Start the new decade with a new bill of wealth
We have highlighted some of the important stages in life and the circumstances you might find applicable to your particular situation.
20 TO 30 SOMETHINGS
Delaying the start of your retirement savings could have a significant impact on the level of retirement fund you eventually accumulate. When you’re in your 20’s and 30’s, retirement may still seem like a long time away. The reality is, however, that if you hope to save a fund large enough to provide you with an income equivalent to two-thirds of your final salary, you would have to save nearly half your income from your 20’s until you retire.
Understandably, you may be reluctant to tie up your money in a fund that may not be touched until at age of 55. Whilst pensions offer the benefit of tax relief, other investment vehicles such as ISA’s can provide more flexibility, as you have access to your money should you need it urgently in the future.
During this decade, you should plan to put as much as possible into your pension. You may find that you can lock up more of your assets now, so it is worth discussing with us the option of switching your ISA holdings to your pension provision to benefit from your higher rate of tax relief.
It may also be appropriate to consider using a wider range of assets, but the difficulty will be trying not to be too cautious with your savings at this stage.
Many people may be coming to the end of a mortgage, with children leaving home. The final decade before retirement is often the most important from an investment perspective. At this point we can advise you how you could build eve greater levels of diversification into your retirement fund, including money held in non-equity assets. These might be cash deposits, bonds, or other fixed-interest securities such as government gilts. This is also a good time for us to request a state pension forecast for you so that you can get a reasonable idea of what this form of income could be in retirement.
Now may be the time that you are considering significantly reducing your risk. You may be deciding whether you need to secure a fixed income, or if y9u can withstand any investment volatility after you have retired.
If you need certainty now, you could buy an annuity with your pension savings, although you do have the option to take 25% of your pension as a tax-free lump sum, perhaps to reinvest elsewhere. Another option is to consider an unsecured pension (formerly income drawdown).
Most people will be required to use their pension savings to buy an annuity by the age of 75. When it comes to buying an annuity, there is a vast array of options. You can choose to inflation-proof your annuity or buy a guarantee so that it continues to pay out for at least 5 years. You may also want an income to continue for your spouse after your death.
We can help you search for the best annuity rate on the market – you should never just take the rate offered by your pension provider.
There are also some alternative means of getting the most out of your pension at this age – so why not contact us to find out how?