Monthly Archives: March 2023

MAKE SURE YOUR RETIREMENT STRATEGY MEETS YOUR NEEDS AND GOALS

It’s important to make a well-informed decision when it comes to deciding what to do with your pension pot: drawdown, annuity or a combination of both. Making the right choice will affect your retirement for many years.

Drawdown gives you freedom and flexibility, allowing you to choose your annual income, whereas annuities provide steady income and security. For those who want both, they can purchase an annuity with part of their pension whilst keeping the rest in a drawdown agreement – giving them the best of both worlds.

The decision of whether to use drawdown or annuities can be a complex one, and professional advice is essential. Depending on your circumstances, either option may be suitable, with some preferring the security of knowing their income will remain stable for life, while others find the greater flexibility of drawdown more conducive to their retirement plans.

ANNUITIES

Annuities provide guaranteed lifetime income, but they also carry risk; if you die shortly after taking out an annuity it means that you won’t benefit from the full value that you paid for upfront. This can make them unsuitable for those with shorter life expectancies compared to those who are expected to live longer. The current rates available on annuities may be attractive when compared to those in the recent past, and this can be an incentive for those previously deterred by low returns.

The benefits of an annuity include long-term security, since the income is guaranteed for life and cannot be affected by fluctuations in investment returns or other market factors. Plus, some policies guarantee indexation which means that the pension will rise with inflation over time. This helps to ensure that retirees have sufficient funds to maintain their lifestyle going forward.

However, there are also downsides to consider when deciding whether an annuity is right for you. Annuity rates tend to be lower when interest rates fall, so you may get less than you had hoped for when taking your pension. Plus, the income is fixed and cannot be adjusted, so if your circumstances change in retirement and you require more funds it may not be possible to increase the amount you are receiving.

Ultimately, professional advice should always be sought with an annuity purchase as there can be a number of factors that need to be taken into consideration before making a decision. It is important to fully understand the terms of the policy and make sure that it is suitable for your individual situation before committing to anything long-term.

DRAWDOWN

In contrast to annuities, drawdown can provide more flexibility and control over how your money is managed in retirement. Drawdown is an increasingly popular option for retirees to receive an income during their retirement. This method of taking an income allows individuals to access their pension fund in a tax-efficient way, as withdrawals are only taxable when they exceed the Personal Allowance

The main advantage of drawdown for retirees is that it offers more flexibility than other options such as annuities or lump sum payments. Retirees can take out whatever amount they require, when they need it, and don’t have to commit to fixed payments over time, allowing them the freedom to make their own decisions on how they wish to use their pension savings.

Another benefit is that any money left in the drawdown pot will not be liable for Inheritance Tax. This is beneficial for those who wish to leave a legacy for their beneficiaries, as the remaining investment can pass directly to them without being taxed.

On the other hand, choosing drawdown does come with some risks. Retirees should consider that markets can potentially be volatile and there may be no guaranteed income from investments. Withdrawing too much capital can also leave you exposed should you live longer than anticipated.

It’s important that individuals have an understanding of how they plan to invest their pension savings and how any losses or gains might affect them in future years. Additionally, if retirees take too much out of their drawdown pot then they could face hefty tax bills.

Overall, it’s important that professional advice is taken before deciding upon a retirement strategy. While drawdown can offer more flexibility than other options, it’s important to weigh up all the pros and cons before making a decision. Ultimately, the right strategy should be tailored to the individual’s needs and circumstances.

COMBINATION OF DRAWDOWN AND ANNUITIES
For some people, a combination of drawdown and annuities may provide the best balance between security of income and control over withdrawals – we can help to determine which option is most suitable for you. Ultimately, it’s important to understand all aspects of both drawdown and annuities, including the pros and cons of each, before making a decision.

Making sound financial decisions requires due diligence and taking into account all relevant factors so that your retirement goals are met in the most efficient way possible. Therefore it is important to consider both drawdown and annuities when planning for retirement, and professional advice is key to making an informed decision. With the right knowledge and professional advice, you will be able to make a decision as to which option is most suitable for your particular circumstances.

By taking into account all relevant factors, you can make sure your retirement strategy meets your needs and goals

ARE YOU CONFIDENT OF MAINTAINING A GOOD STANDARD OF LIVING IN RETIREMENT?
As we all live longer and enjoy unprecedented freedom to decide our own retirement options, it has never been more important to have clarity over what you want to do and how much money you’ll need to achieve that.

Through our retirement financial planning services, we can help you position your finances so that you are confident of maintaining a good standard of living and have the income to realise your life goals, whatever they may be. For more information, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

FOR ISA’S INVESTORS DO NOT PAY ANY PERSONAL TAX ON INCOME OR GAINS BUT ISAS DO PAY UNRECOVERABLE TAX ON INCOME FROM STOCKS AND SHARES RECEIVED BY THE ISA MANAGER . TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.

