Pension Planning

Your guide
to pensions

How a pension could support
your future

There’s no time like the present. You may be many years away
from retiring. But believe it or not, every little thing you do now
could have a positive impact on your future.

If you’re already paying into a pension, this is a great first step. Although,
there are other things you could be doing to make sure you’re saving enough
for retirement – and it’s never too early to start.
In this easy-to-read guide, we outline some of the key considerations to think
about right now. And how our experts could help you further with your plans.

More than half of people who have recently
retired warn the next generation to do
more planning.

2021 research, Money and Pensions Service.

02

Why you can’t just rely
on the state pension

If you work and pay the required amount of tax and National Insurance
contributions, you should be entitled to the state pension once you’re retired
and you have reached the state pension age, which is currently age 66 for men
and women (as of August 2022). This will be given to you each week from the
government.
Over the 2022/23 tax year, the full state pension is £185.15 a week – which
works out at £9,627.80 annually. Of course, this extra income will no doubt be
a helpful boost in retirement. But alone, it probably won’t be enough to meet
even your basic spending needs.
Just think about your wage now – how much you need to live on and enjoy
life. Chances are the state pension will be much lower than the income you’ll
need in retirement. That’s why it’s really important to have your own savings
in place to use alongside it.

Thinking about retirement?

It’s never too early to think about what you want from retirement. And having
at least some inkling now could be a great first step in helping you achieve
your goals.
When you’re retired, you’ll hopefully have more freedom to put you and your
family first, take up new opportunities, and achieve lifelong ambitions. Perhaps
it’s a time when you’ll go on more holidays, see more of the world, and take up
new hobbies?
Whatever you want to do, jotting them down is a really good start.

03

How much money will
you need once retired?

Not only does this come down to money you’ll need for the goals you want
to achieve. It’s also really important to think about your day-to-day costs. For
instance, you’ll need income to cover regular bills and essentials, like food.

Then there are other, possible expenses to bear in mind. You might need
money to support your family financially, such as contribute to university or
wedding costs.

No doubt you’ll want a comfortable lifestyle in retirement – where you can
enjoy life, without having to worry about your finances.

The below Which? table shows how much income a couple might need to
achieve different types of lifestyle in retirement*.

Retirement type

State Pension Basic Comfortable Luxury

£9,627.80 Amount per year £45,000

per person £18,000 £28,000 New

What it will cover

Utilities and Utilities, European Long-haul trips
housing costs transport, holidays and and a new car
housing costs leisure activities every five years
*Which?, 2022.

Depending on how you take your pension, Which? calculates you’d need an
overall retirement pot of £265,420 to achieve a comfortable lifestyle. This
is based on a couple with a state pension each.

If you’re not quite sure on the income you might need, this is something we
can go through with you.

04

Preparing for the unexpected

Saving for retirement isn’t just about planning for the things you know about.
Certain obstacles could crop up at some point in your journey – and impact
on your financial plans.
By factoring these into your plans now, you have more chance of feeling better
prepared for anything around the corner.

Three key things to bear in mind:

Longevity

People are living longer nowadays – so there’s a good chance
your retirement could last a very long time. Much longer than
you might realise.
That’s why it’s not only essential to plan for the first few years
of retirement, but the decades that will hopefully follow.

Changing income needs

It’s important to remember that as you get older, your situation
and income needs may change throughout retirement. For
instance, you may need extra money for unexpected events deep
into retirement – such as short-term or long-term care costs.

Inflation

If you don’t have retirement savings in the right place, inflation
(the rising cost of living) could really hold you back – and
prevent your money from growing in real terms.
In other words, money you build over time could be worth less
in value in 10 years. Inflation has averaged 2.1% over the past
10 years*. If you had £20,000 in savings, it would need to grow
by 2.1% each year to £24,619 to retain its real value.

*As measured by the Consumer Price Index. August 2012-July 2022.

05

Let’s talk
pensions

Thanks to their brilliant
tax incentives, pensions
are one of the best ways
to save for retirement.

Not only is there no tax to pay on any growth you achieve through a pension.
As soon as you start paying into a pension scheme, you’ll automatically
receive an extra 20% in your pot through tax relief, up to a certain amount.
If you’re a higher or additional rate taxpayer and claim for it, you can get tax
relief of 40% and 45% respectively. As well as tax relief, if you have a
workplace pension, your employer will usually pay into it as well, through
something called employer matching.
These are fantastic benefits, designed to help boost your pension pot even
further over time. And the more money you pay into your pension, the more
you can take advantage.
• You can usually contribute up to £40,000 each tax year (or, if you earn

less than £40,000 a year, 100% of your net relevant earnings) and benefit
from tax relief even further.
• If you haven’t made full use of your last three annual pension allowances,
you can usually carry the term forward to make the most of tax relief.
• You can build up to £1,073,100 over your lifetime and still enjoy the full
tax benefits.
• When you decide to take your pension, tax rules will apply at that time.

