Chris Thorpe, Author at Agile IFA

The FIRE movement is a small but growing lifestyle movement. It stands for “financial independence, retire early”, and challenges the traditional path of working until you’re in your 60s before retiring. While the steps FIRE members take can be extreme, it does share some of its core principles with financial planning.

In essence, the FIRE movement involves extreme saving and investing to create a passive income that aims to allow members to retire far earlier than a typical person would. Over the years, several different variations of FIRE have emerged but the goal for all of them is to provide financial freedom which means members can live the lifestyle they want.

Here are five ways FIRE is similar to financial planning.

1. It encourages you to review your spending now

As part of the financial planning process, you will need to look at what your expenses are now. This can help you understand where your money is going and what steps you can take to reach your goals. This may include paying into your pension, adding to your savings, or creating an investment portfolio.

FIRE is an extreme example of this. Members are encouraged to evaluate every expense and purchase they make in terms of the number of hours they’ve worked for it. A common goal of the FIRE movement is to save 70% of your income. This will typically mean adjusting your lifestyle significantly now to secure the future you want.

While both financial planning and FIRE assess what you’re spending now and the effect it will have on your future, financial planning has a greater focus on balance. That means finding a way you can reach short-term goals and live comfortably now, from going on holiday to enjoying hobbies, while still building long-term financial independence.

2. It puts long-term goals at the centre of your finances

The FIRE movement is all about thinking long term, and setting out your goals is part of financial planning too.

In the case of FIRE, the end goal is typically to retire as early as possible while still ensuring you have enough savings to last the rest of your life. For some members, this means they have a goal of retiring in their 30s or 40s and their financial decisions keep this in mind.

When financial planning, thinking long term is an essential part of the process. Your long-term goals may include retiring early, but other things may be important to you too. This could be supporting loved ones financially, travelling the world, or moving into your dream home. Financial planning helps you put these goals at the centre of your financial decisions.

3. It considers retirement early

When should you start thinking about retirement? While most employees will now automatically be paying into a pension, many don’t think about their contributions, or what kind of lifestyle they will enable until retirement is near.

The sooner you engage with a pension, the more likely you are to secure the retirement lifestyle that you want. Even a relatively small increase in your pension contributions while you’re younger can add up.

You may also find you’re missing out on opportunities for your employer to contribute more to your pension or that changing the way your pension is invested makes sense for you.

One of the positive things about FIRE is that it encourages people to start thinking earlier about what they want their retirement to look like.

4. It can provide members with more freedom

Financial independence can give you the freedom to focus on what you want. Having a passive income can mean you’re able to give up work or reduce your hours to spend more time on what’s important to you.

FIRE encourages financial independence through an aggressive saving and investment programme. Members will often have a significant target in mind when building up wealth, such as £1 million or 25 years of income, and will then manage these assets to take a small income that will last throughout their lifetime.

Financial planning can also help you secure greater financial independence. A financial plan helps you reach the goals you’ve set out, but it also considers your financial resilience. This can help protect you from financial shocks and provide you with greater freedom.

By working with a professional, you can have confidence in the steps you’re taking and have someone to talk to if you want to change your lifestyle.

5. It looks at ways to make your money work harder

With such large goals, the FIRE movement has a strong focus on making your money work as hard as possible to build up wealth and then deliver a passive income. This may mean actively reviewing savings accounts to find those with the highest interest rate, and will often mean investing aggressively.

Both of these things can help your wealth grow, but it’s important to review what level of risk is right for you when investing. Financial planning can help you balance risk with potential rewards – all with your goals in mind.

While investments with potentially high rewards can be enticing, they will typically come with higher levels of risk that may not be appropriate. We can help you build an investment portfolio that reflects your risk profile.

Financial planning can help you achieve financial independence and retire sooner if that’s one of your goals while striking a balance to deliver an income that means you can enjoy your life now. If you’d like to talk to us, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The latest figures from the Pension Regulator prove that pension auto-enrolment has been a success – more people than ever are saving into a pension. Yet, research also shows that many people don’t think they know enough about saving for retirement.

Before the government introduced auto-enrolment in 2012, just 4 in 10 private sector workers were actively saving into a pension. Now, more than 70% of employees are taking steps to secure their retirement.

According to the Office for National Statistics, pensions represent the largest portion of private wealth in the UK. Individuals hold £6.4 trillion in pensions. The figure compares to £5.5 trillion in property and £2 trillion in cash.

