How can I guarantee £20,000 per year from my pension?

Small woman in test tube on coins. Abstract photo of financial crisis.

Ask the expert at Smith & Pinching about planning your pension fund - Credit: Getty Images/iStockphoto

I hit my 40th birthday this year and it has made me think more about the future. I have a work pension scheme but I’m not sure I’m putting enough aside for a decent pension when I retire. What value of pension fund would give me something close to £20,000 a year as an income when I retire?

Matthew Hinchliffe is an Independent Financial Advisor Picture: Smith & Pinching

Matthew Hinchliffe is an Independent Financial Advisor Picture: Smith & Pinching - Credit: Archant

Matthew Hinchliffe of Smith & Pinching responds:

There isn’t a quick and easy answer to this. So much will depend on your own circumstances such as the age at which you plan to retire and any additional requirements you need from your pension – for example including a pension for a spouse. It will also depend on what is happening in financial markets both before and during your retirement and on the type of pension income you plan to take.

It is good to hear that you are a member of your workplace pension scheme as this will presumably mean that you are benefiting from contributions from your employer as well as your own contributions. However, the workplace scheme may not be the best place in which to place any additional contributions. It would be important to look carefully at this before deciding where your contributions should be invested. Some workplace schemes may have limited investment choices and perhaps poorer flexibility about how and when you take your pension income. It may be more suitable for you to open a separate private pension of some sort.

Whatever scheme you use for any additional contributions, it’s important that the money you invest in your pension is held in suitable investment funds that are right for you in terms of their investment risk profile and what they have the potential to achieve.

I believe that a proper financial review would be of huge benefit for you at this stage to ensure that you are able to put a plan in place to achieve your desired retirement lifestyle. We use lifetime cashflow modelling tools to enable us to analyse the real numbers involved and come up with projections covering a range of scenarios. Selecting the right pension plan for additional contributions that delivers in terms of both investment risk and performance is a big decision. Ensure that you get independent advice before committing your hard-earned income.

Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

For more information, please visit www.smith-pinching.co.uk

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