Wealth succession

Making the right preparation for future generations.

Financial planning can be a daunting and uncomfortable conversation for many, but thankfully attitudes towards talking about money are changing. Wealth succession should be an integral part of your financial plan as early as possible – because the right preparation now can have positive long-term impacts on future generations.

Despite the uncertain economic climate, families are doing their utmost to ensure they can leave behind a secure financial future for their children and grandchildren. According to predictions, the amount of wealth passed on in the next two decades could double, with estimates this figure could be as high as £5.5 trillion by 2047[1].

Worryingly, an astounding £15bn inheritance still remains unclaimed due to people not informing their beneficiaries about the existence of these funds[2]. With careful planning, you can ensure that your assets are passed on securely for generations to come.

When it comes to transferring wealth between generations, having an open dialogue is paramount for creating the best outcome for everyone.

Before you start this process, consider the following questions:

When do I want to transfer my wealth?
How much wealth do I want to pass on?
Whom do I want to pass my wealth on to?
How do I want to transfer my wealth?

These four questions are closely interconnected – and with careful planning and discussion, you can ensure that your assets are handed down as simply and tax efficiently as possible.

1. When do I want to transfer my wealth?

Keeping your Will up to date is an important part of planning for the future. Not only does it ensure that your wishes are carried out, but having a Will that reflects the current legal landscape where you hold assets can allow for greater flexibility and potential advantages.

Transferring assets during your lifetime may also bring benefits and provide you with the opportunity to experience seeing your chosen beneficiaries benefit from your funds. It’s important to take professional advice to determine which option is best for you and your family.

It’s important to review your Will regularly, such as every two to three years or when there is a major change in your or your family’s circumstances. For example, marriage revokes any existing Will in England and Wales unless it was made in anticipation of that marriage. To protect legacies from inflation, consider linking their value to inflation so they maintain their ‘real’ value over time.

Using your Will to transfer wealth enables you to preserve your own standard of living and future security. On the other hand, giving gifts during your lifetime allows you to witness seeing your beneficiaries experience the benefits of your funds.

Furthermore, if you are subject to UK taxes, it may also be more tax-efficient to act sooner rather than later. Ultimately, each person has different objectives and priorities when it comes to wealth succession; what’s important is striking the right balance between sharing your wealth with loved ones and ensuring that you have enough left to maintain your quality of life and prepare for whatever the future may bring.

Wealth planning involves considering various scenarios and ‘stress-testing’ the outcomes against assumptions such as potential investment returns, inflation projections and long-term care costs. This helps ensure that individuals are prepared for different eventualities and can make better informed decisions about protecting their wealth.

2. How much wealth do you want to pass on?

When making large gifts, cashflow ‘stress-testing’ allows you to make informed decisions on how much you can afford to part with, despite the uncertainty of the future. Knowing this, it is vital to allow for both worst and best case scenarios within your gifting range when planning your wealth. When calculating how much wealth you want to pass on, it is important to consider a few factors.

First, the amount of assets you want to transfer should be enough to cover future costs such as taxes or estate planning services. You should also factor in inflation and other potential investments that could increase the value of your assets over time.

Additionally, you need to think about the lifestyles and needs of your beneficiaries and consider how much money will be required for their future needs. It is important to consider all of these factors when determining how much wealth you want to transfer, as this can have a significant impact on your legacy.

Ultimately, it is essential to have a thorough understanding of your goals and financial situation when calculating wealth-passing decisions. By taking the time to consider all of these elements, you can ensure that your hard-earned wealth is passed on in a way that honours your wishes and provides for your beneficiaries.

3. Whom do you want to pass your wealth on to?

With regards to deciding how to share your wealth, the choice is yours. Should you have young grandchildren, a trust structure could be beneficial in covering their long-term costs such as education, university fees or property purchases.

You can keep some control by being a trustee yourself, especially if one of your beneficiaries has special needs, as this helps ensure the trust deed works for their long-term interests. In addition, you may want to benefit charities close to your heart. Ultimately, the decision is an entirely personal one and should take into account timing and other factors that matter most to you.

