MHA | Can you afford to retire?

Can you afford to retire?

Francis Hudson · Posted on: December 4th 2023 · read

Pension pot

A third of people will be unable to afford their retirement, according to a new report.

Research from major pension provider Scottish Widows has estimated individual future retirement incomes and compared them with the three living standard levels set by the Pensions and Lifetime Savings Association:

StandardExample of StandardRequired annual net income outside LondonRequired annual net income outside London
Single Double
MinimumNo car.£12,800£19,900
Moderate3-year-old car replaced every ten years.£23,300£34,000
ComfortableOne/two cars, each replaced every five years.£37,300£54,500


Regularly revisiting and adjusting the pension plan is essential to guarantee a worry-free retirement...

Partner Francis Hudson

The research showed that 35% of people are on track to fall below the minimum retirement standard.

For the self-employed, the corresponding proportion is 48%, with another 25% reaching only the minimum threshold.

Working out which retirement standard – if any – that you are currently on course for is not straightforward: the launch of the government’s long promised ‘pensions dashboard’ is not due until October 2026.

If you find yourself thinking that the comfortable standard is where you would like to be:

  1. Even if you and your partner each have a full state pension of £10,600 a year, there would still be a net income shortfall of over £33,000 once the state pension comes into payment (at age 67 from April 2028).
  2. That net income figure excludes rental or mortgage costs, which are increasingly encroaching into retirement.
  3. Just over a third of people are on target to reach a comfortable standard, a proportion that falls to about one in five for the self-employed.

Business owners need to view pension provision not just as a personal investment but as a strategy to fortify their business resilience.

Running a successful business carries the risk of having all assets concentrated in one area. To mitigate this risk, diversifying wealth beyond business operations through a pension plan is crucial, ensuring financial stability beyond the immediate scope of their entrepreneurial endeavours.

Regularly revisiting and adjusting the pension plan is essential to guarantee a worry-free retirement.

Additionally, offering a comprehensive pension package to employees can elevate a business's appeal, attracting and retaining top talent in a competitive market. From a tax perspective, effective pension planning provides the opportunity to leverage tax advantages through contributions, optimising one's tax position and enhancing the overall effectiveness of your financial strategy. The key is to start planning early, securing both personal and business futures concurrently.

This insight was previously published in MHA Caves Wealth Quarterly

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To discuss this topic further, or for any questions on personal tax matters, please contact our tax team.

This article is from the latest edition of the Caves Quarterly newsletter. Download the full copy here.

For more insights into financial planning, visit our Wealth Management page or contact your local office with any questions.

Important Information/Risk Warnings

The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.

This is a marketing communication, for general information only, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Caves Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk. Therefore, you are recommended to seek professional regulated advice before taking any action.

The value of your investment, and the income from it, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Occupational pension schemes are regulated by The Pensions Regulator.

The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.

This is a marketing communication, for general information only, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Caves Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk. Therefore, you are recommended to seek professional regulated advice before taking any action.

The value of your investment, and the income from it, can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

Occupational pension schemes are regulated by The Pensions Regulator.

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