Monthly Archives: November 2015

Five Steps to Starting to Save for Retirement in Your 30s

It’s simple: the sooner you start saving for retirement and the more you can put aside, the more you’ll have to spend when the time arrives. What’s not so simple is figuring out what you need to get started once you’re ready to start saving.

I know that many of you have already started this process, but please forward this on to members of your family who may not have.

  1. Start With Some Assumptions

Most people are put off planning for retirement because it seems such a long way off and who knows how much they’ll need, or even if they’ll ever retire?

If this resonates with you, you’re not alone. However, these are only assumptions which could change significantly during the years between now and retirement – so stick a pin in a page and start with that.

When do you want to retire? How much income do you want your pension to provide? How much can you afford to put away in a pension right now? Are you a cautious, balanced or adventurous investor?

  1. How Much Income Will You Need for Retirement?

You can arrive at this decision in a number of ways but, most importantly, it can be refined as retirement gets closer.  You can take advantage of simple calculators that can be found online to see what your affordable level of saving would provide, or you can work out an assessment based on your current expenditure – there is no wrong answer.

  1. Take Advantage of Compounding Growth

With compounding growth, you can earn growth on your growth. The longer your pension runs, the more money you will make, because the growth will just keep rising exponentially. Compounding growth can significantly boost your plan value in the long-run because it will nurture your pension at a faster rate.

e.g if you start saving at 25 (with an annual return of seven per cent after fees), you only have to save around £4,830 annually to reach £1 million by age 65. If you wait until age 40, you’ll need to save £15,240 per year, which is more than triple that amount – all thanks to compounding growth.

To give yourself the best chance of growth, many providers offer a range of funds (which can be difficult to navigate and choose from), but also offer short risk assessments, allowing you to compile a shortlist of investments that suit your appetite for risk.

  1. Find Out About Employer Contributions

The first thing you need to do is enrol in your workplace pension. You may have seen the adverts on TV but, if you aren’t already enrolled, you may be missing out on free money.

From 2017, for most employees, a company will have to contribute a certain amount to your pension. This is like free money and should be considered an additional source of income which will benefit you in retirement.

Make sure you learn what your plan includes, such as how much you need to contribute and the investment options.

  1. Keep an eye on costs

The more that is deducted from your pension in charges, the less growth you’ll enjoy and the lower fund value you’ll ultimately have in retirement. Look for low-cost products and funds (such as index funds), so that you’re spending less on fees and enjoying more in your pension.

If you still aren’t sure, or are struggling to get started, you may want to speak with a financial planner – such as us. We can help you organise your personal finances and create the right retirement plan for you.


The Power of Getting Started

I was chasing up a client the other day that had told me that he desperately needed to meet with me to discuss his financial plan; not so much for his own benefit, but for his family. For some time now he has been promising his wife that he would set out everything they have so that when we all meet up, we can discuss when and if they will run out of money, can they help their children to buy a property each and how much are they going to leave the tax man.

This client certainly has his life plan sorted and since retiring from a very high powered job, he is enjoying lots of adventure and living life to the full.  However, he still hasn’t got his financial affairs in order and there are a number of issues that need to be addressed.   Fortunately for him, they are not massive issues as it is highly unlikely that he will ever run out of money, but all the same it needs sorting out for the family’s sake and then they can all get on with enjoying themselves. Plus in a purely selfish way, I will feel a lot better knowing that it has been done.

I’m guessing what I’ve just described sounds a lot like many people. We can all come up with perfect plans to get everything done, then we wake up and realise that real life gets in the way and in our ‘spare’ time we prefer to do the fun stuff.

When it comes to our finances, we tell ourselves we can’t possibly invest our hard-earned money unless we’ve identified perfect investments and it fits a perfect plan.  Perfection means different things to different people, but with investments it often means, “Guaranteed to make me a lot of money with very little risk.”

There’s one, teeny weeny problem with this definition …. It doesn’t exist! Unfortunately however, that doesn’t stop people from trying to find these perfect investments.

That’s why getting started is such a big thing!  By putting aside a bit of time to think longer term and letting go of the need for perfect, we can begin to recognize that the end goal matters so much more than whether the journey is perfect.

I want to reach my financial goals. I know you probably want to reach yours, too. But we’ll never get there if we keep on stalling or waiting for something that’s highly improbable.

Good things happen if you stick to the plan

This blog coincides with the launch of our first corporate yoga class which took place in our offices yesterday afternoon.  There were quite a number of our staff involved, which is fantastic; I wasn’t one of them as I was busy writing this…. hopefully the yoga made for a calmer drive home.