4. How do you want to transfer your wealth?

When it comes to transferring your wealth, there are a lot of important considerations. It’s essential to understand the different options you have and ensure that your plans meet your financial goals. Before making the decision to gift during your lifetime, it pays to take a step back and assess whether you are able to afford it.

If yes, there are further considerations regarding when and how. Steps 1 to 3 can help determine whether an absolute transfer or trust structure is most suitable; while trusts add complexity, they may be the best way of achieving your goals. Ultimately, timing and affordability must
be kept top of mind in this process.

Source data:
[1] fwu-report-final-version-20-april-2022.pdf (mandg.com)
[2] https://www.independent.co.uk/money/spend-save/inheritance-will-investment-pension-assets-life-insurance-a8927966.html

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.

INHERITANCE TAX AND ESTATE PLANNING ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

Giving retirement a second thought?

Over a third of OVER-55s think they will work beyond their state pension age.

We are witnessing a surge in the number of people giving retirement a second thought due to inflation rates and the cost of living crisis. Not only are more individuals looking to work beyond their State Pension age, but some are returning to employment after retiring due to increasing financial pressures.

Over 2.5 million people aged 55 and over will be impacted by the long-term effects of financial insecurity and think they will continue to work past their State Pension age. Additionally, half of those aged 55 and over don’t believe their pension is enough to fund their retirement, a new survey has revealed[1].

Increasing cost of living

Nearly four in ten over-55s who are not retired anticipate having to work past their State Pension age due to the increasing cost of living. Financial concerns surrounding retirement funding are the top drivers behind working beyond State Pension age.

A quarter (23%) are uncertain of how long their retirement savings will last, and almost one-fifth (18%) admit to not having made any preparations for when they stop working.

Ability to remain employed

Nearly half (46%) of the millions of older workers expecting to work past their State Pension age are apprehensive that doing so will mean they can’t enjoy their later years.

Health, too, is another major concern, with nearly half (45%) worrying their health will deteriorate as a result of having to continue working and more than a third (35%) concerned it will affect their ability to remain employed.

Heavy financial strain

Worryingly, 16% are concerned about being treated differently or worse at work because of their age and the same number worried about not being able to spend enough time with their family due to work commitments.

Looking ahead, the older workforce is expected to be crucial to the UK’s economic recovery as it will help ease severe labour shortages, yet this warning sign points to heavy financial strain many are facing.

Source data:
[1] Survey conducted by Opinium among 2,000 UK adults between 21–25 October 2022.

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

Rising prices can wipe years off retirement pots

How to protect your pension income against inflationary pressures.

For anyone feeling the effects of rising inflation rates, it’s important to ensure that your retirement fund isn’t significantly impacted. While this can be challenging in such an uncertain economic climate, there are measures you can take to ensure that your savings don’t suffer.

Here are some tips to help you protect your pension income for the future.

Postponing retirement

Retiring later can have multiple advantages. It can be a financially wise decision to postpone retirement when inflation is high. Postponing retirement also gives you more time to invest and contribute funds towards your pension pot, allowing you to enjoy a larger sum of money when you eventually retire. Additionally, individuals who choose to retire later can benefit from longer periods of regular income which can be used for extra retirement savings to combat the impact of inflation in retirement.

Furthermore, delaying retirement will allow you to better prepare for future financial commitments such as mortgage repayments and other cost of living outgoings. If appropriate, by postponing your retirement you can make sure that you have the financial security and peace of mind needed for a comfortable retirement.

Consider where your pension is invested

When inflation rates are high, it’s important to take steps to ensure that your retirement savings aren’t adversely affected. Not only will this give you peace of mind about the future value of your pension pot, but it may also prove to be financially rewarding in the long run. One of the most effective ways to do so is by diversifying your investments and spreading out your money across different asset classes.

