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Planning for the future

You’re now at the point where it’s more important than ever to think about your retirement goals. There’s a lot to consider, and what you do now will have a big impact on what happens once you’ve retired

Top tips

In your 40s and 50s, you might have more spending power compared to those at the start of their careers, but you may also have more competing financial priorities. So, now is the time to give some serious thought to a financial plan and how saving for retirement fits in with this.

You’ve made a good start, as you’re already paying into a USS pension, but it’s worth reviewing where you are at, what you need and coming up with a basic financial plan.

1. Look at what you’ll need

First thing to do is look at what you’ll need when you retire, the PLSA Retirement Living Standards gives you an estimate of the kind of income you’ll need when you retire, based on the lifestyle you want.

2. Look at what you’ve got

You’re already paying into the Retirement Income Builder, the defined benefit (DB) part of USS. This gives you a guaranteed income for life and a tax-free lump sum up to HMRC limits when you retire. Every year you build a block of pension based on an accrual rate (1/75 of your salary, up to the salary threshold). The pension you build up is banked and increased in line with inflation (subject to certain caps), giving you an element of inflation protection.

As long as you’re paying in to USS, you get life cover. Your beneficiaries may get a lump sum of three times your salary and a pension too. So, your USS pension will also help take care of loved ones.

To get an estimate of what your pension might give you when you retire, log in to My USS and use the Benefit Calculator.

3. Do you need to save more?

If you think you need more than your Retirement Income Builder pension is going to provide, you have the option of saving some more towards your retirement in the Investment Builder, the defined contribution (DC) part of USS.

You already have savings in the Investment Builder – your flexible savings pot, which you can take as early as 55 without retiring – because you’ve either transferred a pension to USS, are making additional contributions or earn or have earned above the salary threshold. Remember, the salary threshold increased on 1 April 2024, so your contributions to this pot might have changed recently. If you decide you want to save a bit more, you can make additional contributions into the Investment Builder.

Log in to My USS to review your Investment Builder savings and to check your money is invested where you want it to be and that your Target Retirement Age (TRA) is right for you. Your TRA is important if you’re in the Do It For Me option because we use this to determine when to start moving your investments to lower risk funds as you get closer to retirement.

To estimate what impact saving a bit more in the Investment Builder might have, you can use the Benefit Calculator in My USS.

4. Make a financial plan

If you need to save more for the retirement you want, think about looking at where that fits with your competing financial priorities and goals. In other words, financial planning.

Financial planning may sound daunting, but time spent focusing on your finances today could be valuable later down the line.

Start by identifying all your savings goals, not just retirement ones but what you want to achieve as a whole with your money, which might be building a savings pot for your kids, paying off your mortgage or simply lifestyle goals like going on holiday. Then it’s worth breaking them down into short term goals (what you want to do in the next year), medium term (next five years) and long-term (what you’re aiming at beyond five years, like retirement).

Once you’ve set your goals, it’s time to prioritise them, and how much you can save towards what you want to achieve.

5. What does retirement look like for you?

Once you know how much you’ll need at retirement and what you’re projected to have by the time you get there, you need to decide what’s best for you. You might decide you want to take all of your USS pension in full when you retire, or that you’d rather retire early or late. Or if you’re not quite ready to switch completely from a full work life to retirement, you could opt for a more flexible retirement and continue to work a little (in agreement with your employer).

There’s no one size fits all here and it a lot will depend on your personal circumstances. Visit the your options at different ages and stages page for more information.

Next steps

When it comes to making a financial plan and a broader plan for your retirement, here’s a few good places to start:

Published: 25 June 2024