Managing your pension in your 40s: the essential guide
In a nutshell: If you’re in your 40s and saving for retirement, this page is your quick guide to the main things you need to know. Find out more about regularly reviewing your pension plan, how to decide whether you should pay in more and the benefits of compound growth. We also take a look at retirement goals vs lifestyle expectations and how to make sure they line up.
Make your 40s count
No matter how much you’ve saved so far into your pension savings, it’s not too late to make positive changes that could make a big difference to your finances in retirement. Especially when you consider you’re probably only about halfway through your working life!
By actively managing your retirement savings during your 40s you can feel confident in your ability to enjoy a comfortable and fulfilling retirement.
So, here’s our ultimate guide to managing your pension in your 40s.
Your 40s is a great time to take a closer look at your pension savings and your retirement goals.
First, check how much you’ve got saved across all of the pension accounts you have, including workplace and personal pensions. It’s really important you know where they all are - after all you don’t want to lose track of the money you have saved for retirement. If you have lost track of a pension or two, don’t worry you can use the Government’s Pension Tracing Service to help track them down. You may also want to consider bringing them together so you have less accounts to manage, making it easier to keep track of the money invested in them.
If you’re considering transferring pensions, it’s important to understand this is a complex area and may not be suitable for everyone. Before going ahead with a pension transfer, we strongly recommend that you compare the benefits, charges and features offered, including any exit charges, terminal bonuses, protected pension age or protected tax free cash entitlements. You can find out more by reading our transfer factsheet and should speak to an authorised financial adviser if you are unsure about proceeding.
With retirement still a couple of decades away, your 40s can be a great time to assess the amount you're contributing and explore options to increase it where possible. Consider increasing your contributions when you get a pay rise or even adding one off lump sums, from bonuses or other savings. Even small increases could have a big impact on your retirement savings due to the power of compound growth over time. But remember, growth isn't guaranteed. And don't forget to take a look at the tax relief on your contributions.
See how increasing your contributions could add up
Use our tool to see the difference changing your contributions, even by just a small amount, could make to your future.
Understand the benefit of compound growth
When it comes to building up your pension, the length of time you invest for could have the biggest impact on how much your pension could be worth when you reach retirement.
For example, if you were to invest £250 a month for twenty years, you'd save £60,000 into your pension. Over that time, your pension could grow by over £44,000 (assuming an average investment growth of 5% a year, after charges). This would give you over £104,000 to enjoy in your retirement.
However, if you were to save the same amount in total but started saving later so that your pension savings only had ten years to grow, you'd end up with almost £25,000 less to enjoy in retirement due to the impact of compounding.
So, if you can, it's better to start saving as early as possible - even if you can only save small amounts - it could make a big difference to your future lifestyle.
But remember, the value of investments can go down, as well as up and you could get back less than you invest.
Diversification involves spreading investments across different assets to manage investment risk. If you’re invested in your pension's default investment strategy, this is taken care of for you by the experts. As you near retirement many default investments aim to reduce the amount of risk your pension savings are exposed to - by moving it to less risk asset types such as bonds. This type of diversification happens automatically based on your selected retirement age. Which is why it’s important to review your selected retirement age in PlanViewer to make sure it aligns with your plans. Diversification doesn’t eliminate investment risk, as with all investments, there remains an element of risk as the value of your investment can go down as well as up.
If you have selected your own funds, now’s a good time to log in to PlanViewer to make sure you have a well-diversified portfolio. By diversifying your investments, you may be able to preserve your investments against the ups and downs of the market (known as market volatility), which is crucial for making sure you have the money you need in the long term.
When you picture your retirement - what does it look like? Your 40s are a good time to think about the lifestyle you’d like and any specific goals you have, such as travel, hobbies, or healthcare needs. You should also consider any financial commitments, such as supporting family members or paying off debts. And when you’ve worked out what you want to work towards, you can adjust your savings plan to make sure it will support the lifestyle you have in mind. If you're planning for a particular retirement fund size, make sure you’re on track for that goal.
Not sure how much you’ll need? Well, everyone’s different so it’s completely up to you. Use our retirement calculator to help work out what type of retirement lifestyle you'd like and if you're on track.
Getting guidance or advice can be a game-changer, especially as your financial situation starts to become more complicated in your 40s.
It gives you the opportunity to sit down with a professional who understands your unique circumstances and can offer personalised advice tailored to your current pension contributions, investment strategies, and retirement aspirations. They’re there to help you make informed decisions that will maximise your savings and investment opportunities, ensuring you’re well-prepared for whatever the future holds. And if you’ve got your sights set on building a substantial retirement fund, having an expert by your side can be essential in crafting a plan that helps you hit your goals.
It’s important to understand where your pension is invested and how it’s performing, to make sure you’re on track to reach your goals. So, regularly checking in and reading your annual benefit statements are ways you can stay informed about your pension.
Log in to PlanViewer to check in on your pension, via the app or web, today.
It’s also important to keep informed about any changes in pension regulations and financial markets. Your 40s are a time when financial landscapes can shift significantly, so staying updated will help you navigate the changes.