The number of people saving for retirement is rising and the accumulated wealth in pensions is certainly good news, but simply paying into a pension isn’t enough to be sure of a comfortable retirement.

Engaging with your pension and understanding how it’ll create an income when you retire is crucial, and research suggests that many people aren’t confident about their pension knowledge.

6 in 10 people couldn’t confidently say how much they have in their pension

7 out of 10 people can confidently say how much they hold in their cash savings, and 53% said they could estimate the value of their property quite accurately, according to an Aviva survey.

However, just 4 in 10 say the same about their pension despite pensions representing a larger portion of wealth and being crucial for your long-term financial security.

Saving into a pension under auto-enrolment is an important first step, but if you’re not reviewing your pension and what it means for your retirement it could put your long-term wellbeing at risk. Closing the knowledge and confidence gap is just as important as encouraging more people to save through a pension, and it could help you get more out of your savings.

What happens when you pay into a pension?

If you’ve been automatically enrolled into a pension, your contributions will be deducted from your pay cheque, so it’s easy not to think about what happens to the money. But engaging with your pension can help to ensure you’re taking the steps you need to secure your retirement.

As well as your own contributions, in most cases, your employer will contribute on your behalf. On top of this, you will receive tax relief on your contributions to boost your savings even further. This makes a pension a tax-efficient way to save for retirement.

The money within your pension will usually be invested. This could allow your pension savings to grow over the long term. If you haven’t selected how you’d like the money to be invested, it will usually be through a default fund. You will usually have a choice of multiple funds, covering a range of investment risk profiles, allowing you to choose one that’s right for you.

Here are some key questions you should answer to help you understand how your pension savings are building up:

What contributions do you make to your pension?
What contributions is your employer making?
Are you claiming the full amount of tax relief you’re entitled to?
How is your pension invested?

How do you know if you’re saving enough for retirement?

While you may understand how much is in your pension, understanding if it’s “enough” is much more difficult. To do this, you need to consider two things:

How much money do you need to fund your retirement? This will depend on your retirement plans, such as the lifestyle you want. You will also need to consider how long your retirement will last and what other assets you may have to complement your pension.
How will the steps you’re taking now add up over your working life? This means calculating how all the contributions will add up and what you realistically expect the investment returns to be.

Understanding if you’re on track for the retirement you want is important. If there is a gap, the sooner you know, the more options you’re likely to have. Spotting a gap early in your career may mean you can increase your contributions by relatively little as it’ll add up over several decades. If you don’t recognise a gap until you want to retire, you may have to delay or change your plans.

Having confidence in your pension means you benefit from peace of mind now and fully enjoy your retirement when you’re ready. If you’d like help understanding your pension, what it means for retirement, and how it fits into your overall financial plan, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). 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. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

As you may know, inflation (or the “cost of living”) has been rising at a faster pace than usual. If you’re retired, the effect of inflation can be more pronounced and it’s important to understand how it could affect your lifestyle now and in the future.

The Bank of England (BoE) aims to keep inflation at 2% a year. However, according to the Office for National Statistics, the rate of inflation in the 12 months to February 2022 was 6.2%. While the effect of inflation can seem small day-to-day, it adds up.

Why inflation is important if you’re a retiree

If you’ve already retired, inflation can affect your lifestyle more than if you were still working. This may be because your income is static rather than rising with inflation. You may also need to consider how you will use your assets over your retirement. Taking more now to ensure your income rises in line with inflation could mean you face a shortfall in the future.

In addition, energy and food are two of the areas that inflation has affected the most. Traditionally, pensioners have spent a larger part of their income on these two expenditures than workers. So, rising inflation could affect your expenses more than you expect.

While the State Pension will rise in the new tax year in April, it won’t rise at the same pace as inflation. For the 2022/23 tax year, the State Pension will increase by 3.1%. This is because it will rise by the rate of inflation as measured in September 2021.

According to the Centre for Economics and Business Research, the gap between the State Pension increase and the current pace of inflation will mean pensioners are £169 a year worse off in real terms.

So, if you’re retired, what can you do about inflation?

5 things retirees should do to manage the effects of inflation

1. Review your income needs

Looking at how your expenses have changed over the last few months can help you create a realistic budget. Does your current income still allow you to live the same lifestyle, or have you had to make adjustments? Looking at which outgoings have increased can help you see if you need to make any changes.