Having a diverse portfolio can help protect you from losses due to market volatility or inflation and provide access to a broad range of investments while reducing risk. Keeping track of these fluctuations enables you to plan ahead and adjust your investment strategy as necessary. By taking all these factors into consideration, you can ensure that your retirement savings are secure even in a period of high inflation.

Keep contributing

Despite inflationary pressures, continuing to contribute to your pension pot can be a wise decision. Not only is your retirement fund likely to outperform cash savings, but it also allows you to take advantage of the tax relief top-up on contributions offered by the government.

The amount of relief you receive is based on the rate of Income Tax that you pay. If you are in the highest rate Income Tax bracket you can claim additional relief through your self-assessment tax return, enabling you to save even more for your retirement. However, depending on how your pension scheme works, if you don’t pay tax you might not receive tax relief.

Already withdrawing a pension

For those with a defined contribution pension who are already taking an income, it might be beneficial to reduce the amount you are withdrawing in order to keep more of your pot invested. This strategy can help protect your retirement fund against volatile markets and rising inflation levels as the fund manager will monitor the investment performance, making necessary adjustments.

Those with a defined benefit pension need not worry about adjusting for inflation as this is taken care of automatically.

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

Goals don’t just happen, you have to plan for them

How professional financial advice benefits both you and your family.

When it comes to managing your finances, the wealth of resources now available can make it easy to try and go it alone. However, obtaining the right advice from a qualified professional financial adviser will ensure you are able to plan ahead by including expectations for items such as inflation, market declines and your protection requirements, so you can stay on track.

Receiving professional advice is one of the main advantages of working with a financial adviser. Without obtaining this advice, there may be risks that you are disregarding. Emotional factors also have an influence on financial decisions and these can cloud our judgement, causing us to make illogical or irrational choices.

Achieving your goals

This includes confirmation bias, when we seek out information that reinforces an existing belief, which can lead to overconfidence in investment decisions. Your financial adviser will help provide objectivity and identify any possible risks you may not be aware of.

Having financial goals is also one of the main reasons to obtain advice. Whether it’s planning for retirement or another objective, having an experienced professional by your side can help you create and execute an investment plan tailored to achieving your individual goals.

Successful investment portfolio

If you are planning for your retirement, you now have more choices than ever before. While this offers numerous opportunities, it also means that careful consideration and knowledge of pension allowances, tax-efficient savings and other factors have become essential in order to ensure a comfortable retirement.

Knowing what assets you hold and having a clear strategy is key to creating a successful investment portfolio, but these portfolios can become complicated over time. For example, you may have investments with several different providers, overlapping funds or funds that don’t align with your goals any longer.

Start minimising taxes

In such cases, it may be beneficial to bring all of your investments together and simplify the portfolio. Your adviser will help you do this, as they will be able to construct a streamlined portfolio with a clear strategy suited to your specific needs and risk tolerance.

When it comes to wealth building and preservation, tax planning is key. Investing within an Individual Savings Account (ISA) can be a way to start minimising taxes. However, there may be more complex strategies available that could further reduce the amount of taxes you have to pay. That’s where professional advice, if appropriate, will ensure you are able to maximise your tax savings by taking advantage of alternative sophisticated strategies.

Providing invaluable guidance

In addition, to maximise potential returns within your risk appetite, it will be appropriate to look beyond domestic stocks. When managing your own portfolio, you may sometimes be guilty of suffering from ‘home bias’, which involves over-investing in local stocks at the cost of international ones. Your financial adviser will help you to use the full breadth of investment opportunities and make sure that you are getting the best potential returns.

If you have recently come into a large sum of money, it can be difficult to know what to do with it. Your financial adviser can provide invaluable guidance in this situation and help you make the right decision. You’ll have many questions such as should the money be invested or used to pay off your mortgage? Will there be tax implications? And is it best to invest all at once or over time? It’s important to remember that tax treatment varies according to individual circumstances and is subject to change.

