Tip of the month – top saving tips
Recent volatility in stock markets, the property “bubble” and derisory interest rates paid on savings have made some of us question whether saving for retirement – or anything else – can ever be worthwhile. Friends Provident, a leading long term savings provider, believes by setting realistic goals and seeing retirement as an ongoing process rather than an event, people can move closer towards the goal of maintaining their ideal lifestyle in retirement. This we agree with.
A recent study commissioned by Friends Provident revealed the younger generation is already starting to think along these lines by using a range of savings options to fund their retirement - almost two thirds (57%) of 21-29 year olds plan to use property and 43% prefer the flexibility of an ISA. But this may not be the case across all generations. However you save, starting early offers incomparable benefits.
For many people a 'retirement career' is an attractive way of keeping a moderate income in retirement, whereas for others the plan could be to move abroad - either way, careful advanced planning is required along with a dose of realism. The first step for anyone should be to check whether their current savings are sufficient for the future, and then do something about it.
Friends Provident’s saving tips, which seem pretty reasonable to us are as follows:
1. Check how much you have currently saved for retirement. Talk to our IFA affiliate at Champion Financial Advisors Ltd to get information, and if you have had more than one employer we should be able to track down what pension entitlements you may have earned from your time in employment. Understanding what you have earned so far is a big step towards saving enough for retirement.
2. Request a state pension forecast from the Department for Work and Pensions (DWP) and consider if it is worth paying in backdated NI contributions for either yourself or your spouse. If you or your partner are self employed or earn very little, it might be worth considering what NI contributions you pay since some are eligible for a rebate but still provide an entitlement to the state pension at retirement (chances are we have already covered this for you, but ask us!).
3. Understand the rules (or talk to us, we spend a lot of time keeping current). These vary by type of pension and different decisions apply depending on other circumstances, personal objectives, etc
4. Use the free tools on offer to you – We are here to help, but the Financial Services Authority (FSA) produces a jargon free guide to retirement options at www.moneymadeclear.fsa.gov.uk.
5. Ensure your pension scheme providers have your up to date contact details especially if you have had more than one pension scheme over the years. Do not assume that when you reach retirement, that all your pensions kick in automatically. Champion Financial Advisors are past masters at tracking down errant policies from your “youth”.
6. Rationalise your monthly outgoings: To move towards a more financially secure retirement, people over 50 should usually aim to pay off any unsecured debts and consider over-paying on their mortgage to be debt and mortgage free as quickly as possible. - getting rid of your mortgage is usually a wise priority, and even small cutbacks will help to boost your pension pot.
7. Do not take income prematurely, especially if you “work on” or have other income. Generally, if you start taking income from a pension earlier than intended then the annual income you will receive will be lower, whereas if you delay you will receive higher income payments.
As Friends Provident’s Martin Palmer observes:
“These tips may sound simple but saving for retirement does not need to be complicated. Advanced retirement planning ensures long-term security – it does not need to be rocket science.”
