Begin the countdown to your pension

Act now to ensure you have enough put by for a comfortable retirement, warns Jeff Salway

Scots approaching retirement are being exhorted to boost their 
retirement pots while they can after a landmark report warned of a “triple whammy” facing pension savers.

Too many people in Scotland are saving too little for their later years, according to the ninth annual pensions report from Scottish Widows, either because they’re unwilling or unable to.

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The research found that almost four in ten Scots deemed capable of saving for their old age are still not doing so sufficiently, compared with just 14 per cent of people UK-wide. Among them are 13 per cent who are putting no money aside at all.

Expectations of pension incomes are going in the opposite direction, however. While nearly half of workers north of the Border have adequate pension savings, the income they believe they need for a comfortable retirement has risen sharply, hitting £24,500 a year.

Yet the average Scot is on course to get less than half that income, at just £11,200. That 
includes a pension of £3,700 a year from their private savings, with the remainder supplied by the state pension.

Ian Naismith, pensions expert at Scottish Widows, said: “Scotland has the highest percentage of inadequate savers, yet expectations for income in retirement are still increasing.

“To meet these aspirations, an average saver would need to save £12,000 a year, or £1,000 per month.”

He added that Scottish savers face a “triple whammy” of continued economic uncertainty, the ageing population and the rising average of first-time buyers.

However, there are some things you can do if you’re within ten years, five years or even one year of your retirement to boost your pension income. Here we look at the options open at each of those stages.


Review your current savings and investments position, factoring in any pensions (perhaps with previous employers) that you may have lost track of. The Pension Tracing Service (0845 600 2537) can help you do this, while you can get a projection of your likely state pension at retirement from the Pension Service (

This will help you work out if you’re on course for the pension income you want and give you time to tackle any shortfall. That can be done most effectively by increasing the amount you contribute to work or personal pension arrangements. Individual savings accounts (Isas) are the first port of call for saving outside a pension, due to their tax-efficient status.

Graeme Mitchell, director of Galashiels-based Lowland Financial Planning, said: “A net monthly payment of £100 a month into a pension will result in £15,000 being paid into the plan over ten years.

“Be prepared to take a risk, especially with monthly payments, as that can help build up growth and give you a chance to turn £15,000 worth of contributions into £20,000 or £25,000.”

If you haven’t got a work pension now is the time to change that. Most companies will top up your contribution, which also attracts government tax relief.

“If your pension contribution is £400 a year, tax relief of £100 is added and your 
employer pays another £300. Where else can you pay £400 and have an immediate gain of another £400?” asked Mitchell.

Consolidating different pensions can also be effective, especially if some are underperforming and have high fees. Watch out for any big penalty charges for switching or cashing in pension plans though, however. Advice in this is highly recommended.

Salary sacrifice is another option, where you reduce your taxable income by diverting some of your pay into your company pension. This can be especially useful for higher rate taxpayers who can get below that threshold by reducing their salary. Some employers will also pass on the national insurance savings they make as a result of salary sacrifice.


Make sure your investments are not only on track, but still reflect your appetite for risk. This is the time to begin slowly reducing your exposure to equities and higher risk investments in favour or more fixed income and cash. Any hefty losses close to retirement can be very difficult to recover.

“If your risk approach is still broadly the same as it was ten years out you will probably need to reduce risk to protect current values, even though it means you might not have as much when you retire,” said Mitchell.

Do you need to reduce your spending, or even think about delaying your retirement so you can afford a better standard of living when it does arrive? Find out how the government’s planned increase in the state pension age affects you. Your state pension age will be later than previously anticipated, but that doesn’t stop you from retiring when you originally planned to (provided you can afford to do so).


This is the time to make small adjustments and do some homework to ensure you secure the best possible income for your pension pot. Get an up-to-date state pension projection and put together plans for income and expenditure.

How you alter your investment strategy depends largely on what you’re going to do with your pension at retirement. If you plan to take out an annuity you should protect your investments now and de-risk them. If you’re likely to opt for drawdown, however, a large chunk of your pension fund will remain invested when you retire so a different approach is needed. Independent financial advice is again highly recommended in this process.

“Ask yourself if you want a steady return in your last year with no surprises, or to remain in funds which could fall (or rise) but in the worst case scenario leave you will less than you need to retire when you want to,” said Mitchell.

All but a minority of people buy an annuity on retirement, but the income rates they pay are in a long-term decline. That makes it more important than ever to research your options. This includes looking into the type of annuity you want (ie many advisers believe inflation-linked are the most effective in the long run), enhanced annuities (which pay out more income if you’re a smoker or have a health condition) and searching for the best deal on the market, rather than buying immediately from your pension provider.

This may also be the point at which many people decide they can’t afford to retire. But deferring retirement from 65 to 70 could boost your final pension by up to 43 per cent, according to Scottish Widows.

Naismith said: “Whilst starting saving as soon as possible is highly desirable, and increasing contributions as retirement 
approaches is almost essential, the biggest single difference can come from postponing retirement.

“The issue is whether a nation of Scots that aspires to stop working at 63 and have an annual income of £24,500 can accept this change.”