Plan your financial blueprint for 2024 and beyond

As we usher in 2024, it’s time to consider our financial resolutions. Many of us set New Year’s objectives, yet how many of us actually attain these goals? We all harbour unique financial dreams and aspirations, which may sometimes feel unattainable. In the intricate world of finance, the path to your financial objectives might not be as straightforward as you’d like. This is where the essence of financial planning comes into play. Continue reading “Time To Consider Your Financial Resolutions?” →

Rise in living costs forcing many people to dip into their financial reserves

The average cost of housing, food, and energy bills have increased by nearly £500 per month as of September last year compared to August 2022, according to statistics regarding the cost of living in the country[1]. This rise in living costs has forced many people to dip into their financial reserves. Continue reading “£32 Billion Hole In UK Savings Pots” →

Urgency for younger generations to access improved financial education

The chasm between generations regarding retirement prospects is glaringly apparent, as 78% of individuals believe their predecessors had more favourable pension plans or brighter retirement futures. According to recent research, this data highlights a stark revelation that underscores the urgency for younger generations to access improved financial education[1]. Continue reading “Bridging The Pension Generation Gap” →

An effective financial plan acts as your protective shield

In the realm of financial well-being, an old adage rings particularly true: ‘Prevention is better than cure.’ An effective financial plan acts as your protective shield, specially designed to weather any economic storm that may come your way. It offers comfort and control, ensuring that you are steering the ship of your finances, not vice versa. Continue reading “The Power Of Prevention” →

The potential barrier to reaching the same savings levels as men

The gender pension gap is an issue that extends beyond just the disparity in earnings between men and women. It also encompasses other aspects such as financial confidence, engagement with financial products, and socio-economic factors. According to new research, women are 33% more likely than men to say they do not understand how their pension works, indicating a lack of financial confidence[1]. This lack of confidence may explain why some women are less likely to engage with financial products. For instance, women are 38% less likely than men to have a Stocks & Shares ISA and 32% less likely to have a private pension.

Career breaks for childcare

This engagement gap, along with other factors like the gender pay gap, could result in young women in the UK (aged 22 to 32) having just £12,873 per year by the time they retire in the 2060s1. In contrast, young men are projected to have nearly a third more, receiving an average of £19,803 in annual income. The research highlights the gender pay gap also contributes significantly to the gender pensions gap. By the age of 27, women already earn £10,000 less than men of the same age. Other factors impacting women’s pension savings include being less likely to hold senior leadership positions and being more likely to take career breaks for childcare.

Reaching the same savings levels

According to the research, young women are currently projected to have £300k less in their pension pots than their male counterparts by the time they reach the current state pension age. Women are also more likely to work part-time or on reduced hours, take career breaks for childcare, act as unpaid carers, or need time off work for medical reasons, such as menopause. In addition, women often self-identify as having lower confidence regarding savings and investments. This presents another potential barrier to reaching the same savings levels as men. Addressing this issue requires a multi-faceted approach that includes promoting financial literacy among women, creating policies that support women during career breaks, and addressing the gender pay gap. Source data: [1] Analysis based on the following research and assumptions for Legal & General by Opinium Research conducted 2,000 online interviews of people aged 22-32 between the 15th and 29th August 2023 – CPI = 3% • Salary premium = 1% – Salary increase = 4% p.a. (this assumes that salary increases on an annual basis up to retirement at 68) – Median male salary at age 27 = 35,000 – Median female salary at age 27 = 25,000 – Start saving into a workplace pension at age 22, retiring at age 68 -Investment return on pension pot, assuming broad 60/40 asset split, (7% p.a., 4% real) – Qualifying earnings – Currently (£6,240 to £50,270), Historical years (actual LEL and UEL), Future years (increased annually by CPI assumption) – Income based on current Legal & General annuity – fixed rate, single person annuity at age 68, with a 10-year GMPP. Women are 33% more likely than men to say they do not understand how their pension works – 320 (men) – 425 (women) = 105. 105 / 320 = 32.8125% (33%) Women are 38% less likely than men to have a stocks and shares ISA – 324 (men) – 201 (women) = 123. 123 / 324 = 37.962962962963% (38%) Women are 32% less likely to have a private pension -324 (men) – 221 (women) = 103. 103 / 324 = 31.79012345679% (32%) THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

What will you do with your hard-earned pension pot at retirement?

As we navigate life’s journey, retirement presents both a dream and a challenge. It’s the stage where we finally enjoy the fruits of our labour, a time for relaxation, exploration, and personal growth. But the question that often looms is how can we ensure a steady income stream that keeps pace with our aspirations and maintains our lifestyle? Enter the world of annuities. Annuities in recent years have often been overlooked in the retirement planning conversation. But current heightened interest rates have increased demand for annuities, offering unparalleled peace of mind, knowing that your basic needs will be covered, irrespective of how the financial markets perform.

