It takes a mindset that looks to the future – how to update your retirement plans

Picking a personal pension or signing up to a workplace scheme can feel like a box ticked. Then life intervenes. It’s often said that you’re not the same person at 40 or 60 as you were at 20 or 30. Priorities shift, life diverts you and the best laid plans come to fruition. Or they don’t.

The pandemic has been a paradigm of financial disruption. Markets have fallen, people have lost jobs or been forced to dip into savings. Yet, according to a recent YouGov survey, almost a third of the population has managed to save more than before.

Whatever your individual circumstances, the pandemic has provided a very vivid illustration that events have an impact on retirement plans – which is all the more reason why you should check on the progress of your plan regularly. Many of us can be put off doing this for fear that changing our retirement plans is a mammoth and daunting task. So break it down into individual tasks.

You have a lot of living to do
Life expectancy is rising, yet people routinely under-estimate how long they are going to live. Using Aviva’s life expectancy calculator will hopefully provide a pleasant surprise while offering a timely reminder that you could reach retirement age and live for another 25 years, which you will need to fund.

“There’s a massive chasm in estimation of longevity,” says independent financial adviser Nick Lincoln. “Much of the population don’t understand how long retirement lasts or, more importantly, that their lifestyle costs will triple over that period. Realising how long you’re going to live is a wake-up call.” A nice one, though.

Meet the older you
One of the difficulties people have with retirement planning is a complete disconnection with a version of themselves who is 30 or 40 years older. Ageing yourself with some technology is a useful way of visualising that person.

“One of the behavioral biases that stops people engaging with planning for later life is that they see their future self as a stranger,” says Daniela Silcock, head of policy research at the Pensions Policy Institute. “Studies have shown that apps which age you can make a real difference in terms of getting people to care about their future selves and rethink plans.”

It is also a reminder that it’s time to look after yourself. You can’t control whether your hair will thin, but you can stay fit and healthy as you get older by getting into some good exercise, diet and lifestyle habits now. Being active mentally and physically is going to make a huge difference to how you enjoy your retirement.

The government’s Life Course advice rightly suggests seeing health and wellbeing as an investment. “When you meet the real older you,” adds Lincoln, “What you want to be able to say about the plans you put in place is: ‘Thank you.’”

Reframe retirement as ‘fulfilment’
Unfortunately the word “retirement”, like “pension”, has negative connotations of stagnation and decline. So remember that it can be quite the opposite.

“The word ‘pension’ could do with rebranding,” says Alistair McQueen, head of savings and retirement at Aviva. “A good alternative might be a ‘flourish fund’, which is a more active, engaging way of positioning a product so that you can thrive, not just survive, in your longer lease of life.”

In fact your third act increasingly has less to do with watching daytime TV and more to do with redirecting your energy. Some people are choosing not to give up work entirely, opting for flexi-retirement with part-time work to stretch their money. Others opt for volunteering for the sense of fulfilment and participation, or they learn a new hobby. See it as an opportunity to expand yourself.

Think a few moves ahead
Thinking ahead is a key asset in sport. Imagine you’re a snooker player, building a large break, looking several shots ahead. What kind of lifestyle do you want at 70 or 80, and how will you be able to afford it? Aviva offers a number of helpful calculators that can help you gaze into your financial future. You could start with Aviva Shape My Future, which lets you create a simple profile and then factor in the kind of lifestyle you want in retirement to see whether you could afford it. It allows you to daydream a little – how much do you want that cruise?

This next calculator could be one for those attracted to the growing trend called FIRE – financial independence, retire early – people who live frugally so they can stop working earlier and really begin to enjoy life. Aviva’s Retirement Spending Calculator estimates how much money you’ll need monthly to cover things such as household bills, food, drink and transport. In addition, its Retirement Planner offers some idea of how your pot could be split, given current payments. The results from all three may make for sobering reading.

“These tools provide a handy way of getting to grips with people’s expectations, compared to the reality of what they are currently doing about them,” says McQueen. “They are easy to use and an effective rule of thumb that can prompt action.”

Have an annual pension MOT
We are all used to booking the car in for an annual checkover. We should be doing the same thing with our pensions, says McQueen. “If you can dedicate a morning once a year to your pension, it will be really productive long term.

“Half a day is enough to review the essentials like your payments, your income, your annual pension statement and expenditure. Ideally, do it in the first quarter when it’s quiet and before you lose your allowance at the end of the financial year in April. Remember that the government offers those tax breaks to incentivise products like pensions.”

Recognise trigger moments
There are events in life that should give you pause to reflect how they might impact your retirement. Classic triggers include pay rises, windfalls and inheritances (where the temptation is to enjoy the proceeds), or divorce.

“Most of them don’t happen every year but they should always give you pause for thought,” says McQueen. “When they do, review, reflect and revise.”

Seek advice from your peers
Making an appointment with a suited person in a stuffy office to discuss finance can appear intimidating and boring. “Younger people are more likely to take advice from people they see as peers or someone they respect who’s achieved things,” says Silcock. “Even bloggers, Instagrammers and YouTubers can be role models for pension saving, though I’d add it’s important to be careful of advice pushing specific products if you lack financial knowledge.”

Independent financial advice has a useful role to play. But for those unable to pay for it, there is plenty of freely available information out there to demystify pensions. “The internet has transformed financial education,” says McQueen. “There’s a lot of help available on the internet and in the media. The government Money Advice Service website, for example, is particularly useful.”

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