It is often said that the secret of success in any endeavour is “stickability”, your capacity for staying committed to a goal.  But success also depends on having goals you can stick with. Managing that tension is what a financial adviser does.

Inspired by the impressive weight-loss of a work colleague, a portly middle-aged businessman decided to copy his friends programme. It was a crushing regime, involving zero carbs, 5am sprint sessions and mountain biking.  You can guess what happened next? The aspiring dieter lasted about a week on the programme before packing it all in and returning to sedentary life, pies and beer.

In hindsight, it would have been better for him to get some advice first, start slowly, swap the mountain biking for brisk walks and the zero carb diet for low calorie beer. He may not have lost weight as quickly as his friend, but he would probably have had a better chance of sticking with the plan in the longer term.

Similar principles apply with investment. You may envy acquaintances who seem to have succeeded with high-risk strategies, but that doesn’t necessarily mean those are right for you (or them).  In any case, their dinner party talk may leave out key information, such as how they sit up all night watching the market and worrying.

Just as the want-to-be weight loser couldn’t live with 5am sprints, not everyone can stick with highly volatile investments that keep them up at night or that cause them to constantly second-guess themselves and few people can do it without a trainer.

On the other hand, reaching a long-term goal like losing weight and building personal wealth requires accepting the possibility of pain and uncertainty in the short-term.

The trick is finding the right balance between your desire to satisfy your long-term aspirations and your ability to live with the discomfort in the here and now. Quite often, this tension can be managed through compromise. In other words, you can accept some temporary anxiety or you can moderate your goals.

The point is you have choices. And the role of a financial adviser is to help you understand what they are. So, for example, an adviser can assist you in clarifying your goals and setting priorities.

A personal trainer would be unlikely to recommend an out-of-shape sedentary business executive should start running marathons or try to halve his body weight in six months.  The job of the trainer, or an adviser, is to manage your expectations and ensure the goals you are pursuing work with everything else you want to achieve in your life.

An adviser can also assess your capacity for taking risk. We aren’t all high risk takers and a portfolio that’s right for one person may be all wrong for another. That’s because each individual’s circumstances, risk appetites and goals are different. A financial plan should be bespoke not an off the peg solution .

A third contribution an adviser can make is to help you manage change. Our lives are not static, we change jobs, our incomes increase, we take on new responsibilities like children and mortgages, we deal with aging parents, we move cities and countries. Nothing stays the same and a financial plan shouldn’t either.

So not only do different people have different goals, but each person’s own goals evolve in unique ways as they move through life. Reaching those goals requires a detailed and realistic plan, plus a commitment to stay with it. Some people may be up for the triathlon when they’re young and fit. But in later years, they might just need a more conservative programme of stretching and walking.

You can try doing this on your own, of course. But it makes it easier if you have someone to keep you focused, keep you disciplined and help you change course when the circumstances of life require it.

Now that’s stickability!

Suits You ……Tailor Made Pension Scheme for the Family Business

I am pleased to announce that I have recently had confirmation that I have passed my latest exam. To tell the truth I thought my exam days were over, but I really quite enjoyed the study and the paper I had to write to achieve my pass in the Advanced Certificate in Family Business Advising from STEP (Society of Trust and Estate Planners) – trumpet blown!

Family businesses in the UK employ over 9.5 million people and two thirds of this country’s businesses are family owned. We have a great deal of experience in dealing with family businesses a lot of which comes as a result of the fact that we administer the ultimate family business pension vehicle, the Small Self- Administered Pension Scheme (SSAS).

These schemes are the made to measure Family Business Pension Plan in that the family are trustees, members and also have the facility to use the funds in the scheme to invest into the family business by way of a loan to the company (now referred to as Pension Led Funding but we still call it Loan back) or using the funds to purchase commercial property for the business. The key here is that the family has control over the investment strategy, the membership (family members only) and the level of contributions (within limits set out by our good friends HMRC but we covered that in a previous blog and will no doubt do so again).

In addition to this, the fund can assist with the family’s succession plans in that Mum and Dad can draw their benefits from the pension fund making them less reliant on drawing funds from the business enabling more to be paid to younger family members working in the business, when they probably need it most.

In our dealing with the Family Pension Schemes we have grown into the role of Family Business advisors and developed the soft skills necessary to help families with their future planning. It is not always about the money it is often about how and who is best to take the business forwards and where to have the assets i.e. in the Company or the Pension Fund to help with the future generational planning.

I am probably teaching to the converted in many cases but please feel free to pass the word on to other family businesses that could benefit from the bespoke made to measure pension scheme or who simply have a scheme but are not receiving any proactive advice on what they can do.