2. Check your reliable sources of income

As part of your retirement income, you may have some sources that provide a reliable income. You should review these and check if they’ll increase in line with inflation in the new tax year.

As mentioned above, the State Pension will rise but not at the same pace as inflation. You may also have a defined benefit (DB) pension, which pays a guaranteed income throughout retirement. A DB pension will often increase at the same pace as inflation, providing you with some financial security even as the cost of living rises.

If you had a defined contribution (DC) pension, you may have chosen to purchase an annuity that will pay an income for the rest of your life. When purchasing an annuity, you can choose whether the income will increase in line with inflation.

3. Assess investment performance if you’re using flexi-access drawdown

If you have a DC pension, an alternative to an annuity is flexi-access drawdown. This option allows you to take a flexible income, with the rest of your pension usually remaining invested. As a result, the remainder of your pension may increase to keep pace with inflation depending on how the investments perform.

In addition to investments held in a pension, you may also have a separate investment portfolio that could deliver growth that matches or exceeds inflation.

Investing can provide you with a chance to grow your wealth, but you should keep in mind that returns cannot be guaranteed.

4. Review your cash savings

Some cash savings are important as they can provide a valuable safety net if you face an unexpected expense. However, as inflation is likely higher than the interest rate you are earning on your cash savings, the value of your savings could be falling in real terms.

In some cases, moving the money to a different account or investing a portion of the savings can help you reduce the effects of inflation on your wealth.

5. Arrange a meeting with your financial planner

If you’d like help in understanding how inflation is affecting your income now, and the effect it could have in the future, a meeting with a financial planner can help. Please contact us to discuss your income needs and what you can do to protect against the effect of inflation.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

As a parent or grandparent, you may be thinking about ways you can build a nest egg for children or grandchildren. It’s a step that can give them financial security as they become independent.

According to the Royal Mint’s 2021 Savings Report, 93% of parents say a savings account for their children is important. And more than 8 in 10 have already set up such an account. This guide looks at some of the steps you can take to improve the financial security of your children and grandchildren, including:

Opening a savings account
Using a Junior ISA
Investing on their behalf
Making pension contributions.

Download Building a nest egg – How to create financial security for your children and grandchildren to learn more.

Please contact us if you’d like to discuss building a nest egg for your children or grandchildren.

A new variant of Covid-19, dubbed “Omicron”, is affecting some countries around the world, and it could lead to further restrictions in the coming months. The variant comes as supply chain issues caused by the pandemic continue to affect businesses and households.

UK

The UK’s latest GDP figures suggest the economy is lagging behind other G7 nations. The UK’s economy is still 2.1% below its pre-pandemic level in the final quarter of 2019 after growth slowed to 1.3% between July and September 2021. In contrast, France is just 0.1% below pre-pandemic output, while the US economy is already larger than it was pre-pandemic.

Despite suggestions that the Bank of England (BoE) would increase its base interest rate to combat inflation, the Monetary Policy Committee voted to leave it unchanged at a record low of 0.1%. The BoE also said it expects inflation to peak at around 5% next April. If inflation reached this level, it would be the highest rate in a decade and is more than double the BoE’s 2% target.

High rates of inflation could affect both households and businesses. According to the Institute for Fiscal Studies, the average worker would need a pay rise of over 7% just to maintain their standard of living. So, it’s not surprising that a YouGov poll found that UK consumers are feeling less optimised and worried about their finances.

Energy is one of the household expenses that has surged in price. In November, another five energy firms collapsed, including Bulb, which has 1.7 million customers, amid rising fuel prices. Since the start of August, more than 20 energy suppliers have failed.

Supply chain challenges may be part of the reason why the UK is falling behind other economies. The IHS Markit PMI (Purchasing Managers Index) shows the manufacturing industry is growing but struggles with supplies and staff shortages are hampering potential growth.

Data from the CBI also demonstrates the effect shortages are having on prices. New factory orders reached a high not seen since at least 1977, but price expectations have also climbed to a 44-year-high to offset some of the challenges factories are facing.

Staff shortages could be good news for jobseekers. According to the Recruitment and Employment Confederation, active job postings in the first week of November reached a record high of 2.86 million.

In other news, Royal Dutch Shell is planning to shift its tax residency from the Netherlands to the UK as part of a shakeup. The company has said the move will help strengthen its competitiveness. It will also drop “Royal Dutch” from its name. The decision follows a landmark ruling earlier this year in the Netherlands that said Shell must cut its 2019 CO2 emissions by 45% by 2030.

