Retirement planning: everything you need to know

Retirement fund

Savings, investments, pensions; there are plenty of ways to start planning for your retirement. But according to a new report from Scottish Widows, nearly half of women are not saving enough. So what can you do to ensure you are adequately prepared later in life?

Saving for retirement: why is it so important?

It is never too soon to start planning for retirement. There are compelling reasons to get your pension provision sorted out sooner rather than later:

  • We're all living longer, so if we want a comfortable life in our later years and to avoid becoming a burden on our children, making sure we can manage financially when we're older is of paramount importance.
  • The pension age is increasing, for women as well as for men, so that by 2020 both sexes will be expected to work until they're 66, with further increases to 67 expected between 2026 and 2028.
  • Unexpected life changes, such as divorce, can have huge repercussions for our finances in later years and the more you know the better prepared you can be

Scottish Widows’ recent report found that the gap in savings between men and women is most stark among the young, with just 33% of women under 30 saving adequately for retirement, compared to 46% percent of men. But there is some good news: the percentage of women that are saving sufficiently has increased in the past year – in large part due to the introduction of auto enrolment to workplace pensions.

How much will I need for retirement?

Scottish Widows' research shows that people on average feel they need a yearly income of £23,599 to be comfortable in retirement. However, this is very much up to the individual and will depend on your circumstances and the type of retirement you’re aiming for. For more information you can watch Scottish Widows short Pension Basics films, read the pension wellbeing guide and try quick calculators to help plan your future. Visit Scottish Widows knowledge centre for more information.

In addition to what you manage to save for retirement, you’ll usually be eligible for the state pension. The current state pension is £164.35 per week, although the actual amount you will be entitled to will depend on your National Insurance record. With this in mind, it’s sensible to start saving independently for your retirement too, especially if you aim to retire before your state pension age, which may not be until your late 60s. Find out more about the state pension on the government website.

How should I save for my retirement?

There are different ways of saving for later life, and you don't have to follow a conventional route and pay into a pension (although that's often the best way to do it because you get tax relief on your contributions). Other ways to save include ISAs, shares and a property you've invested in and will sell when you're older.


If you do decide to go for a pension, there are three main types:

  • Company pensions – this is organised through the company you work for, and often (though not always) the company makes a contribution in addition to what you pay in.
  • Personal pensions and stakeholder pensions – these are for people who don't have access to a company pension. You pay in an amount each month to a pension provider, and the funds are invested on your behalf. Stakeholder pensions are the simplest version, and you don't have to be working to have one.
  • Self-invested personal pension – these are personal pensions where you have more control over where the money is invested.

Automatic enrolment into a workplace pension

Since October 2012, the government has been rolling out the automatic enrolment initiative, which means every employer has to enrol all employees who meet certain criteria into a workplace pension. You can choose to ‘opt-out’ of the scheme should you want to.

The criteria cover employees who are:

  • Not already in a workplace pension scheme
  • Aged 22 or over
  • Under state pension age
  • Earning more than a minimum amount a year (£10,000 in 2018)
  • Working in the UK, or who usually work in the UK

It won't just be you contributing to your workplace pension, your employer will make additional contributions, plus you'll get tax relief. The thinking is that automatic enrolment will take the hassle out of organising a pension and give people another source of income on top of their state pension.

How much should I pay in to my workplace pension?

Workplace pensions with automatic enrolment currently require a total minimum of 5% contribution to be paid, with a minimum contribution of 2% from the employer and 3% from the employee. However, as of 6 April 2019, the total contribution will rise to 8% (3% minimum contribution from the employer and 5% from the employee).

Research from Scottish Widows suggests this is still not enough. In fact, Scottish Widows’ 2018 Women and Retirement report found a savings rate of 12% throughout a person’s working life is the minimum amount that people should be saving for a sufficient pot in retirement.

What can the government do?

Scottish Widows has found 44% of women are not saving sufficiently for retirement. An unexpected bill of just £270 is enough to put women aged 22-29 into debt, and this fear of financial hardship – which women of all ages are more likely to experience – is discouraging women from saving into pensions. This is leaving the most financially vulnerable at an even greater disadvantage later in life.

Many women are focusing on the now as a priority over the future. 40% of women in their 20s who have a pension say they don't save as much into it as they would like because they want ready access to their money in case of emergencies.

Guidance from Scottish Widows on how to combat this is two-fold:

  • Employees should have some limited but penalty-free access to their pension savings throughout their lives, in case of emergencies. It is estimated a more flexible approach such as this would ensure around 367,000 women ages 22-29 would start paying into a pension for the first time.
  • Employer contributions should continue in instances where employees have to opt out during times of financial hardship. This would prevent a cycle that compounds financial hardship today into financial hardship in retirement.

What else can I do to ensure I am prepared for retirement?

Scottish Widows has useful information on its pension wellbeing hub that can help you plan more effectively for your retirement. Here you’ll find some short, easy-to-follow pension basics videos. Some of the video topics include:

  • What is a pension?
  • How much should I be saving?
  • How do I combine pensions?
  • What happens to my pension during maternity?

Knowing how much you’ve got in your pension, if you’re on track and what you can do next is key when it comes to saving for retirement, and the new pension wellbeing guide from Scottish Widows has information on everything from budgeting and paying off debt to reviewing your savings plans throughout life.

If you're struggling to save, Scottish Widows has a hub of top tips on how to save for your retirement. An independent financial advisor can also provide advice tailored to your specific circumstances if you need further help, although there is usually a charge for this service. If you would like an advisor in your area, just visit Unbiased to find one that suits you.