How to boost your retirement income

Where will your retirement income come from, and how can you boost it?

Find out how you can supplement your retirement income with our easy guide.

Did our retirement saving calculator come up with the sort of figure you were expecting for your yearly living costs? Or were you perhaps surprised to see how much extra you’re going to need each year on top of your state pension?

It’s easy to assume, for example, that because you’ll have paid off your mortgage, you won’t need much money to live on – but the figures can be daunting when you examine them more closely. For example, if you wanted an extra £10,000 a year on top of your pension, you’d need a pension pot of around £167,000 (this is based on This Is Money’s pension pot calculator which assumes an annuity of around £6,000 per £100,000 saved).

If those kind of figures are just plain scary and you’re one of the many who doubt that your pension is actually going to provide the income that you’d like when you hit, say, 65, don’t panic. The best thing you can do is face up to the problem.

We’ve also got some affordable options you can explore to help boost your retirement income…

Still got a few years before you retire?

The most obvious answer is to pay more into your pension, and there are tax advantages if you do. But it doesn’t suit everyone: what if you haven’t got a pension, you can’t afford to pay more in, or you simply don’t feel comfortable with the level of risk associated with the pensions market?

Find out more: Risk and pensions

Risk is one of the key reasons for the changing face of the UK pension market over recent decades, as pension values vary with the ups and downs of the stock market. Back in the 1970s and ‘80s, pension schemes were more generous, largely thanks to the defined benefit (or final salary) schemes run by employers. In these schemes, employers guaranteed retired employees an income for the rest of their life, so they were committed to providing a certain pension regardless of how the stock market performed.

In the 1990s, this system began to change as companies switched to USA-style ‘defined contribution’ schemes, which guarantee the level of contributions employers will pay in rather than the final payout. This saved employers money and switched the stock market risk to employees.

These changes meant that savers have to carry more of the pension burden themselves, and are also more dependent on stock market performance (and, until the recent pension changes, on annuity rates).

Meanwhile, the State Pension has been put under strain by a growing older population, coupled with increased life expectancy – according to the Office for National Statistics the number of people living in the UK aged 100 and over rose by 73% between 2002 and 2012. The result is that the state pension has to support more people, for longer – and it’s feeling the strain.

All in all, it’s a perfect storm and explains why pensions may no longer be guaranteed to provide enough to live on in retirement. There’s no easy answer to this situation, but it’s easy to see why the Government has had to increase the State Pension age and why people are worried about saving enough to retire on.

Other ways to save for retirement

While a pension is one of the most tax-efficient ways to save for your retirement, there are other tax-effective long-term savings options too. Stocks and Shares ISAs are one example and there are also tax exempt savings plans offered by friendly societies.

A long-term savings plan might suit you if you’re worried about putting all your retirement eggs into one basket. It could be run alongside a pension and, whether you use this additional pot to boost your income, treat yourself to a special holiday, help your grandkids out or to simply provide an emergency fund, it could prove a useful pot of money.

Equally, these plans might provide a solution if you haven’t got a pension and are looking for an affordable alternative.

Our survey revealed that many people look beyond pensions when it comes to saving for retirement – apart from additional long-term savings, other options included property and inherited wealth (although relying on an inheritance is risky as this isn’t a reliable source of money – there may not be as much, or even any, money left to inherit).

Find out more: What is a Tax Exempt Savings Plan?

These are unique to friendly societies (they’re not available from high street banks), and provide a tax-free savings option in addition to plans like ISAs. They also provide a minimum return (see ‘Find out more: Long-term, tax free, savings plans’ below).

Did you know there’s an affordable way to get a guaranteed pot of money?

When there are many question marks around retirement, it might be reassuring to have something more definite to look forward to. One way to make this happen is to consider a savings plan that provides a guaranteed or a minimum return on your investment. This way, you know that you have a definite sum to factor in to your plans.

Don’t think you can afford it? You don’t have to pay in huge sums to be able to make a difference – just putting away as little as £25 every month in a low-risk plan could give you a guaranteed pot of money in say 10 or 20 years’ time. It may not be a huge sum, but knowing you can rely on a few thousand pounds coming in at a known point in time could give you more peace of mind.

Find out more: Long-term, tax free, savings plans

Foresters Tax Exempt Savings Plan

This type of plan guarantees a tax free cash sum at maturity, as long as you pay in for the full term of the plan. They’re an affordable way to save as you pay in just £25 a month for anything from 10 to 25 years.

Find out how much you could add to your retirement pot with the Foresters Tax Exempt Savings Plan.

Are there other ways to keep money coming in after you’ve retired?

You could simply carry on working for longer – our survey revealed that attitudes to working past retirement are changing, find out more here. However, if you feel that you’ve done your time and are looking forward to an altogether more leisurely existence there are ways to make your money go further.

