Saving for your pension: people in their 60s

3 December 2014

From April next year, savers will be allowed to do as they wish with their nest egg when they retire. Many anticipate retirees will plough their cash into buy-to-let investments to fund life after work.

Others say they will stick with annuities and income drawdown - or even a combination of both.

But whatever you opt for, the challenge right now is to save as much as you can. Pensions, after all, are a hugely tax-efficient way of saving - essentially, you are getting free money. If you are a lower-rate taxpayer, for every £80 you save the government will top this up to £100; and if you are a higher-rate taxpayer, you need to put away just £60 to get the same amount.

Recent figures, however, from the Department for Work & Pensions revealed almost 12 million of us are still not saving enough, so whether you are retiring in the next year or have 20 years to go, we look at what you need to do now to ensure a prosperous retirement.

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Saving in your 60s

The hard work should hopefully have been done by now but there are still many factors to consider. The vast majority of people are still working in their 60s and aside from those in final salary pension schemes, which have a retirement age of 60, that is a pattern which is likely to continue as people work later in life.

At this point, living costs should have significantly reduced with children having grown up and mortgages hopefully paid off. The focus at this point is likely to be on retirement planning and ensuring that everything is on track to give you the required standard of living you are looking for when you finish working. Your investments should be more conservative at this stage, too, in order to protect the wealth you have built up.

Most significantly, you should also have a good idea as to how you will use your pension. In the last five years before you plan to start drawing your pension, you should have your investments in broadly the right place to support your retirement income plans. You should be taking a look at current annuity rates and at your options for income drawdown; what would be a sustainable income if you were to draw an income from the fund.

McPhail says: "If you'll use drawdown, this means mainly shares with good income prospects, plus some cash and bonds; if annuities, then mainly in investment- grade corporate bonds and gilts; and if you are planning to take cash, then don't leave it until the last moment to sell your investments."

Do your research

Undoubtedly, your pension provider will have sent you a plethora of booklets to read – do not ignore them, especially given the increased flexibility but also rising complexities around pensions. It might be a good time to seek independent financial advice, to ensure you understand your options. Retirees in poor health or who smoke may be able to receive a much better rate of income than everyone else, so check if this apply to you.

Lawson adds: "Different providers will offer different rates that give you different amounts of income, so if you select an annuity it is really important to shop around on the open market for the best rates for your individual circumstances. Think about whether you want to provide a contingent pension for your spouse, whether you want to protect your pension against inflation or whether you want to leave your pension invested and take an income from your remaining pension savings."

A quick word of caution - while hopefully it is not an issue by now, retiring while heavily in debt is obviously not recommended. Even if you have not yet retired, your pension could be used as a means of repayment.

In fact, following a High Court ruling in 2012, if you have reached retirement age and are subject to bankruptcy proceedings, then creditors may be able to force you into taking pension benefits to recover debts owed.

Most people at this stage of their life are focused on generating income to provide a comfortable standard of living for the rest of their lives. As such, their investment choices are likely to be very low down on the risk spectrum, with arguably the vast majority sitting in cash, where at least the only threat is inflation.

However, retirees who have not bought an annuity may find they need to remain in at least some riskier investments in order to replenish their nest egg. But remember even after retirement, you can still pay up to £3,600 into your pension every year and if you have some spare savings, this can be a good way to boost your income as you will receive tax relief on any payments you make in.

Connolly says: "Having catered for their own financial planning requirements, many people will be looking at estate planning and how they can leave assets to future generations when they die. With increasing longevity, many people can expect to live long beyond their 70s and so it is important that they plan with this in mind."

Investing in your 60s

At this stage, an income-producing balancing fund or portfolio will be desirable, and experts recommend funds that invest across a range of asset classes to reduce risk compared to a pure equity fund.

Haynes cites the JP Morgan Multi-Asset Income Fund, which aims to provide an attractive income-focused return through a blended portfolio of a variety of different and uncorrelated investments.

Connolly tips the Schroder Multi Manager Diversity Fund. He say: "This is an ideal choice for a cautious investor, essentially being a whole portfolio in one fund. It invests about one-third in equities, one-third in cash and fixed interest and one-third in alternative investments such as commodities."



Find out everything you need to know about the new pension rules and how to plan ahead for the retirement you deserve with our new magazine, How to Retire in Style. The magazine is available to buy now from all leading newsagents, or can be ordered online at

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