Week 5: Investing for retirement – planning your pension

Introduction

Watch the following video to hear Martin introduce Week 5 of Managing my investments. This week covers the crucial subject of pension planning.

Download this video clip.Video player: ou_futurelearn_mmi_vid_1056.mp4

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Transcript

MARTIN UPTON

Hello again, I’m Martin Upton from The Open University’s True Potential Centre. Welcome to the penultimate week of Managing my investments .

This week is entirely devoted to the crucial subject of pensions and how to ensure that you have sufficient income to retire in comfort. We look first at State Pensions and at the reforms to these that are unfolding in the UK.

We then examine different types of pension products – from occupational pension schemes to personal schemes that are unrelated to your place of work. We examine how pension incomes are determined from the fund that you compile prior to retirement.

And we also examine closely the pensions revolution that is unfolding in the UK and which is giving us greater flexibility in how we draw on and spend our pension ‘pots’.

The truth is that many people don’t plan properly for their pensions – either putting off starting a plan in earlier life or not focusing on the income, and hence living standards, that the pension is projected to provide.

So don’t turn a blind eye to pension provision – open your eyes and start planning for an enjoyable retirement! Have a great week!

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Making provision for your income in retirement is a critical aspect of your overall investment strategy. It requires long term forecasting of your income needs in retirement and the returns from your pension products intended meet those income needs. Given the recent liberalisation of pension rules in the UK, there are now more options for using the ‘pension pots’ built up ahead of retirement. While this has been generally welcomed, this liberalisation has created uncertainty about the best options to utilise the money built up for retirement.

When planning for income in retirement, it is clearly essential to take into account the state pension you may be entitled to. When you have forecast your state pension, you will have a clearer idea about how much income your own pension plans (e.g. occupational pension or personal pension) will need to generate to provide the total income you need in retirement. In the UK, state pension arrangements are going through a period of transition with the state pension age being pushed back and with the roll out, from 2016, of the new ‘flat-rate’ state pension.

There’s a lot to examine this week, particularly given the concurrent changes to the pensions landscape. But the effort will be worthwhile, since you will gain greater clarity about what you need to do now to ensure a comfortable retirement in the future.