The introduction of auto-enrolment and the subsequent contribution increases has made saving for retirement a common discussion topic. Yet many UK workers and particularly younger generations aren’t optimistic about their life once they retire but it could be an opportunity to engage.

For many, passing on some form of financial legacy once they pass away is a goal. But imparting financial wisdom while you’re still alive could have a far greater and lasting impact. With many in the UK worried about how they’ll finance their retirement years and the lifestyle they’ll be able to maintain, it’s a great opportunity to pass on the tips you’ve picked up.

According to a report from asset managers State Street, UK workers expect to achieve just 55% of their current income in retirement. Continuing this pessimism, just 34% of the working population surveyed were at least somewhat optimistic about their financial situation in retirement.

When broken down into age, young UK employees were even more negative about their retirement prospects. Less than one in ten millennials felt financially prepared for retirement and just 6% believe they’ll be able to afford the lifestyle they want. Compared to their counterparts in the other seven countries involved in the survey, young UK employees are far more likely to feel pessimistic about their life after work.

Part of the worry young employees are faced with was put down to uncertainty and not knowing whether they are preparing sufficiently. Yet, just 46% of all UK respondents were aware of the amount they currently saved for retirement, indicating that there are steps those concerned can take.

While worrying about the future isn’t a positive thing, it does suggest that millennials are open to engaging on the topic of pensions and the steps that could help improve their outlook. For parents and grandparents, it represents an opportunity to help young family members effectively plan for the future.

Tips for improving retirement outlook

Whether you’re worried about your own retirement plans or those of your children and grandchildren, there are some steps that can be taken to improve the outlook:

1. Start using a Workplace Pension: The first place to start when seeking to improve finances in retirement is the Workplace Pension. Most workers in the UK have been automatically enrolled in their work’s pension scheme, meaning they and their employer are contributing, as well as benefiting from tax relief. If you’ve opted out, it’s worth considering re-joining the scheme, and, if possible, increasing the monthly contributions you make.

2. Look at voluntary pension alternatives: As well as an auto-enrolment pension, choosing to contribute to a voluntary scheme can really boost savings. With more flexibility to make contributions that suit your current level of income and spending, you can adjust it to match your lifestyle over time to build up a pension fund that will provide you with the retirement freedom you want.

3. Check National Insurance contributions: While most UK workers will be paying National Insurance (NI) contributions automatically, there are some that won’t. To qualify for the full State Pension, you’ll need to have made 35 years of NI contributions. If you’ve taken time out of work, freelance, or haven’t made NI contributions for another reason, it’s important to check whether you’ll qualify for the State Pension without making a lump sum payment.

4. Make use of the ISA allowance: ISAs provide you with a tax-free way to save disposable income. While there are restrictions on how much can be added annually, making use of your full allowance can provide you with additional income when it comes to retirement. For millennials that are keen to build up a sizeable pension fund a Lifetime ISA (LISA) could be perfect, while those with a higher risk appetite may find a Stocks and Shares ISA could deliver higher returns.

5. Check your pension regularly: If you find that you’re worrying about the amount you’re saving in your pension, checking it regularly can give you peace mind. Understanding where you pension fund is at and how it’s progressing is key to creating realistic plans for what you’ll do when you decide to give up work. It’s a simple way for making sure you stay on track with your goals in mind.

6. Seek independent advice: Working with a financial planner can help you project where your retirement savings will be, letting you see how different scenarios will have an impact. If you have specific financial goals in mind, we can help you see what adjustment you’ll need to make now to reach them. For millennials worried about uncertainty, seeking independent financial advice can give them the confidence to make decisions.

To get started moving towards your retirement goals or to understand the advice your children and grandchildren could benefit from, please get in touch with us today.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. Your pension income could also be affected the interest rates at the time you take your benefits.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.