Complex financial matters

Your adviser will be able to assist you with these decisions, ensuring that you get the best possible returns and maximise your wealth in the long term.

When it comes to complex financial matters, receiving professional financial advice is important. For instance, the introduction of the Lifetime Allowance means that investors must now be aware of how much they accumulate in their pension accounts, or risk facing an excess tax charge. With expert guidance, you can plan accordingly and make sure that your retirement goals are met without risking a substantial tax bill.

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.

A PENSION IS A LONG TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND ON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

We are delighted to announce Gary Hanley's appointment as Director

We are pleased to announce that Investing For Tomorrow team member, Gary Hanley, has been appointed to our board of directors.

Gary joined the company in October 2017 as our Senior Paraplanner where he very quickly became a very important member of Investing For Tomorrow. He soon went on to achieve his Chartered Financial Planner status and we are delighted to welcome him to the board alongside Laurence and Toby.

When asked for a few words, Gary responded:

“Anyone who knows me knows I am not one for a big fanfare or long speeches! But above all, I am a family man and what I love about Investing For Tomorrow is the family ethos that runs through the company. I remember sitting-in on one of Laurence’s meetings when I joined the company. When a new client agreed to engage us as their Financial Advisers he shook their hand and said “welcome to the IFT family”. For me this is at the heart of Investing For Tomorrow. It is this ethos that makes staff members, and clients, feel like they are valued individuals and not just a number like you can sometimes feel with larger multinational companies.”

Managing Director Toby Turner added:

“Gary has a very keen eye for compliance and has worked very closely with the existing Directors to ensure that we remain fully compliant with each and every facet of the FCA regulations as they change from time to time. He has consistently helped us to push the business forward on several fronts. It was a natural progression for him to be appointed a Director and we are thrilled to have him join us on the Board.”

We are confident that with Gary’s help, Investing For Tomorrow will continue to grow and embrace any new challenges ahead. We are proud to welcome Gary to the board of directors to help steer the ship.

Financial jargon

7 out of 10 adults are puzzled by financial matters lingo.

Being informed about financial matters is essential to making sound decisions and staying in control of your money. Unfortunately, many people feel confused by the jargon used in financial discussions and services.

A recent study of UK adults reveals that seven in ten feel puzzled by financial jargon, while three-quarters don’t understand the concept of ‘the economy’[1]. Those aged 18-24 are the least likely age group to be confused by financial terms, with only 52% feeling puzzled compared to 69% across all age groups.

Most at a loss

However, younger respondents admit to being the most at a loss when it comes to managing money. 58% of those aged 18-24 confess they are perplexed by this task, compared to only 23% of people aged 55 and over.

The study revealed that younger people are also less likely to have heard of financial products and terms, which could explain why those aged 18-24 are the least confused by financial jargon. The survey also found that only 61% of 18-24s have heard of the term ‘pension’ compared to 97% of respondents aged 55 and above.

Financial terminology

In addition, only a quarter (25%) of 18-24s know about ‘contents insurance’ whereas almost all (92%) of those aged 55+ have heard this phrase. Furthermore, less than three-fifths (57%) of 18-24s recognise the term ‘inflation’.

The results suggest that although younger respondents may not be as confused by financial terminology as other age groups, they may lack understanding when it comes to some key financial products and money management skills.

Lack confidence

Despite having heard of some key investing terms, many people lack confidence in understanding what they mean. Just 43% of those who have heard the term ‘gilt’ know its meaning and only 59% of those aware of an ‘annuity’ feel confident in its definition. Similarly, 61% of people who have heard of an ‘ESG fund’ are comfortable with its meaning.

Many people find financial matters confusing and it can be easy to avoid the things we don’t understand. However, once these matters become clear, it can lift a huge weight off our shoulders.

Source data:
[1] The research was carried out by Ipsos UK on behalf of Aviva. Ipsos UK interviewed a representative quota sample of 2,379 adults aged 18+ in the United Kingdom using its online i:omnibus between 1–3 November 2022.

