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Key traits for successful wealth-building

Developing an investment strategy tailored to your goals.

Committing to a financial plan is crucial for building wealth and achieving long-term financial goals. When you have a plan, you are more likely to stay focused on your objectives and take the necessary steps to reach them.

Planning allows you to develop an investment strategy tailored to your risk tolerance and financial goals. It helps you understand different investment options, diversify your portfolio and make informed decisions about where to allocate your funds. A comprehensive investment strategy also addresses potential risks and provides contingency measures.

Basic principles to follow for investing and avoiding costly mistakes

Invest early:

Starting early is critical to building wealth. Investing for a more extended period allows for the power of compounding, where your savings generate even more earnings over time.

Invest regularly:

Consistent investing throughout the year is essential. By investing a fixed amount regularly, you can buy more when prices are low and less when prices are high, potentially reducing the average cost of your investment.

Invest enough:

Saving enough today is crucial for achieving long-term financial goals. Knowing how much you need to save now can help you have a sufficient investment portfolio for your future goals.

Have a plan:

It’s essential to have a well-structured plan to avoid making hasty investment decisions based on short-term market movements. Maintaining perspective and long-term focus can help you stay committed to your plan.

Diversify your portfolio:

Diversification is critical to managing risk and improving your chances of success. Investing in various asset classes, geographical markets and industries allows you to tap into different opportunities and potentially create a smoother investment experience.

Building wealth is a long-term endeavour. A financial plan keeps you focused on the bigger picture, reminding you of your long-term objectives even during short-term market fluctuations or economic downturns. It instils discipline and patience, key traits for successful wealth-building.

Remember, these principles provide general guidance, and it’s always important to consult a financial professional before making investment decisions.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

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

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Protecting your children and securing their future

Our health, an invaluable asset, is often overlooked or taken for granted.

As a parent, ensuring the well-being of your children is a top priority. From having open conversations with your partner to creating a Will, there are straightforward measures you can implement to provide them with the protection they deserve.

Open the conversation

Discussing sensitive topics might be uncomfortable, but it’s essential for planning and protecting your children’s future. Choose a time and place to start this important conversation when you and your partner or immediate family won’t be disturbed. By viewing it as a practical task rather than an emotional one, it becomes easier to handle.

Appoint a legal guardian

Many parents still need a formal plan regarding who would care for their children if they were no longer around. Selecting a legal guardian is crucial to ensure your children’s well-being. A legal guardian can be anyone over 18 years old, such as a close family member or friend. If a guardian isn’t chosen, your children may end up in foster care while the courts appoint a guardian.

Create a Will

After discussing your plans and selecting a guardian, make it official by creating a Will. A Will allows you to specify how your estate should be distributed upon death. Dying without a Will leaves the distribution of your assets up to the law, which may not align with your wishes. Moreover, a Will can help minimise Inheritance Tax, leaving more for your children to benefit from.

Look into life insurance

Having life insurance in place is a responsible way for parents to ensure the financial security of their children in the event of their death. It is an essential part of any family’s financial plan and can provide you and your family with the peace of mind that they will be taken care of in case something happens. It could provide a tax-free cash benefit to your children if something were to happen to you. This money can help pay for your children’s living expenses or any other financial needs. Having life insurance in place ensures that your children are financially provided for in the event of your death.

Seek expert advice when necessary

Having children is a financial game-changer. Not only do you increase your expenses, but you also gain the responsibility to protect them by providing for their future. One way to do this is by speaking with your professional financial adviser. By obtaining professional financial advice about your life insurance requirements for your children, you can protect their future and provide them with financial security. No parent wants to think of the unthinkable, but by investing in life insurance, you can give your children the security they need to face whatever comes their way.
Following these simple steps, you can take charge of your children’s well-being and guarantee their future is protected.

How to invest after retirement

Ensure your wealth is preserved for future generations.