HOW TO PROTECT YOUR PENSION INCOME AGAINST INFLATIONARY PRESSURES

For anyone feeling the effects of rising inflation rates, it’s important
to ensure that your retirement fund isn’t significantly impacted. While this can be challenging in such an uncertain economic climate, there are measures you can take to ensure that your savings don’t suffer.

Here are some tips to help you protect your pension income for the future.

POSTPONING RETIREMENT

Retiring later can have multiple advantages. It can be a financially wise decision to postpone retirement when inflation is high. Postponing retirement also gives you more time to invest and contribute funds towards your pension pot, allowing you to enjoy a larger sum of money when you eventually retire. Additionally, individuals who choose to retire later can benefit from longer periods of regular income which can be used for extra retirement savings to combat the impact of inflation in retirement.

Furthermore, delaying retirement will allow you to better prepare for future financial commitments such as mortgage repayments and other cost
of living outgoings. If appropriate, by postponing your retirement you can make sure that you have the financial security and peace of mind needed for a comfortable retirement.

CONSIDER WHERE YOUR PENSION IS INVESTED

When inflation rates are high, it’s important to take steps to ensure that your retirement savings aren’t adversely affected. Not only will this give you peace of mind about the future value of your pension pot, but it may also prove to be financially rewarding in the long run. One of the most effective ways to do so is by diversifying your investments and spreading out your money across different asset classes. Having a diverse portfolio can help protect you from losses due to market volatility or inflation and provide access to a broad range of investments while reducing risk. Keeping track of these fluctuations enables you to plan ahead and adjust your investment strategy as necessary. By taking all these factors into consideration, you can ensure that your retirement savings are secure even in a period of high inflation.

KEEP CONTRIBUTING

Despite inflationary pressures, continuing to contribute to your pension pot can be a wise decision. Not only is your retirement fund likely to outperform cash savings, but it also allows you to take advantage of the tax relief top-up on contributions offered by the government.

The amount of relief you receive is based on the rate of Income Tax that you pay. If you are in the highest rate Income Tax bracket you can claim additional relief through your self- assessment tax return, enabling you to save even more for your retirement. However, depending on how your pension scheme works, if you don’t pay tax you might not receive tax relief.

ALREADY WITHDRAWING A PENSION

For those with a defined contribution pension who are already taking an income, it might be beneficial to reduce the amount you are withdrawing in order to keep more of your pot invested. This strategy can help protect your retirement fund against volatile markets and rising inflation levels as the fund manager will monitor the investment performance, making necessary adjustments. Those with a defined benefit pension need not worry about adjusting for inflation as this is taken care of automatically

WHERE ARE YOU ON YOUR RETIREMENT JOURNEY?
Regularly revisiting your financial plan and retirement planning is essential in order to ensure your long-term security and prosperity. No matter what strategies you decide to implement going forward, we will provide valuable insights into making the right choices for your future. Please contact us to discuss your future plans.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

7 OUT OF 10 ADULTS ARE PUZZLED BY FINANCIAL MATTERS LINGO

Being informed about financial matters is essential to making sound decisions and staying in control of your money. Unfortunately, many people feel confused by the jargon used in financial discussions and services.

A recent study of UK adults reveals that seven in ten feel puzzled by financial jargon, while three- quarters don’t understand the concept of ‘the economy’. Those aged 18-24 are the least likely age group to be confused by financial terms, with only 52% feeling puzzled compared to 69% across all age groups.

MOST AT A LOSS

However, younger respondents admit to being the most at a loss when it comes to managing money. 58% of those aged 18-24 confess they are perplexed by this task, compared to only 23% of people aged 55 and over.

The study revealed that younger people are also less likely to have heard of financial products and terms, which could explain why those aged 18-24 are the least confused by financial jargon. The survey also found that only 61% of 18-24s have heard of the term ‘pension’ compared to 97% of respondents aged 55 and above.

FINANCIAL TERMINOLOGY

In addition, only a quarter (25%) of 18-24s know about ‘contents insurance’ whereas almost all (92%) of those aged 55+ have heard this phrase. Furthermore, less than three-fifths (57%) of 18-24s recognise the term ‘inflation’.

The results suggest that although younger respondents may not be as confused by financial terminology as other age groups, they may
lack understanding when it comes to some key financial products and money management skills.

LACK CONFIDENCE

Despite having heard of some key investing terms, many people lack confidence in understanding what they mean. Just 43% of those who have heard the term ‘gilt’ know its meaning and only 59% of those aware of an ‘annuity’ feel confident in its definition. Similarly, 61% of people who have heard of an ‘ESG fund’ are comfortable with its meaning. Many people find financial matters confusing and it can be easy to avoid the things we don’t understand. However, once these matters become clear, it can lift a huge weight off our shoulders

READY TO TELL US ABOUT YOUR FINANCIAL AIMS?
Depending on your individual situation, financial planning doesn’t have to be complicated. We know you’ll have different priorities for your wealth at different points in your life. Whatever your financial aims, we have the expertise, products and services that can help you achieve them. To find out more, please speak to us.