Securing the best possible deal

They offer a steady, guaranteed income throughout your retirement years or for a specific period. But given the irreversible nature of purchasing an annuity, it’s imperative to thoroughly explore your choices, select the most suitable type and secure the best possible deal. Annuities provide a practical means of converting your accumulated pension savings into a lifelong source of income. Comparing rates across various providers is essential once you determine your required income level. This process, known as the ‘open market option’, allows you to bypass your provider’s offer and potentially secure a higher rate with another provider.

Boosting your retirement income

Shopping around could boost your retirement income by as much as 20%. To put it in perspective, simply by exploring your options, you could increase your retirement earnings by nearly £6,000. Recent analysis reveals that a 66-year-old with a £100,000 pension pot can now purchase an annuity yielding an annual income of £7,000 – an increase of £174 compared to last year[1]. The analysis highlights a striking difference between the best and worst annuities available. For a 66-year-old with a £100,000 pension pot, rates can vary by up to 3.6% – equating to a potential annual income discrepancy of £254 or £5,945 over an average retirement period[2].

Making the right choice

Securing the right annuity for your needs can seem daunting, given the variety of options available. This one-time, typically irreversible decision is vital, and understanding the different types of annuities can greatly facilitate the process. When choosing an annuity, you can select a conventional level-income annuity, which ensures consistent payments throughout your life. Alternatively, an increasing annuity starts with a lower initial income, but your payments increase annually in line with inflation or a predetermined rate, such as 3% or 5%. It’s essential to carefully consider the options’ costs and benefits to make the most suitable choice.

Selecting an annuity

Your marital status is another significant factor in selecting an annuity. If you opt for a single-life annuity, it will only pay out during your lifetime. In contrast, a joint-life annuity provides a full payout to you during your life, and after your death, it typically pays 50% of that amount to your partner until their demise. Another option worth considering is a guaranteed income period. Under this plan, payments continue until the end of a chosen period (usually five or ten years), even if you pass away prematurely. In such a scenario, the income would be paid to your beneficiaries or estate, offering them financial security.

Certain lifestyle conditions

An enhanced annuity may be the right option for those with certain lifestyle conditions or medical history. Whether you smoke, are overweight, have type 2 diabetes, or have suffered from cancer, heart disease, or other life-threatening conditions, you may be eligible for an enhanced annuity, which results in higher payouts. The rates are increased to reflect the potential impact of these conditions on your lifespan. Even conditions like excess weight or high blood pressure could qualify you for an enhanced annuity. Source data: [1] As of 30/9/23, a standard lifetime annuity with a rate of 7% for a single life with a £100k premium, 66 years old, with a 5-year guarantee. Based on a level benefit that is paid monthly in advance. [2] As of 30/09/2023, Legal & General Retail estimates that an average 66-year-old with a standard level of health will have a life expectancy of 90 years. THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEF

The art of de-risking

For many individuals, their pension investments are allocated to funds. These could be funds selected by their pension provider or ones they’ve chosen independently. Traditionally, retirement planning has centred around investing in shares-based funds during one’s younger years. As retirement approaches, the strategy typically shifts to de-risking the portfolio, diversifying into bonds, cash, and shares. Continue reading “Securing Retirement” →

Tackling retirement anxieties requires understanding your current financial resources

Retirement is often seen as the golden phase of life, a period earmarked for relaxation and pursuing personal interests. However, a recent study has pointed towards an increasing trend of ‘retirement anxiety’, especially among individuals aged over 40[1]. Continue reading “Charting Your Financial Future” →

£26.6 billion in forgotten pensions

Did you know as many as 1 in 20 people could have a pension they didn’t think they had? Could that be you? It’s estimated £26.6 billion is currently trapped in forgotten pensions, averaging about £9,500 each[1]. With most individuals juggling multiple jobs throughout their lifetime, it’s no wonder that some of these pensions fall through the cracks. Whether due to a change of address or simple forgetfulness, these lost pensions could be the key to a more comfortable retirement.

Search for lost pensions

Losing track of an old pension is easier than you think, especially if you’ve moved house and should have informed your old pension provider. But if you suspect that you have a lost pension, don’t despair. Start by reaching out to your previous pension provider. If you’re unsure who that might be, the government’s Pension Tracing Service can provide up-to-date contact details for your pension scheme. Tips on how to track down your lost pension: Begin by revisiting your CV or recalling every job you’ve held since leaving school or university. You may have had a workplace pension for each of these roles. Check any old pension statements you might have for details about your plans. The more information you can gather, the better.

Connecting with your pension provider

If you remember the provider of your old pension, contact them first. When doing so, provide as much information as possible to aid in the search for your pension savings. This includes your plan number (if available), date of birth and National Insurance number.