As you enter your golden years, the excitement of finally retiring may be tinged with some uncertainty. With the working days behind you, it’s natural to wonder if you’ve amassed sufficient resources and how best to utilise them.

Additionally, life can be unpredictable, so it’s essential to be prepared for unforeseen circumstances. Investing for income after retirement can seem a daunting task, but it is by no means impossible. With professional advice, careful planning and continuous monitoring of your investments, you can ensure that your savings last as long as needed.

To help you navigate this new chapter, here are some tips on investing after retirement to ensure your hard-earned savings continue to support you throughout your well-deserved rest.

Keep an eye on inflation

When it comes to investing after retirement, inflation should always be taken into account. Inflation reduces the purchasing power of money over time, so it’s essential to consider this when making investment decisions. Investing in products such as index-linked annuities or government bonds can help protect against inflation risk and provide consistent income over the long term.

Consider different asset classes

Investing in different asset classes can help diversify your portfolio and minimise risk. This could include equities, fixed income (such as bonds), property, cash or alternative assets. Different asset classes have varying levels of risk and returns, so it’s essential to understand the risks associated with each before investing.

Don’t forget about taxes

Taxation rules change regularly, so it’s crucial to ensure you are up-to-date on the latest regulations to take advantage of potential tax breaks or benefits when investing after retirement.

Key points to consider

Income Tax:

Depending on your total income, including pensions, investments, and other sources, you may be liable to pay Income Tax. Keep track of your personal allowance, which is the income you can earn before paying Income Tax.

Capital Gains Tax (CGT):

When you sell an investment or asset that has appreciated in value, you may be subject to CGT. However, there is an annual tax-free allowance for capital gains, so ensure you know the current threshold.

Dividend Tax:

If you receive dividends from investments in shares, you’ll need to consider dividend tax. There’s a tax-free dividend allowance, but any dividends above this threshold will be taxed.

Inheritance Tax (IHT):

Proper estate planning can help minimise the impact of IHT on your loved ones. Make sure to understand the current IHT threshold and consider strategies such as gifting assets or setting up trusts to reduce potential tax liabilities.

Pension Contributions:

Even after retirement, you can still contribute to your pension and potentially receive tax relief on those contributions. This can be an effective way to grow your pension savings while reducing your overall tax liability.

Individual Savings Accounts (ISAs):

Utilising ISAs allows you to invest in equities, bonds, and other assets without being subject to Income Tax or CGT on the returns. Maximise your annual ISA allowance to take advantage of these tax benefits.

Rebalance your portfolio regularly

Once you have created a well-diversified portfolio, reviewing and rebalancing it regularly is essential. This will help ensure that it remains aligned with your goals and the risk profile you are comfortable with.

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

Building a diversified portfolio

What is it, and why is it important?

Trusting that your investments are progressing toward your objectives is vital, allowing you to concentrate on the things you value most in life. This is why building a diversified portfolio is crucial to any successful investment strategy. 

Diversifying your investment portfolio can limit your exposure to any single type of asset, therefore helping to reduce the risk and volatility of your portfolio. The primary goal is to spread your investment portfolio across many different asset classes to mitigate the risk of each.

Achieve long-term investing success

Investing in multiple different asset types ultimately means that certain investments’ positive performance neutralises others’ negative performance. Whilst this may be tipped in one way or another, it yields long-term, stable returns and lower risk over time.

Building a diversified portfolio is essential for anyone wanting to achieve long-term investing success. With the right approach, investors can create a balanced investment strategy that helps them reach their financial goals while minimising risk.

Understand your risk tolerance

Before you begin, it’s crucial to assess your risk tolerance. This involves evaluating your financial goals, time horizon, and comfort level with potential losses. Knowing your risk tolerance will help you select investments that align with your goals and preferences.

Choose a variety of asset classes

A well-diversified portfolio may include asset classes such as equities, bonds, cash, and alternative investments like property or commodities. Each asset class has its own risk and return characteristics, so including a mix of them can help balance your overall risk.

