Retirement + 2 children = 49%

New research among 45-65 year olds by Standard Life reveals having children living in your household can have a big impact on your retirement decisions.
Almost half of respondents (49 per cent) with two children in the household have no financial plans to provide for the future, compared to just over a third (35 per cent) without children. Children also impact decisions on when to stop working and retire. You are more likely to retire later if you have children in the household with 10 per cent of adults who aren’t retired not planning to retire until 71-75 compared to only 2 per cent who don’t have children living with them.

Price inflation

Taking a career break or deciding to work part time can have a significant impact on your pension fund at retirement. A female saving £150 a month, increasing annually in line with price inflation from age 20 to age 65, could have a pension fund of £559,000 *1.
Taking a 5-year career break from age 30 during which pension contributions stop reduces the pension fund to £480,000 - a decrease of over 14 per cent. If you work part-time and cut in half your contributions from age 30 onwards this could reduce the pension fund to £380,000 - a decrease of over 31per cent.

Loss of pension

John Lawson, Head of Pensions Policy at Standard Life said: “It isn’t surprising that those with children living in the household have even more financial constraints than those without. Apart from the actual cost of bringing children up there are so many other considerations these days - such as childcare costs, then for some there are school and university fees to consider. There is obviously only so much money to go round. But the loss of pension can be a forgotten cost for many when making decisions, in particular by going part time."
But there are things you can do, and it’s never too late. If we can save even a small amount for retirement it can make a difference. How and when we retire has changed, we no longer have to retire at age 65, we can work flexibly for much longer.

Other findings from the research of 45-65 year olds include:
- 34 per cent of those with two children in the household will make up for lost time and travel the world in retirement
- 63 per cent with two children in the household are looking forward to spending their time with their children and grandchildren in retirement
- 44 per cent of those questioned without children in their household and who haven’t yet retired intend to stop working completely.

If you have one child in the household, 42 per cent intend to stop work completely but if you have two children only 27 per cent intend to stop working completely

As part of the Changing Face of Retirement research, Standard Life has published a list of top tips to help people re-engage with their financial planning:

- Don’t panic!
- Seek professional financial advice - see also http://www.iangreen.com/
- Continually review your financial goals
- If you don’t have one, make a plan.
- Ask for a state pension forecast and calculate your state pension retirement age)
see also http://greenfinancial.blogspot.com/2012/01/state-pensions-and-missing-14462581.html

- Review your investments
- Consider deferring taking the state pension at your default retirement age - for every year you defer taking benefits you can increase the pension by 10.4 per cent *2

- If you have moved jobs, ensure you have kept your old employer up to date with address changes so you can claim any workplace pension when you retire

If you can, increase your savings If you’re a higher rate tax payer, ensure you claim the tax-relief. Standard Life estimates 300,000 people are not claiming this currently

The above article is available in the Green Financial January/February client magazine at http://www.iangreen.com/magazine.php or via www.facebook.com/GreenFinancial

Notes:
*1. The pension fund figures assume investment returns of 7 per cent p.a. before charges, an annual management charge of 1.7 per cent p.a. and price inflation of 2.57 per cent p.a. The first monthly contribution is made at exactly age 20 and the last contribution is one month before the 65th birthday. The pension fund of £559,000 adjusted for price inflation in today’s terms would be £184,000 at age 65. A five year career break would reduce the figure to £158,000 in today’s terms.
Reducing contributions by half from age 30 would reduce the figure to £124,000 in today’s terms.


2. Source: DirectGov.