Utilising the Pension Tracing Service

If you believe you have a missing pension but lack information, turn to the government’s free Pension Tracing Service. Available on the gov.uk website or via phone at 0345 600 2537, this service can provide up-to-date contact details if you remember the name of your old employer or the pension company.

Contacting the Pension Administrator

The Pension Tracing Service will only provide the contact details of the pension’s administrator. It’s then up to you to reach out and determine whether you have a pension and its current value.

Verifying Your Pension Entitlement

Just because you have pension paperwork from a previous employer doesn’t necessarily mean you’re entitled to a pension. You may have received a refund of your contributions when you left the employer. Some older workplace pensions also required membership for a specific number of years before a pension entitlement was granted.

Beware of scammers

Scammers often exploit legitimate events, so be vigilant around National Pension Tracing Day. Always ensure you’re communicating with legitimate entities.

Keep track of your pensions

If you move house in the future, remember to inform your pension providers of your new address to avoid losing track of your pensions again.

Time to track down your lost pensions?

Have you lost track of pensions from previous employers?  Don’t let your hard-earned money go unclaimed. Remember, it’s your money, and you have every right to claim it. Let us discuss how we can help you start your search and secure your financial future! We look forward to hearing from you. Source data: [1] https://nationalpensiontracingday.co.uk/ A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).  THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.  YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

Preserving wealth for your future lifestyle

After a lifetime of hard work, you’ve successfully built a substantial and comfortable retirement account. Congratulations are in order. You’ve officially entered the golden years of retirement! Now, it’s time to enjoy the fruits of your labour, provided you’ve laid the groundwork for a well-prepared retirement. But investing after retirement is quite distinct from accumulating wealth during your working years. The approach of steadily building your investment portfolio, benefiting from pound cost averaging and return compounding, worked well during your earning years. A low-maintenance ‘set and forget’ strategy, with occasional rebalancing, might have been all you needed. But when you retire, the investment dynamics change.

Don’t underestimate your lifespan

Entering retirement might bring a sense of accomplishment but can also usher in doubts. You might question whether you’ve amassed enough resources, how to optimise them, and what to do if unforeseen circumstances arise. If you’re transitioning out of work entirely, you may experience a significant shift in perspective. It can be psychologically challenging to watch your net worth decrease after a lifetime of seeing it grow. Planning ahead can alleviate this stress. Begin by defining your financial goals and estimating their costs. Additionally, don’t underestimate your lifespan. The average life expectancy in the UK during 2023 was 81.77, but if you’re in good health in your sixties, you will likely live longer[1].

‘Necessary expenditures’ and ‘desired expenditures’

This will likely involve distinguishing between ‘necessary expenditures’ and ‘desired expenditures.’ Compare these projected expenses against your known income sources—state and defined benefits pensions, any annuities due—to determine how much your personal pensions, capital, and investments need to generate to cover any deficit. In your retirement income strategy, you’ll encounter three major risks: inflation, longevity, and market volatility. Each requires a unique solution. Inflation silently erodes your spending power annually as prices rise. This has become particularly noticeable recently with the sharp increase in the cost of living after a period of relatively low inflation. However, even minor annual increases can compound into substantial hikes over the two decades or so that the average person spends in retirement.

Two principal courses of action to consider

Market fluctuations are an ever-present uncertainty. While risk-taking can yield rewards over the long term, significant swings in a retirement portfolio’s value can be unsettling and potentially catastrophic if withdrawals coincide with market downswings in the early retirement years. Regarding retirement, your pension options are not solely about investing. You can take two principal courses of action as you approach this phase of your life. You can either continue investing and withdraw money from your pot as needed, a strategy known as pension drawdown, or purchase an annuity, an insurance policy ensuring a steady income for life.

Challenging endeavour filled with numerous pitfalls

Pension drawdown provides additional flexibility and the potential for higher returns and increased income from your pension pot. Since your pension fund remains invested, market performance can fluctuate. Purchasing an annuity guarantees you a regular income that will last throughout your lifetime. Moreover, annuity rates have increased over the past year due to the rise in interest rates. Securing a steady income for 30 or so years can be a challenging endeavour filled with numerous pitfalls when drawing from an investment portfolio; the long-term average return and the sequence of returns matter. Poor performance in the initial years can also be costly, even if followed by good returns.

Pension investment strategy aligned with your needs

While it’s crucial not to take too little investment risk, de-risking a portfolio might not be the best move if you only need to draw modestly on your money and keep most of it invested for long-term returns. However, withdrawing from your pot means you can benefit less from compounding returns. Ensuring your pension investment strategy aligns with your needs is essential as you approach retirement. Depending on whether you opt for an annuity or a drawdown, you might need to adjust the asset mix in your portfolio to meet your retirement objectives. Source data: [1] https://www.macrotrends.net/countries/GBR/united-kingdom/life-expectancy THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, SO YOU COULD GET BACK LESS THAN YOU INVESTED.