It is “never too late to start making up a shortfall in your pension”, according to Sarah Corney, private client director at TrinityBridge.
One thing savers just turning 60 should consider is to try and save more into a pension, as even five or six years of compound interest on additional savings is better than nothing.
Adjusting how much they plan to spend on luxury or discretionary purchases, such as holidays, new cars or lavishing their family with gifts, can also help.
However, there may be times when people are further behind than they would want.
While recent figures released by the Pensions and Lifetime Savings Association (PLSA) showed the state pension is enough for a retired couple to live a minimum retirement (and a relatively small pot is need for single people), many will prefer to live a more moderate, or even comfortable, life after they finish their career.
And inflation will mean they could be further away from their goal than the initial figures suggest, she said, something that is “underplayed” by savers.
“You’ll often need far more to keep the lights on or buy food than you expect,” she explained.
Assuming 2% inflation (the Bank of England’s target) per year, a 60-year-old in a couple today hoping to retire at the state pension age in six years’ time would need £518,034 for a comfortable retirement, an increase of almost £60,000.
Even for a moderate retirement, this figure stands at £281,540, up from the PLSA’s current figure of £250,000.
If some way from their goal, savers could also consider a phased retirement by working part-time, thus delaying the start of their pension income and giving them more time to benefit from interest.
More extreme options include downsizing to a smaller property or even changing their planned retirement age. This has the added benefit of generating a salary while also benefiting from the state pension.
Regardless of their situation, the first key step for those in their early 60s is to determine their expenditure each month, something she described as “the starting point” for all retirement planning.
Navigating these costs can be incredibly challenging. One way to do this is to determine their essential, discretionary and luxury spending buckets for retirement, such as how much they will need for their bills, the spend to take care of their family and the cost of holidays or a new car.
If they have not already, Corney said this is a “crucial time” for savers to start taking professional advice on their pension planning.
“Retirement is a long time to be supporting yourself for and things can often take you by surprise,” she said.
There is, of course, a world where savers are ahead of their goals and have more in their pot than they initially expected. In this scenario, they can up the lifestyle they expect in retirement or consider retiring early.
As they go through their 60s and retirement becomes more of a possibility – particularly as people turn 66 and reach state pension age – Corney noted people should look to take advantage of the 25% tax-free lump sum from their workplace pension.
It does not impact their Personal Savings Allowance and many providers will allow people to take this 25% in “drips and drabs, without it being taxed”.
This lump sum can provide various benefits to new retirees. It offers a convenient, untaxable source of money that savers can use for a range of purposes, such as any final expenditures, such as mortgage payments, or generally to ease them into their first few years of retirement.
Retirees could also choose to put it to work in generating an income, such as by purchasing an annuity to de-risk portfolios.
While this will also depend on personal circumstances, Corney noted that annuity rates “have been very competitive recently”.
According to data from Hargreaves Lansdown, the current annuity rate for a 65-year-old ranges from 5.4% to 7.9%, depending on marital status, whether retirees want a fixed or growing level of income each year and if the quote is guaranteed.