Invest in different sectors and industries

Within each asset class, diversify further by investing in various sectors and industries. This helps to protect your portfolio from downturns in specific areas of the economy. For example, if you invest in equities, consider holding multiple sectors like technology, healthcare, finance, and consumer goods.

Consider geographical diversification

Investing in different countries and regions can also reduce risk. Other economies and markets may respond differently to global events, so having exposure to international investments can provide additional diversification benefits.

Regularly rebalance your portfolio

Over time, the performance of your investments will cause some to grow more than others. This can make your portfolio unbalanced and expose you to more risk than you initially intended. To maintain your desired level of diversification, reviewing and rebalancing your portfolio periodically is essential.

Monitor and adjust

Keep an eye on your investments and the overall market conditions. Stay informed about global events that could impact your investments, and be prepared to adjust your portfolio if necessary.

Building a diversified portfolio requires time, research, and ongoing management. However, the benefits of spreading your risk and protecting your investments from market volatility make it a worthwhile endeavour for any investor.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

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

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Getting retirement ready

Key steps to achieving a comfortable retirement.

A comfortable retirement is a common financial goal, and contributing to a pension is essential to achieving it. Although retirement may appear distant at the moment, there’s much to consider. Let us assist you in navigating this crucial life milestone.

By planning ahead and making smart decisions about your savings, you can ensure a stable and enjoyable retirement.

Here are 10 steps to help you get pension retirement ready:

1. Assess your current financial situation

Start by evaluating your current financial standing, including your income, expenses, assets, and liabilities. Determine how much you can save for retirement without compromising your current lifestyle.

2. Set retirement goals

Think about the kind of lifestyle you want to have during retirement. Consider factors like travel, hobbies, healthcare, and support for family members. Estimate the annual income you will need to maintain this lifestyle, taking inflation into account.

3. Calculate your pension gap

Compare your projected retirement income with your current savings and expected pension benefits. This will help you identify any potential shortfall in your retirement fund, known as the pension gap. Knowing this gap will give you a clear target to work towards.

4. Contribute to your pension plan

Commit to regularly contributing to your pension plan. The earlier you start, the more time your investments have to grow, thanks to the power of compounding. Look into your employer’s pension scheme and take advantage of their matching contributions.

5. Diversify your investments

Don’t rely solely on your pension plan for your retirement income. Diversify your investment portfolio with other assets like equities, bonds and property. This will help spread risk and provide the potential to increase your returns.

6. Review your pension plans regularly

Revisit your pension plan at least once a year to ensure it’s on track to meet your retirement goals. Adjust your contributions or investment strategy if necessary, and contact us about seeking professional financial advice if you need clarification on your decisions.

7. Plan for the unexpected

Life can be unpredictable, so it’s essential to have contingency plans in place. Ensure you have an emergency fund to cover unexpected expenses and consider insurance policies like life and health insurance to protect yourself and your family.

8. Reduce debt before retirement

Aim to pay off high-interest debts, such as credit card balances and personal loans, before you retire. Entering retirement with minimal debt will reduce your financial stress and help you enjoy a more comfortable lifestyle.

9. Consider working part-time during retirement

If you’re concerned about your retirement income, consider working part-time or freelancing during your retirement years. This can provide additional income and help you stay active and engaged.

10. Stay informed about pension regulations and changes

Keep updated with any changes to pension regulations, tax laws, and investment options that could impact your retirement planning. Staying informed will help you make better decisions and adapt your strategy accordingly.

By following these steps, you can take control of your financial future and work towards a comfortable and fulfilling retirement. Starting early and staying consistent with your contributions and investments is vital to a successful pension plan.

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

Responsible asset selection

Supporting responsible practices and contributing to a sustainable future.

Environmental, Social, and Governance (ESG) investing is a strategy that focuses on companies that prioritise environmental, social, and governance factors in their operations. Investing in these businesses aims to support responsible practices and contribute to a sustainable future.

