Give your Retirement Some Clarity - 3 UK Retirement Calculators
Retirement might be half a world away, or it might be just around the corner. But it’s never too late or too early to start planning. Your retirement plan might be the most important strategy you will put in place. It’s likely to involve emotional preparation, financial planning and a fair amount of commitment.
A survey conducted in 2011 revealed that 64% of working adults in the UK aged 50+ “either do not believe or do not know whether they will ever be financially prepared for retirement.”
To make things simple, we have chosen three free calculators to help you potentially achieve the retirement of your dreams. Hopefully, they will streamline your plan, give you some practical clarity and pinpoint where you are in relation to your goals. The calculators may answer the following questions:
- When can I retire?
- How much money do I need to retire?
- How achievable is the lifestyle I want for my retirement?
Before we begin, it’s important to understand the way in which the UK State Pension can influence your retirement. According to the government, “For many people, the State Pension is only part of their retirement income.” As a result, it is likely that you may need to invest or save independently so that you can adjust your pension accordingly.
The UK State Pension has been the cause of a lot of confusion in recent years. In fact, the new State Pension (which was introduced in April 2016) was a way to simplify the old one, and improve equality. Upon introducing it, the government explained, “The old rules were complicated, making it difficult to know how much you’d get until you were close to State Pension age.”
However, the new State Pension has received its fair share of confusion too. A survey conducted in 2016 revealed that 35% of UK citizens did not know what the full new State Pension was. 85% of individuals did not know the age at which they could receive it.
As a result, here’s a quick crash course on the UK State Pension, the changes it faced and what you can expect from it.
Glossary of terms:
Basic State Pension: The old model of the State Pension. It applies to women born before 6th April 1953 and men born before 6th April 1951.
New State Pension: The new model of the State Pension. It applies to women born after 6th April 1953 and men born after 6th April 1951.
Qualifying year: “A tax year (April to April) during which you have paid, have been treated as having paid or have been credited with enough National Insurance Contributions (NICs).”
What changes were made?
The old model: The Basic State Pension:
- The maximum weekly amount you could receive was £122.30
- To receive any amount of State Pension there was no minimum number of qualifying years
- To receive the full amount, you will have needed 30 qualifying years
- You could have received more than the full amount under the Additional State Pension
The new model: The New State Pension:
- The full amount you can receive is £159.55 a week (2017/18 rate)
- This is solely based on your National Insurance record
- You may not be entitled to the full amount - this is subject to your National Insurance records
- You need 35 qualifying years to receive the full amount (if you have no National Insurance record before 6th April 2016)
- If you have a National Insurance record before 6th of April 2016, you will usually need a minimum of 10 years to receive any amount of State Pension - though these do not need to be consecutive
- You may have to pay tax on your State Pension
Now, let’s move on to our three free calculators for your UK retirement plan.
When can I retire?
In 2019, the age at which you can claim your State Pension will begin to rise, and by 2020, it will reach 66. The current State Pension age varies for men and women, which is why you may find the government’s State Pension calculator extremely useful. You will also be able to find out your Pension Credit qualifying age and when you will be entitled to free bus travel.
Note: you will not receive your State Pension automatically, you will need to claim it. Approximately 4 months before you reach State Pension age, you should receive a letter instructing you on how to do this.
How much money do I need?
Standard Life’s calculator can be a fantastic retirement tool to plan “your life once you stop work.” Depending on the lifestyle you want during retirement, this calculator can guide you on the amount you might need. You can choose from additional expenses, such as a 2 week holiday each year, weekly dinners with friends and a health club membership. You can also find out how the assumptions are calculated.
How achievable is my desired lifestyle?
Once you have a rough idea of how much money you might need, you may wish to know how achievable your dream lifestyle can be.
In just a few steps, the Money Advice Service’s Pension Calculator can allow you to calculate a comprehensive financial plan depending on your target retirement income, any defined contribution schemes and your State Pension.
This calculator may give you a better idea of how close you are to achieving your goal. If you’re on track, this may give you the motivation to keep going - though if you’re falling short, this may give you the sign to adjust your savings accordingly. You can also find out what the assumptions are based on.
If you’re looking for ways to create more wealth for your retirement, you may find yourself with plenty of options. Like property crowdfunding, for example. By investing in our opportunities, you’ll be giving your money the chance to track UK house prices and provide you with hassle-free, monthly rental income. To learn more about how property crowdfunding can simplify your retirement, click here.
Written by Jenna Kamal
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