Tips to help handle retirement income concerns

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With rising inflation and coronavirus still affecting financial markets, you may be concerned about how this affects your pension savings or even considering changing your retirement plans. We have some tips to help make your savings last longer and keep your retirement plans on track.

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Rises and falls in the markets are part and parcel of investing, but it’s natural that you might have occasional concerns about the impact this can have on the retirement savings that you’ve worked so hard for. If you want to take steps which could help your money last longer, here are some things to consider.

How Covid has changed retirement plans and attitudes

A Standard Life survey of retirement attitudes found that Covid has left many people feeling anxious about their financial stability in the future. More than a quarter (28%) of people said their financial situation worsened during the pandemic. Among this group 71% said they are worried about spending too much now in case they run out of money in the future and 67% said they now have a more cautious attitude towards their finances.

The impact of Covid was more obvious among those not yet retired. 21% of non-retirees said they’re cutting back on spending and 5% said they’re delaying their plans to retire. If you’re approaching retirement here are some important things to consider in the current uncertain climate.

What to consider if you're worried about your pension money lasting

When you take your money matters

Taking money from your retirement savings can involve taking out small amounts at regular intervals from your pension pot – a bit like paying yourself a salary. This is called flexible income or sometimes income drawdown.

If you do this when markets are falling, that amount becomes a larger proportion of your overall pension pot. Think about it like taking the same size slice from a smaller pie.

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Once you’ve taken it out, you’ll have less money invested to potentially recover losses if and when markets (and your investments) rise again. And this might affect how long your money lasts.

Remember, the value of your investments can go down as well as up and you may get back less than was paid in.

Taking a flexible income is one way to take your pension money. You can also take cash lump sums or you can use your pension money to buy a regular income for life – sometimes called an annuity. You could also do a combination of all these things. You can find out more about each of your options by reading Ways to take your money or there’s lots of guidance on the MoneyHelper website.

Where you take money from can make a big difference

If you can, consider taking less from your pension pot and explore other savings or sources of retirement income if you have them. While most customers think about their pension plan as the first stop for retirement income, using cash savings or Individual Savings Accounts (ISAs) means your pension pot is invested for longer and has a greater chance to grow. This can make a big difference to how long your retirement income will last.

Take some time now to see what you could get from the different ways there are to take your pension money using our retirement calculator. If you know the approximate value of your pension pot it can show you how taking a lump sum, regular income, or a combination of both will affect how long your money lasts.

If you’re not sure how much you’re likely to have in your pension pot when you come to retire you can use our pension calculator, which will take your State Pension into account as well as any personal pension plans.

Check where you’re invested and make sure it fits your long-term plans

Research suggests that the returns your investments make in the first few years after starting to take money from your pension plan could have the biggest impact on how long it will last.

So, if the value of your pension pot falls in the early years, it’s harder for investment growth to make up these losses in later years. That’s why it’s important to regularly review your investments to make sure they’re doing what you expect and they remain right for you and your long-term plans.

If you have a Standard Life pension plan, you can check where you’re invested by logging in.

It’s about balance – help protect and grow

It generally makes sense to have a good mix of investments that can help protect the money you need to take from your pension savings in the short term, while also giving the potential for growth that can help the rest of your pension savings last for longer. This usually means having a mix of lower and medium risk investments – but this can vary depending on your individual circumstances. You can find out more about managing your retirement investments in our article How to prep your pension savings for retirement.

Know when to ask for help

If you’re approaching retirement age and considering your retirement plans it may be a good time to think about financial advice. It can help take some of the worry out of things and help your money to go further. There is likely to be a cost for advice but it may save money in the long run. Find out more about advice in our guide to Getting ready to retire. If you don’t have an adviser, you can find one in your area at unbiased.co.uk

Join a Standard Life webinar

Joining one of Standard Life’s webinars can also help you gain confidence in making the right decisions and support you in planning a tax-efficient retirement income.

Find out more about how they work, who they’re for and sign up to a webinar that’s right for you on our retirement planning webinars webpage.

The information here is based on our understanding in February 2022 and should not be regarded as financial advice.