Having children at home impacts on your retirement

17 February 2012

Julie Russell
Head of Customer Relationships at Standard Life

Research carried out for us by YouGov among 45-65 year olds has revealed that having children living in your household as you get older can have a big impact on your retirement plans. Almost half of older people (49%) with two children in the household have no financial plans in place to provide for their own future, compared to just over a third (35%) of those without children.

Children were also found to impact on decisions about when we actually retire. Our research among older people found we are more likely to retire later if we still have children in the household when we are 45-65 and that 10% of those who weren’t yet retired were not planning to retire until they are aged 71-75. Just 2% of 45-65 year olds who don't have children in the household are planning to put off retiring until that age.

Dauntingly, almost half of respondents (49%) who haven't yet retired and have two children in the household think they will be worse off than their parents, compared to 40% of those who don’t have children at home.

Taking a career break or deciding to work part time can have a significant impact on your pension fund at retirement too. So, when it comes to your finances, the impact of starting a family is manifest and this research makes it clear how vital it is to plan ahead, so we can give our children the very best start in life while keeping our own retirement plans on track.

So here are some top tips to help you in preparing your finances for starting a family, without sacrificing your retirement income.

Plan ahead

Mitigate the reduction in pension savings due to a career break increasing how much you save in the years before and the years after. Even small increases in the amount saved into a retirement fund can make a big difference, particularly if you start saving early. Read more about boosting your pension.

Second - don't panic!

Seek professional financial advice. Advisers can help organise your long term savings and calculate exactly how much you need to be saving each month to achieve your future plans.

Continually review your financial goals

Identify what you want to achieve for you and your family and plan ahead. This includes holidays, a home in the sun, a new car and a financially secure retirement where you can enjoy time together. Read more about financial commitments.

Review your private pension

Regularly review your private pension arrangements and make sure you are on track. Find out more about how much do you need in retirement.

Don't forget to review your state pension

To find out more about the state pension you will receive at retirement go to DirectGov. Bear in mind that you can choose to defer you state pension, then for every year you defer, your benefits can increase by 10.4%. So if you have invested enough in a private pension that might be an attractive option for you. But bear in mind that state retirement ages are trending toward being later and later, so plan ahead to bridge the gap if what you really want to do is be able to afford to retire well before the state pension age.

Review your investments

It makes sense to make sure your pension investments are working as hard as they can for you. If you aren't sure what investments to choose then it pays to seek advice.

Check your tax relief

The great thing about pensions is the tax relief - which essentially means the government also contributes to your pension. Basic rate tax relief is given automatically, so for every £100 you save into your pension, the government will add another £25. If you are a higher rate tax payer, they will invest the higher rate tax rebate, but you will have to proactively claim the difference back for your pension fund.

Keep in touch

If you have moved jobs, ensure you have kept your old employer up to date with address changes so you can claim any workplace pension when you retire.

Review your personal finances regularly

If you have the capacity to increase your savings, do so. Even an additional £20 a month can have a big impact on your retirement income. And don't forget, the government will add a minimum of 20% tax relief.

Put your plan into action

Finally, remember that the earlier you plan for your future, the easier it gets. You should obtain your own professional advice as to the suitability and availability of any products or services featured as each individual's circumstances are unique.

As with any investment the value of your fund can go up or down and may be worth less than what was paid in. Tax rules and legislation may change. The value of tax relief may change and will depend on your financial circumstances. The information we have given is based on our understanding of law and current HM Revenue & Customs practice.

* Source: YouGov Plc. Total sample size was 2174, of which 982 adults in the UK were aged 45 - 65. Fieldwork was undertaken between 31 August and 2 September 2011. The survey was carried out online. The total figures have been weighted and are representative of all UK adults (18+). For some of the questions respondents could choose more than one answer.

About this article

Please note that the opinions and comments expressed by contributors in the article are personal and not necessarily those of Standard Life group (Standard Life Plc and its subsidiaries).

The article is intended to be for information purposes only and is not intended as promotional material or to provide financial advice. You should obtain your own professional advice as to the suitability and availability of any products or services featured as each individual’s circumstances are unique.

Standard Life group accepts no responsibility for the availability of, and the information contained in, any of the third-party websites referred to in links to which have been provided for general information purposes only. The websites concerned, and their contents, are not endorsed or promoted by Standard Life group in any way, unless otherwise indicated.