According to research by insurers Wesleyan, partners in professional firms would like to retire, on average, at the age of 62 with an annual pension income of between £36,000 and £50,000. However, many of them have not planned sufficiently for the future, with 35 per cent likely to use the equity built up in their properties to generate further funds.
Many will have started building up their pension pot later in life due, firstly, to the pressures of completing qualifications and training, then perhaps finding partnership capital and (most expensive of all!) raising a family. In your thirties, foregoing a decent holiday in the interests of making an increased pension contribution is seldom an attractive option.
However, if we are to enjoy a comfortable retirement, it is important to consider increasing pension contributions as the demands made on our income in mid-career diminish.
Of course, the tax relief for pension contributions makes a massive difference to the value of the funds invested over time. This argument is particularly compelling if your income falls just over £100,000, so that your marginal rate of tax on the top slice of your income is 60 per cent.
Milsted Langdon Director, Peter Groves, specialises in strategic business and tax planning, services for high net worth individuals and professionals.