NEARLY TWO-THIRDS OF PEOPLE IN THE UK MORE CONCERNED ABOUT CLIMATE CHANGE

The impacts of climate change have been increasingly felt around the world in recent years. Governments, businesses and citizens alike are urged to take steps to reduce their environmental impact. The reality is that climate change is a threat to human wellbeing and the health of the planet.

Recent weather events, such as heatwaves, floods and fires this year, have made nearly two-thirds (60%) of people in the UK more concerned about climate change. A further 59% are also worried about weather reports from other countries, including in Australia and America, according to new research

RENEWABLE ENERGY SOURCES

The good news is that green investments and pensions have grown in popularity over recent years as more people become aware of the climate crisis and its implications. These initiatives allow investors to allocate their capital into sustainable funds, which support businesses and projects that promote a cleaner environment and renewable energy.

Such steps could include investing in renewable energy sources, reducing single-use plastics usage or becoming more mindful of energy consumption. It is not too late to make a positive impact. If we all work together and take steps to reduce our emissions, we can help ensure that future generations will be able to live in a world where the effects of climate change are properly managed and minimised.

UN CLIMATE SUMMIT

Two out of five (42%) people have said that the UN climate summits have made an impact on their climate change concerns – and 40% said that having children and grandchildren has made them worried about climate change.

This has spurred many to take action and live more sustainably in the last 12 months. Most popular planned changes include reducing plastic usage (71%), shopping locally (62%), driving less (53%) or buying an electric or hybrid vehicle (32%), and consuming less meat and dairy (49%).

COST-SAVING MEASURES

However, the cost of living crisis is making it difficult for people in the UK to take action on climate change. The majority (65%) are concerned about the cost of living and a third (34%) are understandably now more concerned with their energy bills as opposed to living sustainably.

Many people are taking cost-saving measures this winter. Shockingly, 12% are even anticipating skipping meals. Sustainability is unlikely to be the priority with almost four in ten (38%) thinking that it’s too expensive to live more sustainably.

DOING YOUR PART TO HELP THE PLANET
By investing in such initiatives, individuals can not only do their part to help the planet but also benefit from potential returns on their investments, depending on market conditions. If you would like to discuss your options, please contact us.

WOMEN MORE VULNERABLE TO COST-OF-LIVING CRISIS

Throughout their lives, women face a number of challenges that can place them at a financial disadvantage compared to their male counterparts. This can include inequality of pay at work, taking career breaks or taking part-time positions due to an expectation they will take on greater responsibility for family commitments.

This often leaves them less financially resilient and in the context of the cost of living crisis, where everyone is feeling the pinch, it places additional pressure on their financial wellbeing. This can have an impact in the here and now but can also contribute to inequalities in the long term, such as with pension savings.

FINANCIAL RESILIENCE OVERESTIMATION

Working women are significantly closer to the breadline if they lose their income and more vulnerable to the cost of living crisis, according to new research. On average, working women are only 14 days away from the breadline in the event they lose their income. This is significantly less than the average working man, who would be able to meet their household costs for 28 days. The household average stands at 19 days.

While the average working woman has comparable debts to men (£558 vs. £665), they have significantly less set aside in all their savings and investments (£1,801 vs. £3,214). With a daily expenditure of £90, calculations show that women would only be able to fund their household spending for two weeks with no income. On average, women overestimate their financial resilience, assuming they are 60 days from the breadline; this is compared to men who assume they have 90 days.

REDUCING ESSENTIAL SPENDING

Women are considerably more likely to view the cost of living crisis as a ‘constant source of worry’ (78% vs 68% of men) and therefore take action to address it. Women are much more likely to be cutting back on luxuries (86% vs 76% of men) and reducing essential spending where possible (72% vs 65% of men).

On average, working women surveyed have a lower median annual personal income (£23,245 vs. £31,070), likely due to a number of reasons. Statistics show that in 2021, the gender pay gap among full- time employees was 7.9%, up from 7.0% in 2020[2], signalling that women in full-time employment continue to get paid less than their male co-workers.

EMPHASIS ON BUDGETING

Similarly, working women are significantly more likely to be in part-time employment compared to men (31% vs 11% of men surveyed), with the expectation of domestic and caring responsibilities often placed on women’s shoulders.

While the cost of living crisis has placed an emphasis on budgeting and financial planning, women’s financial wellbeing still faces considerable challenges in the long term. Research from earlier last year showed that, on average, women’s pensions are half the size of men’s (£12,000 versus £26,000).

WANT TO DISCUSS HOW TO MAKE THE MOST OF YOUR MONEY?
With a significant strain on the nation’s finances, it’s important that everyone is aware of their financial situation to manage realistic expectations. To discuss how we could help you to make the most of your money, please get in touch.