Europe

The European Central Bank’s (ECB) chief economist Philip Lane commented that tightening monetary policy now to temper inflation would be counterproductive. Inflation reached 4.1% in October, more than double the ECB’s target. Rising inflation means prices are rising. In Germany, factory-gate prices increased by 18.4% in the year to October, the largest rise since 1951.

According to the European Commission, inflation is also affecting consumer confidence. The rising number of Covid-19 cases is also likely to be having an effect, with Austria entering full lockdown and Germany reintroducing emergency measures to control the spread of the virus.

Dutch container shipping group Maersk commented that there was no end in sight to the supply chain crisis. Despite disruptions, the group posted record quarterly revenues as freight rates increased sharply.

US

Much like the UK, the US continues to struggle with supply chains issues and inflation.

The IHS Markit PMI fell from 60.7 in September to 58.4 in October. While still growing, the pace is slowing as factories struggle to meet the demand for new orders.

Inflation has also reached a 30-year-high of 6.2%. This has led to the US Federal Reserve starting to taper the stimulus programme that aimed to support the economy during the pandemic. As well as affecting businesses, inflation has dampened consumer confidence. The University of Michigan’s Consumer Sentiment Index fell to its lowest level since 2011.

Figures show that October was a good month for jobseekers. The US added 531,000 jobs in October and revised the figures for August and September upwards. Since the record losses in April 2020 caused by Covid-19 restrictions, the US has added 18 million jobs. However, the total number of new of jobs is still more than 4 million short of pre-pandemic levels.

US pharmaceutical giant Pfizer has lifted its full-year sales forecast as Covid-19 vaccine sales rise again. The company reported sales of $24.1 billion (£18.1 million) between July and September, a 130% increase year-on-year.

Asia

Japan, the third largest economy in the world, highlights how some countries are still struggling to recover from the pandemic. The country’s economy shrank by 0.8% in the third quarter of 2021. The fall was deeper than expected and was linked to global supply disruptions, as well as businesses cutting back their spending plans.

Tighter restrictions in China have led to Yahoo ceasing trading in the region. Yahoo blamed a challenging business and legal environment for the decisions. The company added that it was committed to the “rights of our users and a free and open internet”. The move follows a similar decision from Microsoft, which has said it will close LinkedIn’s Chinese site.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

As we head into a new year, it’s common to think about the changes you could make to your life to improve your wellbeing and reach your goals. Taking steps to instil positive habits at the start of 2022 could set you up for greater wellbeing in the long term.

If you’re thinking about making a resolution this year, listing your priorities now and in the future can help give you some direction and lead to a habit that will have a long-lasting impact. Here are seven positive habits that could help you, whatever your goals are.

1. Create a routine and stick to it

Your daily routine can help improve your mental wellbeing. From setting a regular bedtime to eating at the same time every day, a consistent routine can reduce stress and help you focus on the important things. Finding a routine that works for you and your lifestyle could deliver a health boost.

A routine is also a good way to instil other habits that you may want to adopt. If you want to improve playing an instrument or learn a new craft, carving out a dedicated time each day or week to focus on this can help ensure you give these goals your full attention.

2. Think about what makes you happy

What makes you happy or gives your life purpose?

Regularly spending time thinking about what is important for you can help you make decisions that will lead to a lifestyle that brings your more joy. Yet, it’s something that many people don’t do. According to an Aegon report, only 4 in 10 people think about what gives their life joy.

It can be as simple as thinking about what you’ve enjoyed the most in the last week or what you’re looking forward to, but it’s a habit that can improve your mindset. Making a habit of doing this can help steer decisions to those that will make you happier and give you clear priorities when you think about the future.

3. Increase your physical activity

When your body is healthy, your mental health improves too. Physical activity is an excellent positive habit to adopt that can mean you’re able to make the most of your life. Not only will it improve your physical health, which can help keep you active and independent later in life, but it can reduce stress and leave you feeling happier.

Making exercising, from a brisk walk to swimming, part of your routine is a great way to improve wellbeing.

4. Get outdoors more

Being outdoors can make you happier and healthier, especially if you head to a place filled with nature.

Being surrounded by trees or other natural sights has been found to lower blood pressure and stress. It can instantly boost your mood and improve your focus too. A habit of going for a walk through your local park, or visiting national parks and nature reserves in your free time can improve your mental health and provide a chance to exercise outdoors.

