Worried about cost of retirement? How to give your pension a mid-life MOT

Worried about cost of retirement? How to give your pension a mid-life MOT Over six million people don’t have a plan to pay their rent or mortgage when they retire Do you ever have "the fear" about the future: or more specifically, how you’re going to pay for it? You’re not alone. According to exclusive research from Royal London, over six million people don’t have a plan to pay their rent or mortgage when they retire. Four in ten of those who expect to pay housing costs in retirement don’t know how they’ll pay. Having lived in London for nearly 30 years, I feel your pain. You may have some lucky/organized friends who have retired or are retiring already. But some of us look set to work till we drop… or do we? Does the future have to look so bleak? Is there help out there? What are your options if you are middle-aged and missing out on retirement planning? After sending me in to a blind panic about my own retirement provisions, I thought it was only fair to ask my fellow TV expert Sarah Pennells for her tips! But first, the facts… Am I in the minority for not having enough cash for retirement? Take a deep breath everyone, this is sobering stuff, but I mention it so you know you’re not the only one. Here’s what Royal London found from their research. - Over one third of adults - 18.7 million UK adults - expect to pay housing costs in retirement or are currently doing so. - Just under half of those who rent (45%) expect to pay housing costs for more than ten years. And only half of people with a mortgage expect to be mortgage-free within six years of retiring. - Those who think they’ll have housing costs in retirement have £34,948 in their pension pot on average. People who do not expect to pay housing costs in retirement have £120,682 on average saved in pensions (the average pension pot size overall was £93,221). - Six in ten of those currently in ‘financial crisis’ expect to pay housing costs in retirement compared to just over one in ten of those who describe themselves as comfortable. - Over a third of renters (35%) don’t know how they’ll pay their rent in retirement compared to over four in ten (42%) of mortgage holders. So how are we going to pay the rent? The research found: - Almost one in four renters (23%) think they will pay their rent in retirement using means-tested benefits compared to 2% of mortgage borrowers. - Almost one in five renters (18%) say they’ll use the State Pension to pay their rent in retirement compared to 7% mortgage borrowers. - One in seven renters (14%) say they’ll use pension income to pay housing costs compared to over one in five (22%) of mortgage borrowers. Okay, I’ve freaked you out enough! The point is, you might think your finances are pretty rubbish, but you’re one of millions – and it’s not too late to do something about it. Sarah’s top tips to help you with your retirement planning If you're in your fifties, don't fall into the trap of thinking it's too late to improve your retirement finances. This can actually be one of the most important decades for getting your plans on track. Find any lost pensions, consider boosting contributions if you can afford it, and work out how you'll meet any housing costs in retirement. Our research found that four in ten people expecting to pay rent or a mortgage in retirement don't know how they'll cover those costs, so having a plan can make all the difference. Don't guess – work out what your housing costs could be One of the biggest retirement planning mistakes is assuming everything will somehow work itself out. If you'll still be paying a mortgage or rent in retirement, try to calculate what those costs could look like and how you'll cover them. Give your pension a mid-life MOT Many people spend more time reviewing their mobile phone contract than they do their pension. Your fifties are a good time to check how much you've built up, whether you're contributing enough and what sort of income your pension might provide. Even a bit extra into your pension now could make a difference by the time you retire. If you’re employed, find out if your employer will match any extra money you pay in, pound for pound, to boost your pension further. Think carefully before spending an inheritance If you receive an inheritance, it can be tempting to give some cash to family members, renovate your home or treat yourself. But if you still have a mortgage, using some or all of an inheritance to reduce the balance could be one of the most effective ways of improving your finances in retirement. Lower housing costs in later life mean your pension income won't have to stretch as far. Track down any lost pensions You may have more retirement savings than you realise. If you've changed jobs several times, you may have pension pots you've forgotten about. The Pension Policy Institute estimates there are around 3.3 million lost pension pots worth around £31 billion in total, with an average value of roughly £9,500 each. Finding just one lost pension could give your retirement income a valuable boost. The Government's free Pension Tracing Service, which helps people find contact details for old pension schemes is a good starting point. Renting? Build some wriggle room into your plans Renters face an additional challenge because rents don't stand still. More than half (57%) of renters in our research said their rent had increased in the previous 12 months. If you expect to rent throughout retirement, it's worth building a financial buffer into your plans rather than assuming today's rent will be tomorrow's rent. See if you can clear your mortgage sooner If retirement is on the horizon and you still have a mortgage, check how much you can afford to overpay and what your lender will allow. Paying a little extra each month could mean you’re mortgage free months or even years earlier. Just check any early repayment charges if you’re on a fixed rate deal. Don't let uncertainty stop you taking action You don't need a perfect retirement plan to get started. The important thing is to take the first step. Whether that's finding a lost pension, increasing your contributions by a small amount, paying a bit extra off your mortgage or simply working out where your retirement income will come from, small actions today can add up to a much more comfortable retirement tomorrow. A little tip before you get started If your heart rate has gone through the roof just reading this article, then don’t panic! Getting started is the hard bit. But don’t make it a mission. Put 30 mins in your diary to start the process. Stick the tele or the radio on so you’re not sat in silence and make yourself comfy. Now set a 30-minute alarm on your phone and stop work the moment it rings. Have a drink or a nice reward! Start by using the pension trackers to find your lost cash. You might have more than you think! And don’t forget that the free MoneyHelper website has loads of plain English pension advice – and they have a helpline you can call too. - Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist - Sarah Pennells is a leading money and finance broadcaster and is the consumer finance specialist at Royal London