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Saving for retirement

When you are younger than I am (46!) retirement may seem a long way off but the sooner you start planning for it the better off you are likely to be.

Pension plans are one way of saving for when you stop work and they come with generous tax advantages. Individual Savings Accounts (ISA) are an alternative that may be suitable for some people either instead of, or as well, as pension plans.

If you work for an employer you are likely to have access to a pension scheme through your work. Workplace pensions are constantly changing and the days of a secure final salary pension scheme are numbered.

Stakeholder pensions were introduced in 2001 but were flawed in that employer’s did not need to contribute although some did pay contributions of 3% of salary.

From 2012 we are likely to see the introduction of ‘personal accounts’ with compulsory employer and employee contributions; these products will have very low charges and a limited range of investment options. Unfortunately though employees will be able to opt out, so the populace will take one step forward and then immediately a step back!   

The most important point about saving for retirement is to make sure that you have sufficient income to enjoy your retirement.  How much is ‘sufficient’ will depend on your circumstances but you could start off aiming for half of your current earnings as a target retirement income. You can make allowance for any state pension that you might receive (a forecast is available online from the Department for Work & Pensions and any existing pensions that you have from previous employment or self employment.

Expert Financial Solutions Ltd Chartered Financial Planners and independent financial advisers in Witney can calculate your retirement income shortfall and advise you on saving for retirement including advice on Individual Savings Accounts (ISAs) and the best way of saving for retirement whether it be through an ISA or pension plan or other savings vehicle.

Another method commonly used to work out how much to save for retirement is simply based on halving your age; so if you are 35 you should contribute around 17.5% of your income to a pension plan, if you are 40 you should contribute 20% and so on.

Some people think that they can rely on their home to provide for retirement but you should bear in mind that you can’t eat bricks and mortar, and if you sell your house to provide for retirement income, where are you going to live?

Also, what will happen if there is a housing market downturn at or near to when you need your retirement income? Who will buy your house and what will they pay for it? Will they be able to raise finance? The 12 to 18 month period to August 2009 has shown that house prices can fall as well as rise.

A pension fund or ISA is a more liquid investment than a property and can usually be cashed in as and when required to provide a lump sum and or income as and when required. When you invest in one property you do not have the same degree of diversification of investments that you have with a pension fund which might be invested in shares, corporate bonds, and commercial property.

Most clients will be able to calculate how much income they need, when they want to retire or reduce work, what their spouse or partner would need, and the need to protect against inflation. 

The highly qualified and experienced pension advisers of Expert Financial Solutions Ltd in Witney near Oxford, Oxfordshire offer advice on retirement saving, advice on contracting out advice on contracted out personal pensions, advice on retirement planning, advice on personal pensions, advice on stakeholder pensions, advice on ISA savings.

Expert Financial Solutions Ltd Chartered Financial Planners and independent financial advisers advise many high earners and high net worth clients on their pension and retirement savings. Our highly qualified and professional financial planners are pension experts and have the highest level of pension qualifications including G60 advanced financial planning certificate pensions, and AF3 advanced diploma in financial planning pensions.

Expert Financial Solutions Ltd use sophisticated financial modelling software to understand your current financial position and then forecast how well off you will be in retirement taking account of all existing plans and arrangements you have including personal pensions, previous employer’s schemes and State retirement benefits.

From this model we are able to identify the progress you are making towards achieving your objectives and then create and agree with you a funding plan tailored to you, your objectives, and investment risk profile. 

As part of the process we can review your existing contribution levels, and review the charges, investment performance, and suitability of existing arrangements. Having completed a review we can arrange implementation of any changes required.     

Thereafter it is essential to review your progress towards your objectives in future and make such adjustments as are necessary.

September 2009