By focusing on companies with high ESG scores, investors can support sustainable and ethical businesses while enjoying the potential for superior financial performance.

Here’s a breakdown of the three ESG criteria:

Environmental:

This criterion evaluates a company’s impact on the environment. Factors such as energy use, sustainability policies, carbon emissions, and resource conservation are considered when assessing a company’s environmental performance. Companies with strong environmental practices often have lower environmental risks and demonstrate a commitment to reducing their ecological footprint.

Social:

The social aspect of ESG investing examines how a company treats its employees and interacts with the communities in which it operates. Businesses prioritising employee welfare, workplace safety, and community engagement are more likely to have a positive social impact and maintain a good reputation. Supporting companies with strong social values can promote fair labour practices and foster a more inclusive society.

Governance:

Governance factors relate to a company’s leadership, management, and overall corporate structure. Key considerations include executive compensation, audit processes, internal controls, board independence, shareholder rights, and transparency. Companies with robust governance structures are more likely to be accountable, trustworthy, and better prepared to manage potential risks.

By considering ESG factors in investment decisions, investors can support companies that demonstrate a commitment to sustainability, ethical practices, and strong governance. This approach aligns investments with personal values and can lead to long-term financial benefits, as ESG-focused companies are often better equipped to navigate evolving regulations, mitigate risks, and capitalise on emerging opportunities.

Focused on sustainability, ethical practices, and strong governance

ESG factors are increasingly essential for investors when evaluating companies and making investment decisions. Investing in high-scoring ESG companies allows for responsible and ethical investments without sacrificing returns. Numerous studies have shown that companies with strong ESG performance tend to outperform their counterparts with lower ESG standards.

High ESG scores indicate that a company is focused on sustainability, ethical practices, and strong governance, which can lead to long-term success and reduced risk exposure. These companies are more likely to be resilient in market fluctuations and other challenges.

On the other hand, businesses with low ESG standards have often faced consequences like declining share prices and reputational damage. Examples of such companies include those causing significant environmental harm, engaging in unethical practices, or attempting to cheat regulatory systems. These events can lead to financial losses for investors who hold shares in these companies.

Challenges of ESG Investing: Greenwashing and Subjectivity

ESG investing has gained significant traction recently as investors increasingly seek to align their portfolios with ethical values. However, the varying interpretations of ESG categories and the rise of ‘greenwashing’ can make it challenging for investors with specific ethical requirements to navigate this space.

Subjective nature of ESG

One of the main challenges of ESG investing is the subjectivity in evaluating companies based on their environmental, social, and governance policies. What is considered a responsible investment for one person could be unethical by another. For instance, a sugary drinks manufacturer may have an excellent recycling policy, earning them high marks in the ‘E’ category. However, some investors might argue that sugary drinks are detrimental to society, making the company an unsuitable investment choice.

This subjectivity makes it difficult for investors to find a universally agreed-upon standard for determining whether a company or fund meets their ethical criteria.

Threat of greenwashing

Another challenge facing ESG investors is the phenomenon of ‘greenwashing,’ where companies or funds market themselves as environmentally friendly or socially responsible when, in reality, they do not meet these standards. This deceptive practice can lead to investors unwittingly supporting businesses that do not align with their values.

To combat greenwashing, investors must conduct thorough due diligence on the companies and funds they are considering. This may involve reviewing third-party ESG ratings, examining a company’s sustainability reports, and scrutinising the portfolio holdings of ESG-focused funds.

Navigating ESG investing challenges

Despite the challenges posed by subjectivity and greenwashing, ESG investing remains an essential tool for those who wish to align their financial goals with their ethical values.

To successfully navigate these obstacles, investors should:

Clearly define their values and priorities when it comes to ESG issues.

Conduct thorough research on companies and funds, utilising third-party ESG ratings and other available resources.

Be cautious of companies or funds that make bold sustainability claims without providing concrete evidence to back them up.

