Saving for retirement – where to start Coventry

Saving for retirement has never been more difficult than it is today for many reasons. Firstly, what has caught everyone by surprise is the sudden increase in life expectancy that most of us can look forward to, meaning that those few twilight years of retirement have now turned into two or three decades. If we retire sometime between the ages of 60 and 65 then, with a bit of luck, we can look forward to 20 to 25 years of retirement or even more. But here comes the rub – how are we going to finance this so that we can enjoy life and live in reasonable comfort?

Not only that, this is all coming at a time when many others things are coming into play as well. The security that many of us may have enjoyed through employer pension schemes is being eroded as employers see that they can’t afford the huge cost that this implies. The state pension is certainly, on its own, not going to be adequate to support a reasonable lifestyle. And with interest rates so low, annuity rates are also low and our savings will not necessarily be able to buy us a decent pension. And all this is happening when, at the moment at least, it is extremely difficult to put aside any spare cash for our future needs.

But the need to provide for our futures won’t go away and more and more of this responsibility will fall to us as individuals to sort out. So where do we start?

The subject can seem awfully confusing and it is extremely difficult to know who to trust. Pension companies want to sell you pensions, equity release firms want you to buy into their schemes and financial advisers quite probably have an eye on the commissions and fees they might earn. However, at some stage it is likely that we should use the services of a financial adviser that we can trust because, once we get into the detail, the issues and considerations, and the tax and legal aspects can become very involved and complicated.

However, long before that stage, it is quite possible, indeed essential, that we take a strategic look at our life and understand what we want it to look like, financially and otherwise. Financial advisers may help us with “planning our life” in a more general sense before getting into the detailed financial planning but this is not necessarily their strength or their interest. Therefore, we must do some of our own thinking beforehand.

Our “pension pot”

The concept of retirement in a financial sense, although, undergoing many changes, is fundamentally straightforward to understand and identify. It consists of a time when we can no longer look to earned income to support us but we must live on the wealth and resources that we have accumulated to date. That wealth includes savings, property, private and employer pensions, and our entitlement to state pensions. What we have to do is to manage those resources over the remainder of our lives to provide the lifestyle we want and, if possible, fulfil any further aspirations such as leaving something to our children.

The very basic considerations then come down simply to two things - how much money we need to live on each year whether from a pension or somewhere else, and how long do we expect to be retired. If we multiply one by the other, say £15000 each year by 20 years then we arrive at an approximation of how much we need – our pension pot, in this case £300000.

If the money comes from pensions, annuities or investment income so be it. However, if we can’t look to those things and if our wealth is tied up in our property then it may mean we need to arrange some form of equity release. If we can look to neither of these sources then it may mean we will have to work for longer and reduce that 20 years of retirement, supplementing our income, possibly in part-time employment.

But, at least, we now have an idea of the scale and scope of our problem.

Click here to access more useful information for the over 50s from in my prime.