is a balancing act between what you hope for and the reality of a retirement that may last for two or three decades.

A lot of this uncertainty can be taken away by making sure you have a retirement plan.

There are lots of different places where you might have retirement savings, such as your state pension, any company or personal pensions, and other assets such as property and ISAs. Some automatically give you an income, while others require you to make decisions. Either way, you need to know how much you have so you can plan ahead effectively – find out more about creating a retirement plan.

Planning your retirement

The first step is to figure out what you might need in retirement, and what your current pensions might provide.

What you can do now

Bring your pensions together

If you have savings in several pensions – which is likely if you’ve changed jobs during your career – then bringing them together means you have just one company to deal with for every aspect of your income. Just make sure you are aware of your income options and that you have checked the charges that will apply.

Maximise the tax benefits of pensions

In summary, a £100 contribution today typically costs you £80 if you live in the UK and are a basic-rate taxpayer, as little as £60 if you’re a higher-rate taxpayer and £55 if you pay additional-rate tax. You can do this by:

  • Increase or start a regular contribution
  • Make a one-off payment
  • Use your carry-forward allowance, to make use of any annual allowance that you did not use during the three years immediately before the current tax year.

Rates of tax relief for Scottish Residents may differ to the rest of the UK.

Manage your assets

Switch other assets (such as ISAs, unit trusts or other investment accounts) into your pension so you can maximise your tax relief.

Review your investment choices

Think about where you are invested. Does your asset allocation match your appetite for risk and the type of income you would like to generate?

Use your carry forward allowance

The carry forward allowance allows you to make use of unused annual allowance from the three previous tax years. This means you may be able to contribute more than your annual allowance to your pension pot this tax year (until 5th April 2019) and still benefit from tax relief.

To use carry forward, you must make the maximum tax relievable contribution in the current tax year (typically £40,000* in 2018/19) and can then use unused annual allowances from the three previous tax years (provided you were a member of a pension scheme), starting with the tax year three years ago.

You can’t receive tax relief on contributions in excess of your earnings in a tax year and you only receive higher rate tax relief to the extent that you have paid it.

Carry forward

Find out more about taking advantage of unused annual allowance in our Carry Forward guide.

The tax benefits of a pension

  • Savings that you put into your pension are not taxed
  • In a personal pension such as the Fidelity SIPP, we can claim 20% tax relief from the Government and add it to the money you save
  • You can save up to £40,000* a year in your pension and receive tax relief so long as it’s not more than you earned
  • You can claim money off your tax bill if you pay higher-rate or additional-rate tax
  • From the age of 55 you can normally take a tax-free lump sum worth up to 25% of your pension.

What next?

If you want to open a new pension or transfer an existing pension to Fidelity, then take a look at our Self-Invested Personal Pension (SIPP). It’s low cost and easy to manage online.

*Tax relief is only available on the lower of the annual allowance (currently £40,000) or 100% of your earnings in a given tax year. If you exceed your annual allowance you may have a tax charge to pay unless you have unused allowance you can carry forward. If you have earnings of £110,000 or more, the amount you can pay in and receive tax relief on could be 'tapered' down to £10,000. Alternatively, if you’ve already taken taxable income from your pension pot under pension freedoms, your annual allowance may be £4,000 (known as the money purchase annual allowance) and you will not be able to use carry forward to contribute to a SIPP.

For more information on tax relief and all the allowances please visit our pension allowances page.

** Exit fees terms and conditions

Remember that the value of investments can fall as well as rise, so you may get back less than you invest. 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 charges, features, and services offered.

If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly suggest that you seek advice from an authorised financial adviser.

Fidelity SIPP transfer factsheet

Thinking of transferring?

To find out what you should consider first, please read our Fidelity SIPP transfer guide.

Thinking about taking cash from your pension?

Once you reach the age of 55, you’re usually free to take money out of your pensions, even if you don’t retire. If you have no immediate plans to use the cash, it may be better to leave it invested in your pensions.

Leaving your money invested means:

  • Your money stays in a tax-privileged environment
  • You don’t affect the inheritance you leave to your loved ones
  • You may get a better return

Your pension is there to give you an income for the rest of your life, so if you take too much too soon, you may not have enough left for what could be two or three decades of retirement.

Make life easier by bringing your pensions together

Combining your pensions into a Self-Invested Personal Pension (SIPP) can make it easier to manage your savings - and it could be cheaper, with lower fees than you’re currently paying.

Related articles

This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

The value of investments can go down as well as up, so you may get back less than you invest. This information is not a personal recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s retirement service on 0800 368 6882, Monday to Friday, 9am - 5pm, or refer to your financial adviser. Eligibility to invest into a SIPP depends on personal circumstances and all tax rules may change in future. Pension money cannot normally be withdrawn until age 55.