Creating My Retirement Income …
Most people will depend on a pension to provide them with at least some of their income in retirement. This may be from the State, a company pension or a private pension arrangement (personal pension/SIPP) or a combination of these. The subject of pensions has featured heavily in the press and in the news for a number of reasons.
Firstly, not enough money is being saved in pension funds to guarantee a comfortable retirement for most people. 22% of people are not saving for retirement at all and 54% are failing to save enough.
How soon should I start to plan? …
This takes me back to my days as an Adviser at Prudential Assurance. I didn’t meet many 20 year olds interested in saving for their retirement, until I pointed out the effect of delaying retirement planning by just five years to age 25.
For instance, at age 20 building a retirement income of say, £20,000 pa at age 68 would entail a monthly contribution of around £207 pm (based on an average growth rate of 4% pa and 0% inflation). Delaying that decision to age 25 would increase the recommended contribution to £262 pm and by age 30 to £335 pm.
Throw inflation, starting a family, divorce, volatile stock market returns, low interest rates, job changes and mortgage payments into the mix it’s hardly surprising that most of us end up close to retirement without fulfilling our original intentions of building a sustainable income for retirement through contributions to a pension scheme.
What about the State Pension?
A new single-tier UK State pension was introduced from 6 April 2016. Among the changes were amendments to the State Pension Age for both men and women. Someone age 20 now will be entitled to a State Pension when they reach age 68, and this will be reviewed at least every five years, so it could be older. To check your own eligibility go to https://www.gov.uk/state-pension-age. The qualifying years of National Insurance contributions in order to receive a full State pension also increased from 30 years to 35 years (a proportionate rate of benefit is paid for a lower number of qualifying years). If you are fortunate enough to have 35 years of qualifying National Insurance contributions and are retiring now, you would receive £168.60 per week (£8,767 pa).
So how can I ensure I have sufficient retirement income?
Typically, most people we come across tend to make up their retirement income from a number of sources …
Retirement planning encompasses much more than the provision of income through a pension. Advisers need to have a thorough understanding of their clients’ circumstances before giving advice on their retirement strategy. There may be a need for both income and capital in retirement. The health of the individual and life expectancy is also a consideration, together with the individuals tax status. Annuities ensure an income for life and new pension flexibilities mean that the question ‘how long will I live in retirement?’ is even more relevant.
Estimating a client’s financial needs in retirement and developing a financial plan to meet those needs cannot be a precise operation. It is nevertheless important to undertake some calculations to understand the extent of any income and capital shortfall. Such calculations may come as a shock to some individuals.
There are a number of vehicles you can use to create your retirement income. Savings and investments can also play a key role in bridging any gaps in income by creating a tax efficient income to run alongside any pension income.
Four key questions to ask yourself when considering the total income/capital you will need at retirement …
How can I find out if I’m on track with my retirement planning?
You can usually do this using our service. If you would like to know more contact firstname.lastname@example.org
Speed Financial Solutions are a highly qualified financial services provider looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your investment planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to your advantage. Our relationships are built on trust and mutual respect. We are ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a Fellow of the Personal Finance Society (PFS) which is the professional body for the financial planning community. The PFS is part of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner specialising in Investment, Taxation and Trusts.
Please take a look at our website – www.speedfinancialsolutions.com
For further information contact us on Tel 951 315 271 or 951 318 529
We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
The contents published are not recommendations or decision aids for your investment decisions and they do not constitute any type of advice. We are not tax advisers and independent tax advice should always be sought.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
27 June 2019