If you’re happy to devote some time to other money-making activities, there are plenty to choose from. From taking in ironing to filling out online surveys, there are many opportunities to bring in a bit of extra cash. You could also try bartering skills to save spending money – a spot of babysitting in return for some help with home maintenance, perhaps.

Make sure you get everything you’re entitled to

It’s worth remembering that there are literally billions of pounds of benefits for older people that go unclaimed every year, according to Age UK, so it’s worth checking whether you’re eligible for any yourself.

If you’re interested in finding out more from Foresters Friendly Society, sign up to our quarterly e-newsletter for savings-related news and tips, competitions and more.

Please Note:

Inflation could reduce the value of your money over time.

Tax rules may change and depend on individual circumstances.

The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you’re unsure as to the suitability of a product you should seek advice from a Financial Adviser. You may have to pay for this advice.

When will you be able to afford to retire?

Will your retirement nest egg really be enough? Or perhaps you’re one of the many planning to rely on the state pension for your golden years, but do you know what it will actually get you?

Use our handy calculator below to work out how much you’ll need to live on and to see if you’re ready for retirement. Then learn more about our long term savings options which can help you prepare for your future.

If you are worried about your retirement plans, you’re not alone. Take a look at the results of our survey to find out how you compare to the average Jo when it comes to retirement savings.

Please Note:

Inflation could reduce the value of your money over time.

Tax rules may change and depend on individual circumstances.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.

Are you an average Jo when it comes to saving for retirement?

If you’re not sure when you’ll be able to afford to retire, even though you may already be saving money for the longer term and have a pension in place, don’t worry – you’re not alone.

There are plenty of others in the same boat, as you can see below….

Our long term saving and retirement survey revealed that there’s a lot of uncertainty around retirement, particularly when it comes to whether we’ll have enough money to live on and when we will actually be able to retire.

If you’re in a similar situation, why not try our useful retirement calculator to work out roughly how much money you will need when you stop work.

You’ll find some handy tips on how to add to your retirement savings as well.

Download or print our Average Jo guide here.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.

How to stop burying your head in the sand and start saving

A recent survey by showed that nearly two in three of us ignore issues that worry us, so that we can avoid facing up to them. But why do we want to avoid them – and how do we stop it?

Do you avoid the bathroom scales? Dodge that ‘awkward’ conversation? Refuse to think about how you’ll fund your retirement? If so, you’re not alone!

Although most of us understand the benefits of monitoring our weight, relationships or spending, we often ignore what’s going on in order to avoid negative feelings, particularly guilt, when we’re presented with the reality.

Why we hide away

“The ‘ostrich problem’ is the idea that there are times when people would rather not know how they’re doing,” explains Dr Thomas Webb, a psychologist at the University of Sheffield. “For example, people might not want to know how much money they’ve spent or what their partner thinks of their social skills. It’s called motivated inattention.”

Postponing the problem

In other words, the desire to assess our progress is at conflict with the desire to protect ourselves. This very human need to avoid pain is understandable, and it means that we often avoid or run away from what we see as problems – which could be anything from a dull toothache to mounting debts. Money, unsurprisingly, topped the list of most common worries, followed by health and relationship issues – and women (65%) were more likely than men (62%) to bury their head in the sand.

But this behaviour is based on what we fear might happen. The thing to remember is that this is essentially our imagination running away with us, and in most cases the reality of the situation – whatever it is – won’t be nearly as bad as we think.

Face up to it and you’ll feel better

In any case, ignorance isn’t always bliss. Nearly a third of people in the survey said that they made a bad situation worse by not dealing with it straight away. So the key is to stop allowing that fear to make decisions for us and make it a rule to deal with things as soon as they come up, or become an issue.

Talking things over with friends, family and significant others can be a good first step in helping us to face up to reality and make a plan to take control. Not only that, it will release an enormous psychological burden – feeling in control of something makes you feel much better than pushing it to the back of your mind.

Case in point

Life insurance provides a good example. Perhaps our unwillingness to consider the future explains why only 38% of us have a life insurance policy. But the fact is, as you get older, the cost of a premium usually goes up. Buying when you’re younger means you lock in the policy at a cheaper premium, so it really is better to do it sooner rather than later.

Similarly, if you’re worried about saving for the future, it only takes a few small steps to make a start – and it’s been proven to make you happier. You don’t have to put away a fortune, even smaller amounts can make a difference. Did you know, for example, that you can put away as little as £25 a month in a Foresters Friendly Society savings plan? It’s a really simple way to start planning for your future.

Feel the fear and do it anyway!

If you recognise any of your own ostrich tendencies here, why not take action to confront the issue and overcome it? In the long run, you’re bound to feel a lot better than if you stay with your head stuck in the sand.

This blog is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.

Sources: The Great British Ostrich Crisis