06

Make the most of your pension

To build the retirement income you deserve, it isn’t just about the contributions
you make. Where you put your money plays an equally important part.
Usually, any money paid into a Pension is held in a fund and invested in
assets like the stock market. Over time, this could help your money grow
further in value – as long as you’re comfortable with your capital being at
risk as the value of your investment could go down as well as up.
There are lots of pension funds to invest in, each with their own objective
and risk level. Finding one that’s right for you could make a positive difference
to how your money grows over time.

If you have a workplace pension

When this was set up, it’s common for the money paid in to be automatically
placed into a default fund. These type of funds offer a one-size-fits-all
approach. So if this applies to you and you’re still in it, have you considered
it may not be working how you want it to?
We can check how your pension is invested. And if necessary, we’ll look at
other fund options that might be better suited to you and your individual needs.

95% of people in a workplace pension
or defined contribution pension scheme
are invested in the default fund, according
to new research*.

*The Pensions Regulator, 2021.

07

The earlier you start, the better

To achieve a comfortable lifestyle in retirement, you’re likely to need more
than £200,000 saved up in a pension. This may sound a lot. But by saving
into a pension as early as you can, you have more chance of achieving this.

This table shows how much you may need to save each month,
to reach a target pension amount. As you can see, the earlier
you save in life, the more manageable it can be.

Target value From age From age From age
at 65 30 40 50

£100,000 £89 £168 £375

£250,000 £221 £420 £936

How we worked this out:

• We’ve assumed your underlying pension investment will grow by an
average of 5% a year. If your investments grow by a lower amount, you’d
need to save more to achieve your target. Please note this is an illustrative
example only.

• We’ve also assumed you’ll retire at 65. Please note that the age you start
taking the pension could affect the benefits you receive.

• Contributions are before tax (ie gross). It is also based on a single
life pension and doesn’t factor in the rate of inflation.

The illustration provided isn’t representative of the performance of investments
you will have, and the amounts may be more or less than this.

08

We’re here to support you

When it comes to making the most of your pension, we appreciate there can
be a lot to think about. To make life easier for you and help you make informed
decisions, we’re here to provide you with all the support you need.

Through our pension review service, we’ll help you:
• Develop a clearer picture of how much income you might need to achieve

the lifestyle you want, as well as your retirement goals.
• Find out how on track your pension plans are, and whether important

changes need to be made to strengthen them. (We’ll carry out a full analysis
of both your current and old pension schemes, and also check over any
savings and investments you have.)
• See what other pension schemes could be better suited to your unique
circumstances. There are no upfront fees to hear our recommendations,
and you’re under no obligation to act on anything we discuss.

If you don’t already have a pension, we could help you set one up.
And if you feel you’ve left it too late, we’ll talk through possible steps
you need to take – to address any shortfall you have (between your
retirement savings and the income you need).

09

It’s all about you

We appreciate everyone’s unique. We’ll take the time to get to know
you – and provide recommendations that are right for you and your
personal needs.
To give you the right level of help, we offer a range of advice
services at different costs, tailored to you.

Our no pressure promise

Upon hearing our recommendations, we promise there’s
no pressure to take our advice. And we’ll give you the
time you need to decide what’s right for you.

It costs nothing to hear our recommendations

You’ll only have to pay a charge if you wish to go ahead with a
recommendation. Even then, we’ll talk through all costs in detail
before you make your decision.

10

Your next steps

Arrange your free phone
consultation with Skipton.

1 Speak to the person referring you today to book a telephone
appointment.

2 Skipton will then call for an initial chat to help you decide
if our advice could be an option for you.

3 If you’re happy to go ahead, Skipton will book you in for
a review either at your local branch or through a video link.

We offer pension financial advice to anyone with £20,000 or more to
invest, or at least £400 per month. Or have an existing pension(s) with
a minimum value of £50,000.

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15th February 2022

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A pension is a long term investment and your Capital is at Risk. Your fund
value can go down as well as up and you could get back less than you paid in.
The tax treatment of pensions is dependent on your personal circumstances and
prevailing legislation which may change in the future. Your eventual income will
depend upon factors such as the size of your fund at retirement, future interest
rates and tax legislation. With income drawdown, if you take too much income
too quickly, your fund could be depleted or run out altogether.

11

If you’d like this booklet in large print, braille or audio, please ask in branch
or call 0345 850 1700.

Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority,
under registration number 153706, for accepting deposits, advising on and arranging mortgages and providing
Restricted financial advice. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN. 11-0996\0922