Diversify their investments across ESG-focused companies and funds to mitigate the risk of inadvertently supporting unethical businesses.

By taking these steps, investors can better ensure that their investment choices align with their ethical values and contribute to a more sustainable and socially responsible future.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

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

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Maximising your investments in your 50s

Time to evaluate whether you need to modify your objectives or saving strategies?

As you enter your 50s, retirement is no longer a distant dream but a rapidly approaching reality. Ensuring that your investments work diligently to secure the lifestyle you envision for your golden years is crucial. By optimising your financial strategy now, you can confidently retire according to your personal goals and aspirations.

Defining your retirement savings target may have been on your financial to-do list for some time. However, delving deeper and establishing a more precise goal is essential. Determining the amount you need to save for retirement involves considering your desired retirement age, post-retirement activities, expected investment returns, and inflation rates.

Obtaining professional financial advice will provide valuable insight into your retirement savings’ longevity, helping you evaluate whether you need to modify your objectives or saving strategies. By refining your retirement goals, you can work towards a concrete target and ensure a comfortable and secure future.

Evaluate your investment strategy in your 50s

In your 50s, as you approach retirement, it’s crucial to reassess your investment portfolio to ensure the proper balance between risk and reward. The level of risk suitable for you will depend on your retirement funding plan and target retirement date.

If you plan to purchase an annuity in a few years, it may be wise to gradually shift your pension fund from equities to lower-risk assets like cash. This helps avoid a potential stock market downturn that could deplete your pension just before you need to buy an annuity.

On the other hand, if you intend to finance your retirement through income drawdown and additional savings and investments, moving to cash too early might result in your money running out sooner than expected. Maintaining some exposure to equities allows your portfolio the chance for long-term growth. Remember that your retirement could last for several decades, during which inflation will decrease the real value of your savings and diminish your money’s purchasing power.

One way to counter rising prices is to stay invested in the stock market, as history demonstrates that it performs better than cash and outpaces inflation over extended periods. Diversifying your investments across various asset classes can help your portfolio withstand market fluctuations.

Obtaining professional financial advice will help you determine the ideal asset mix for your situation, considering your investment horizon and risk tolerance.

Boost your retirement savings with pension tax relief

Pensions are a powerful tool for saving for retirement, especially when you’re in your 50s. One of the main reasons for this is the tax relief you receive on personal pension contributions. This tax relief can significantly enhance your retirement savings, making it essential to focus on your pension as you approach retirement.

When you make a pension contribution, the government provides tax relief, essentially free money. For example, a £1,000 pension contribution would only currently cost you: £800 if you’re a basic-rate taxpayer, £600 if you’re a higher-rate taxpayer, and; £550 if you’re an additional rate taxpayer. This tax relief can help you grow your retirement savings more quickly and efficiently.

You can contribute up to 100% of your UK relevant earnings or £60,000 (whichever is lower) into your pension each year until age 75 while still benefiting from tax relief. However, your pension annual allowance could be lower than this if you have a very high income.

If you wish to save more than your annual allowance, you can utilise unused allowances from the previous three tax years under carry-forward rules. This option allows you to maximise your pension contributions and use the tax relief available.

Focusing on your pension and taking advantage of tax relief is a smart strategy for those in their 50s looking to boost their retirement savings. Understanding the benefits of pension tax relief and maximising your contributions can ensure a more financially secure future during your retirement years.

Maximise your tax allowances

As an investor, there are numerous tax allowances you can take advantage of to maximise your financial benefits. One such allowance is the Individual Savings Account (ISA), which currently allows you to invest up to £20,000 per year (tax year 2023/2024) and enjoy tax-efficient income and growth.

With the flexibility to withdraw from ISAs without paying tax, they serve as a valuable income source for those retiring before age 55 (the current normal minimum pension age (NMPA) and contribute to a tax-efficient retirement income portfolio. Starting from April 6, 2028, the NMPA will increase to 57. This change may affect you differently depending on your birthdate.

