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Your late 30s and 40s are a time for taking stock of your long-term finances. It’s potentially a time for considering whether you need more living space or the odd junior individual savings account (Junior ISA) – and whether you should start to overpay the mortgage, if you can, to help bring it down faster.

It’s also a time to look beyond your career and consider what your retirement might actually look like.

After all, you’ve probably been paying into a pension for quite some time now – whether that’s a company pension, personal pension such as a self-invested personal pension (SIPP), or a combination of the two. You may even have several pension pots out there.

First, ask yourself: how much money will I need? The answer will depend on when you want to retire, how you want to live and what your financial circumstances are.

Second, find out – perhaps with the aid of a pension calculator or financial adviser or by looking at your various pension statements– just how much retirement income you’re on course to generate for yourself.

And third, don’t panic if you find yourself falling short. You have plenty of time to double-down on your efforts or even change course.

Think about where you can make sacrifices and add more to your pension pot. Alternatively, consider raising your targeted retirement age, or even lowering your targeted retirement income.

Bolstering what you have

Let’s look at how you can make the road to retirement clearer, smoother and, in the end, more rewarding.

Unlike your 20s and 30s, you may find that the time-rich, cash-poor formula is turned on its head. You’re drawing a bigger salary than you used to, but work and family commitments are taking up most of your time.

So you may have spare cash to bolster your overall pension pot. This includes contributing more to a workplace pension to take advantage of employer matching or – if this avenue has been exhausted or you are self-employed – opening or contributing more to a low-cost SIPP.

Remember, you can also carry forward pension allowances from previous tax years – up to three. So in theory you may be able pay up to £160,000 in a SIPP in any one year to make up for any shortfalls.

Your earnings are probably moving towards their peak as your career matures, allowing you to save more. Your mortgage may also be getting smaller. Within less than a decade, your children may also start to become less dependent on you1.

Or maybe there are some lifestyle sacrifices you could make to enable you to pay more into your pension and achieve your most ambitious retirement goals?

Crucially, the more money you put into pension investments, the more you could benefit from the compounding of your returns over time. And you still have plenty of time left for even small amounts to make a sizeable difference through the power of compounding – and more so when you consider the tax-relief you can earn on your contributions.

Remember, don’t just rely on your employer. The bigger your pension pot, the better your retirement will be!

Consolidate to better accumulate

Lowering your investment costs can help to reinforce this effect too.

The annual cost of keeping money in a workplace pension can range from 0.28% a year to as much as 0.68%2, depending on scheme type and size. By comparison, the Vanguard Personal Pension (SIPP) has an annual account fee of just 0.15%, which also covers any individual savings accounts (ISAs) or general investment accounts held with us3.

So if you have several pension pots scattered about the place, now may be an opportune time to consider consolidating them within a low-cost SIPP to save money. A SIPP is like a workplace pension scheme insofar as you don’t pay tax on the money you pay in4 nor on what is earned when it is invested.

With almost one in nine people changing jobs in 2017, and again in 2018, there are lots of workplace pension pots potentially floating around. By the age of 40, it’s highly likely that many of us will have several pots sitting in different investment products, some of which may have long been forgotten. One recent survey suggested nearly a quarter of UK adults aged under 55 have lost track of old pensions worth an estimated £37 billion in total6.

If you think you may be one of them, it may be worth using the government’s pension tracing service.

Consolidating these products within a low-cost SIPP can help make these pension savings last longer. It can also help you take greater control by enabling you to see all your pension investments in one place, so you can find out what’s working, what’s not working, and whether too many of your investments are concentrated in one area.

It can help you focus more on your retirement goals and cut down on the administration too!

(Just remember to always check what kind of pensions you have because if any are defined benefit schemes that pay a guaranteed retirement income, they are usually best left alone. If in doubt, speak to a financial adviser.)

Visualise your retirement

There are some key questions every 40-something should be asking. What is it I want from retirement? What kind of retirement can I afford? And when will it start? By consolidating your pension assets and establishing how much in extra payments will help and where you can make savings, you can have the retirement you deserve after years of hard work.

Your transitional 40s may be a busy time and include their fair share of stress – you could be balancing the needs of kids in full-time education and elderly parents who may need your support. But things will look very different a decade or two from now, so it’s time to picture what your retirement might actually be like.

Statistically, your 60s are a happier time than your 40s. Make sure you have the pension income to enjoy them!


1 Based on the average age of mothers and fathers in England and Wales in 2020 – 30.7 years and 33.7 years, respectively.

2 ‘Pension charges survey 2020: charges in defined contribution pension schemes’, Department for Work & Pensions, January 2021.

3 Additional charges depend on the funds chosen and any trading costs associated with them.

4 ‘SIPPs: What they are and why you might want one’, Vanguard.

5 Tax is only liable when you withdraw money from your pension as it becomes part of your overall taxable income, but like the tax you pay on your working income it is subject to personal allowances and tax bands.

6 Profile Pensions’, FT Adviser, 6 January 2020.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in an ISA, Junior ISA  and Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested.

You cannot usually access your pension savings or make any withdrawals until the age of 55.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Any tax reliefs referred to in this article are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important information

This article is designed for use by, and is directed only at, persons resident in the UK.

The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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