Perfect storm

Major long-term ramifications for financial health and wellbeing.

A perfect storm of global and domestic factors has contributed to spiralling inflation in the UK, triggering a cost of living crisis. This is pushing up the prices of food, fuel and housing. This crisis is by far the top concern for UK consumers: 58% are very worried about it, rising to 69% of women, according to research[1].

Three-quarters of those aged 50 and over are also worried about how the cost of living will impact their retirement with one in two (53%) fearing that they won’t have enough income to survive financially when they stop working[2].

Weather the cost of living crisis

Interestingly, only 42% of people are very worried about inflation specifically, suggesting a lack of understanding about what’s driving the crisis. After two decades in a low inflation and interest rate environment, an abrupt change in the economic climate has prompted many UK households to relook at their personal finances so they can weather the cost of living crisis.

Everyday luxuries like subscription services and holidays have been first to go as we tighten our belts. But faced with double digit spikes to fuel and everyday essentials, many feel more radical changes to household finances will be required to steady the ship.

Not being able to save enough

Worryingly, the research suggests that families are increasingly prepared to pause savings and investments, and some would even cut back on pensions contributions or dip into their nest eggs, actions which could have major long-term ramifications for their financial health and wellbeing.

The key findings are that more than one in five (22%) people across the UK are having sleepless nights worrying about the economic environment. Their top concerns are 58% cost of living, 42% rising inflation and 29% not being able to save enough towards retirement.
Most people are not prepared for the squeeze – 55% say they are not confident their finances will hold up against the rising cost of living.

Making or considering financial changes

53% are concerned about not being able to save for their emergency fund given the current economic environment, and 54% are worried they’ll use up all of their emergency savings to cover the cost of living rise. 59% of people are concerned they’ll need to work for longer as a result of today’s cost of living.

People are making or considering financial changes which will have long-term ramifications. 11% of consumers have given up investing, and a further 17% plan to do so. Asked more broadly about their finances, more than half of adults (55%) say they are not confident their finances will hold up against the rising cost of living.

Least confident age group

Of this, 34% say they are not very confident and 21% say they are not at all confident. This surges higher among women, with 63% of women saying they’re not confident compared with 47% of men who say the same.

Delving into the detail, those aged 45-54 are the least confident age group around the strength of their finances – 63% are not confident. This is closely followed by 35-44-year-olds (62%) and then 25-34-year-olds (59%) who say the same.

Source data:
[1] Research was carried out by Censuswide for Charles Stanley among a UK representative sample of 2,086 UK adults. The survey was completed between 09/06/2022 and 13/06/2022.
[2] Conducted by Perspectus Global – 1,000 UK based Britons aged 50 and over was commissioned by Unbiased during April 2022.

Feeling the pinch

Women more vulnerable to cost-of-living crisis.

Throughout their lives, women face a number of challenges that can place them at a financial disadvantage compared to their male counterparts. This can include inequality of pay at work, taking career breaks or taking part-time positions due to an expectation they will take on greater responsibility for family commitments.

This often leaves them less financially resilient and in the context of the cost of living crisis, where everyone is feeling the pinch, it places additional pressure on their financial wellbeing. This can have an impact in the here and now but can also contribute to inequalities in the long term, such as with pension savings.

Financial resilience overestimation

Working women are significantly closer to the breadline if they lose their income and more vulnerable to the cost of living crisis, according to new research[1]. On average, working women are only 14 days away from the breadline in the event they lose their income. This is significantly less than the average working man, who would be able to meet their household costs for 28 days. The household average stands at 19 days.

While the average working woman has comparable debts to men (£558 vs. £665), they have significantly less set aside in all their savings and investments (£1,801 vs. £3,214). With a daily expenditure of £90, calculations show that women would only be able to fund their household spending for two weeks with no income. On average, women overestimate their financial resilience, assuming they are 60 days from the breadline; this is compared to men who assume they have 90 days.