Other essential allowances to explore include the personal savings allowance, dividend allowance, and capital gains tax exemption. These allowances currently allow you to earn tax-free interest up to £1,000, depending on your marginal income tax rate. Additionally, you can receive tax-free dividends up to £1,000 and enjoy tax-free investment gains up to £6,000 for the 2023/24 tax year (the allowance is set to reduce to £3,000 in April 2024).

Obtaining professional financial advice will help you optimise your allowances and structure your portfolio for maximum tax efficiency. By leveraging these allowances, you can make the most of your investments and secure a comfortable financial future.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

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.

Are we entering an investment bond renaissance?

Exploring why they are an attractive option to mass-affluent investors.

Onshore investment bonds typically carry a lower risk and contribute significantly to a well-rounded portfolio. Historically, numerous investors have opted for a 60% equities and 40% bonds split in their portfolios, as these two assets often (keep in mind, not always) exhibit contrasting performances under varying economic circumstances – a beneficial attribute during market volatility.

Following the Capital Gains Tax (CGT) changes announced in last year’s November Budget, many investors are likely considering investment bonds a more attractive option. The Chancellor’s decision to reduce the CGT allowance to £6,000 this year and to £3,000 in April 2024 means investment bonds are more attractive to mass-affluent investors who previously held money in OEICs and unit trusts.

Investment bonds offer several benefits:

Onshore bonds are not liable to CGT. Onshore bonds are treated as having already paid 20% tax on any gains when calculating a chargeable gain. In reality, the tax deducted is likely to be less than this.

They can be ideal for Inheritance Tax (IHT) planning and are exempt from IHT after seven years if held in a trust.

Investors can withdraw up to 5% of their initial investment annually without triggering a chargeable event or any immediate tax liability.

Top slicing relief available to reduce tax liability, which can eliminate or significantly reduce any tax liability when a chargeable event is incurred – helpful if investors are in the accumulation phase and are preparing for retirement (maybe a higher rate taxpayer while owning the bond, but a basic rate taxpayer when encashing).

Options to assign a bond (for example, between husband and wife). For tax purposes, the assignment will generally be treated as if the new owner had always owned it – If one is a basic rate taxpayer, they could have no tax to pay on encashment.

Have you exhausted your other tax allowances?

Changes to CGT and the tax-free dividend allowances are also likely to appeal to investors looking to reduce IHT liabilities and those who have used their Individual Savings Account (ISA) allowances or received a large windfall payment.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

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

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Normal Minimum Pension Age update

Essential information for your retirement planning.

A significant change is on the horizon that may affect when you can access your pension money. We’ll guide you through this change and its potential implications, so you can confidently prepare for retirement.

The current normal minimum pension age (NMPA) is 55, which means you can start taking your pension savings once you reach that age. Some exceptions exist, such as if you’re experiencing ill health or have a lower protected pension age. However, the general rule applies to most people.

Starting from April 6, 2028, the NMPA will increase to 57. This change may affect you differently depending on your birthdate.What does this mean for me?

What actions should I take?

If you were born after April 5, 1973:

It’s a good idea to review any existing plans to determine if the change will affect them. You may need to plan for another couple of years of saving, which could alter your retirement income. No action is required if you didn’t intend to access your pension savings before turning 57.
Regularly reviewing your retirement plans is a smart habit, especially as you approach the age when you’d like to start accessing your pension savings.

If you were born after April 6, 1971, but before April 6, 1973:

You have two options – carefully consider which one best suits your circumstances.

Option 1: Access your pension savings before the deadline

If you don’t want to wait until you’re 57 to access your pension savings, you’ll need to begin withdrawing funds between turning 55 and April 6, 2028. Remember that you can access your pension savings without taking large or regular amounts; you can decide what’s right for you. However, obtaining professional financial advice before making any decisions is essential.