Reducing essential spending

Women are considerably more likely to view the cost of living crisis as a ‘constant source of worry’ (78% vs 68% of men) and therefore take action to address it. Women are much more likely to be cutting back on luxuries (86% vs 76% of men) and reducing essential spending where possible (72% vs 65% of men).

On average, working women surveyed have a lower median annual personal income (£23,245 vs. £31,070), likely due to a number of reasons. Statistics show that in 2021, the gender pay gap among full-time employees was 7.9%, up from 7.0% in 2020[2], signalling that women in full-time employment continue to get paid less than their male co-workers.

Emphasis on budgeting

Similarly, working women are significantly more likely to be in part-time employment compared to men (31% vs 11% of men surveyed), with the expectation of domestic and caring responsibilities often placed on women’s shoulders.

While the cost of living crisis has placed an emphasis on budgeting and financial planning, women’s financial wellbeing still faces considerable challenges in the long term. Research from earlier last year showed that, on average, women’s pensions are half the size of men’s (£12,000 versus £26,000)[3].

Source data:
[1] Online survey among 5,021 UK consumers using Savanta’s proprietary consumer panel between the 28th June and 5th July 2022. The survey covered employed & self-employed consumers aged 18 to 65 only, approximately nationally representative but ensuring a minimum sample in every region of the country.
This extrapolates to approximately 31.228 million adults in the UK. Results were re-weighted to represent the UK population in terms of age/gender, region & employment status. All averages that are shown are median values. References to income refer to household income.
Basic expenses are housing costs, loans/ credit card repayments, utility bills and food. When savings and investments are referred to it includes both personal and household.
Legal & General’s Deadline to Breadline report, explores financial resilience, security and engagement of working households across the UK. The report contains key ‘conversation starters’ for advisers to help with tricky questions during this difficult time for clients.
[2] Office for National Statistics (ONS), Gender pay gap in the UK: 2021, 26 October 2021
[3] Legal & General analysis of based LGIM’s proprietary data on c4.5 million defined contribution members as at 1 April 2022 but does not take into account any other pension provision the customers may have elsewhere.

Tracing old and lost pensions

Nearly half of pension holders have lost track of some of their pension pots.

The lost pensions challenge in the UK has grown significantly in recent years, further exacerbated by the pandemic, which resulted in a large proportion of people moving jobs. A recent Pension Policy Institute research briefing calculated the total value of lost pension pots has grown to £26.6 billion in 2022[1].

If you’ve worked for several employers throughout your career, you might have accumulated multiple pension plans. You may also have set up personal pensions, especially if you’ve been self-employed or a contractor at some point.

Administrative burden

Owning multiple pensions can be an administrative burden, but it could also be costing you financially – whether that’s through excessive fees or poor investment performance. Today, nearly half (46%) of UK pension holders have lost track of some of their pension pots, according to new research[2].

This means that – against the backdrop of the rising cost of living – millions of people across the country could right now be missing out on pension pots that are sat with their previous employers.

Retirement plans

Nowadays, the average UK employee has 11 jobs over their lifetime, the research highlights. So while it’s understandable that savers may forget how many pension pots they’ve accrued over the years, they currently risk incurring unnecessary management fees – or even missing out on those savings altogether – at a time when higher inflation threatens to spoil their retirement plans.

Moreover, savers who have kept track of their pension pots will be in a much better position to make informed retirement decisions when they get older. 13% of people did not know how to track down a pension pot from their previous job. And although savers currently have the option of combining their pensions, 16% didn’t know how to go about tracing their lost money.

Multiple pensions

This lack of knowledge is particularly worrying. Having multiple pensions with different employers or pension providers can create an unnecessary headache for retirees, and this will come at a time in life when things should ideally be less challenging for them.

To complicate matters even further, the number of workers with small pension pots of under £1,000 has skyrocketed in recent years. The Pensions Policy Institute (PPI) has predicted that the problem is only going to get worse, with the number of small pots set to triple to 27 million by 2035.