Remember that leaving your pension savings invested longer allows for potential growth. Also, note that taking taxable money from your plan (anything exceeding your tax-free entitlement) may reduce the amount you can contribute to your plan due to the money purchase annual allowance. Learn more about this on our website.

Option 2: Wait until you turn 57

No action is needed if you weren’t planning to access your pension savings before age 57. You can access your pension savings at any time after turning 57. However, if you withdraw funds before April 6, 2028, you’ll retain the opportunity to do so before age 57.

If you were born on or before April 6, 1971:

No action is required, as you will already be 57 when the change takes effect, and your retirement plans won’t be impacted.

Not retired yet? Review your retirement date

Even if you can no longer access your money at 55, your retirement date may still be set to your 55th birthday. It’s worth checking it now.

You can change your retirement date anytime, but the chosen date can affect your plan. For example, if you’ve invested in a lifestyle profile, your pension investments are designed to transition to lower-risk investments as you approach your retirement date. This helps reduce the impact of market fluctuations on your pot’s value.

If your retirement date is set to your 55th birthday, but you don’t plan to access your money until 65, your investments won’t align with your plans, potentially affecting your pension savings’ value when you’re ready to withdraw them.

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

Price of adulthood

Financial responsibilities increase significantly after 25.

Paying essentials like utilities and council tax becomes a reality as young adults transition from student life to the workforce. The reality of financial responsibilities often accompanies the excitement of newfound independence during one’s mid-twenties.

According to research, young workers may find their first salaries insufficient to cover necessities like utilities and council tax. The study reveals that the number of people making regular payments significantly increases among those aged 25 to 34 compared to those aged 18 to 24[1].

The data highlights that only 34% of 18 to 24-year-olds currently pay utility bills, but this figure doubles to 68% among 25 to 34-year-olds. Similarly, internet usage payments rise from 45% for 18 to 24-year-olds to 70% for 25 to 34-year-olds.

Tips for managing regular payments

By following these tips and taking control of their financial responsibilities, young adults can ease the transition from student life to the workforce and set themselves up for a more secure financial future.

Create or review your budget

A household budget can help you afford essential costs and identify potential savings. It can give you peace of mind about whether you can afford your essential expenses and have money left over for any non-essentials. If you already have a budget, it’s worth checking to see if it’s still working for you, especially as many costs have risen over the last few months.

Looking closer at your current and past spending habits, you might find ways to cut costs in the future – freeing up some money to put elsewhere. Budgeting apps can analyse your spending and categorise expenses, making finding areas where you can cut costs easier.

Check for savings

Find opportunities to cut costs by switching providers or finding better phone contracts or utility bill deals. It’s always worth seeing if you can cut costs by changing providers or shopping around to see if you can get a better deal on your phone contract or utility bills, for example.

Nowadays, switching providers is a relatively seamless process, and it can save you substantial amounts. As you age, you should check for any discounts or benefits you’re entitled to.

Set goals and consider ways of saving

Establish clear savings goals and explore options to manage your finances better. Even if you don’t have the money to set aside right now, analysing your options will help you better manage your finances. If you can save, first try to build up a ‘rainy day fund’ for those unexpected expenses that can tip monthly budgets over the edge, like an appliance or car repairs.

Consider long-term savings and retirement planning

Saving into a pension plan offers tax relief on payments, and employers often contribute as well. They offer tax relief on your payments, so putting money into one can cost less than you think. If you have a workplace pension plan, your employer will typically pay into this – usually making a minimum payment of 3% of your earnings.

In comparison, your minimum personal contribution generally is 5%, with some employers willing to pay more. Some even match the employee payments up to a certain amount – meaning if you can put in more, they will too. It might be worth checking to see what’s possible, as this is a great way to boost your pension savings. Starting contributions early can significantly impact your total retirement fund.

Source data:
[1] Boxclever conducted research among 6,000 UK adults. Fieldwork was conducted 6th Sept – 16th October 2022. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

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