Better retirement

The recent PPI research on lost pension pots also indicated that the speed at which pension pots were being classified as lost was increasing, with an extra 1.2 million pots having been ‘lost’ in the four-year period between 2018 and 2022. That’s a 75% increase in lost pots in just four years.

While consolidation will not be the best option for all pots, for some people consolidating their pensions into one pot would undoubtedly bring them much closer to their money, increasing their sense of ownership and control, and potentially setting them up for a better retirement.

Source data:
[1] Source: https://www.pensionspolicyinstitute.org.uk/sponsor-research/research-reports/2022/2022-10-27-briefing-note-134-lost-pensions-2022-what-s-the-scale-and-impact/
[2] https://adviser.scottishwidows.co.uk/assets/literature/docs/2022-10-pension-pots.pdf

Time to get your retirement plans in motion?

Three in five Britons feel stressed about later life planning.

It’s only natural, in a world where most people are worried about things that are beyond their control – the rising cost of living, increasing inflation and interest rates that haven’t been seen for years – that you may also feel out of your depth when it comes to things like pensions and later life preparations.

When it comes to later life planning, more than three in five people (61%) feel stressed when they think about their retirement. This figure rises to almost three-quarters (74%) of 25–34-year-olds, new research has highlighted[1].

Unsurprisingly, given the current economic climate, all age groups, with the exception of the over-55s, admit to being stressed about: whether or not they will have enough money set aside at retirement to do all the things they want to do (71%); how long their pension pot will last (65%); whether or not they are paying enough into their pension pot (59%); and how early they need to start paying into a pension (49%).

In the majority of cases, the most anxious across all age groups are the 25–34-year-olds, with the starkest contrasts in numbers being around how early they need to start paying into a pension (70% vs 49% nat.avg), whether or not they should have more than one pension pot (70% vs 50%) or if they are paying enough into their pension savings (77% vs 59%).

However, with a little planning and simple rules of thumb, you can feel more in control of your savings and know if you are on track for the lifestyle you want in your retirement.

Give you greater control over when you retire and with how much money

How long? Aim to save for your retirement at least 40 years before you want to retire. The later you leave it, the more you will need to save each month to reach your target.

How much? Try to save at least 12.5% of your salary towards your pension every month – this may seem challenging at the moment but something to aim for. And remember, this can include money from you, your employer and the government.

Final pot size? Aim to amass a pension pot of at least ten times your salary by the time you retire.

Tax relief: Take advantage of the tax relief offered by the government to boost your savings. When saving into a pension, for every £8 you save, the taxman adds an extra £2.

Employer contributions: Every employer in the UK must provide eligible employees with a workplace pension. Not only that, but they must contribute to this pension. Some employers will contribute more if you save more, helping towards the 12.5% target.

Invest wisely: By investing your money, in a pension or elsewhere, your money can grow through to your target retirement date.

Investment risk: The value of investments can go down as well as up and you may get back less than has been invested but remember that investing in a pension is a long-term investment and over time you could reap greater rewards.

Keep checking: Saving for your retirement should not be a ‘set and forget’ activity. Use your annual pension statement to check if you are on track for your retirement target.

Reframe your expectations: Life expectancy in retirement could be 20 years or more, so bear in mind how long your money may need to last.

Use the pension freedoms: From 2015, the pension freedoms allow more flexibility in retirement planning, but take time to understand the options before acting.

Search for lost pensions: There are close to 3m lost pensions in the UK where pension providers and clients have lost touch with each other; this equates to £26.6bn, or £9,470 per person[2]. If you think you’ve lost touch with a pension check with the Pension Tracing Service.

Source data:
[1] Research was conducted by Censuswide between 06.10.22 – 10.10.22 from 2,001 general consumers, national representative sample. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.
[2] https://www.pensionspolicyinstitute.org.uk/media/4185/20221027-ppi-bn134-lost-pensions-2022-whats-the-scale-and-impact.pdf
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.