5. Embrace mindfulness

Modern life can be stressful and mean it’s difficult to focus on the present. If you find that your mind wanders to other tasks or plans instead of enjoying the present moment, mindfulness can be a useful practice.

Mindfulness is a type of meditation where you focus on what you’re feeling in the moment. It aims to relax the body and minimise stress. It can help you recognise how emotions are driving behaviours and it can help you make positive changes to your life. Just five minutes a day to practice mindfulness can boost your mental wellbeing.

6. Make time to spend with people

Setting out time to spend with other people can be hugely rewarding.

That may be time to focus on your family and friends or to find opportunities to meet new people. Socialising is good for a variety of reasons. It can not only stave off the feeling of loneliness and boost happiness, but it can help improve memory and cognitive skills. Making an effort to meet up with people physically or stay in touch digitally can make your life richer.

7. Make a long-term plan

Don’t just focus on the changes that could improve your life now, but look at what you want to achieve in the future. It can mean you’re able to look forward to the things you plan to do and relieve the worries you may have. Setting out what life you want to lead in 10 or more years can put you in control.

Despite the benefits, just 1 in 3 people have a concrete idea of their future self, according to the Aegon report. Just 13% of people have a plan to reach money goals that could help them achieve their aims. While you may have a vague idea about what you want your future to be like, a concrete plan means you’re far more likely to reach these goals.

This is something financial planning can help you with. We’re here to help you think about your long-term lifestyle goals and the steps you can take now to ensure you have the financial means to reach them. Please contact us to arrange a meeting.

The UN Climate Change Conference (COP26) took place in November in Glasgow. The climate change summit brought together countries to discuss how they can tackle the global issue. It was the first time since COP21, which took place in 2015, that parties were expected to enhance their commitments to climate change.

The outcomes were disappointing for some, with activists arguing they did not go far enough. Yet, an agreement was made that, while not legally binding, sets the global agenda on climate change for the next decade.

If you’re an investor, agreements and governmental policies that relate to climate change could have an impact on your portfolio. For instance, reducing certain activities or penalising companies that pose a risk to climate change agreements could mean that some of your investments aren’t as profitable as they once were.

So, what was agreed at COP26 and how could it affect investors?

The COP26 agreement

Among the key parts of the agreement are:

For the first time at a COP conference, there was a plan to reduce the use of coal. However, after an intervention by China and India, the plan to “phase out” coal was watered down to “phase down”
Over 140 countries signed up to a forests and land use pledge, with the leaders of countries home to 90% of the plant’s forests committed to halting land degradation by the end of the decade
Around 20 countries have said they would end overseas funding of fossil fuels by 2022
Almost 100 countries agreed to slash methane emissions by 30% by 2030
World leaders agreed to phase out subsidies for fossil fuels, although no dates have been given
Countries pledged to support developing countries coping with the effects of climate change and help them switch to clean energy alternatives
Financial organisations controlling $130 trillion (£96 trillion) agreed to back “clean” technology and direct finance away from industries that burn fossil fuels.

While parts of the agreement may have been watered down, the outcome shows a commitment to moving towards cutting out the use of fossil fuels. These steps aim to keep temperature rises within 1.5C above pre-industrial levels. Rises above this are predicted to cause “climate catastrophe”.

However, a report in the New Scientist, suggests the pledge put forward in Glasgow doesn’t go far enough. Research estimates that current climate plans would lead to temperatures rising 2.4C. As a result, world leaders and businesses could find that they face increasing pressure to make further commitments.

The effects for investors

While the outcome of COP26 may not have an immediate effect on your investments, it does suggest that political and regulatory scrutiny will increase.

A UK commitment at COP26 highlights the increased scrutiny businesses will face. By the end of 2023, all large companies and public enterprises will be required to publish a net-zero transition plan.

Companies that don’t start taking action against climate change could face two challenges:

As regulation changes, they could find that activities are hampered or that costs begin to rise. Business leaders will need to consider how they can operate when global commitments are being made to cut fossil fuels and preserve the environment.
Companies that fail to make changes could also find that negative press and customer views have a direct impact on sales and operations. Again, it could affect the profitability of a business.

Investors should be aware of the impact that climate action could have on their investments and the level of risk they’re taking. Taking climate action into consideration when making investment decisions, doesn’t just mean reducing your exposure to some areas. It can also mean seeking opportunities.

As fossil fuels are phased out, the reliance on renewable energy and electric vehicles will rise. For some investors, these industries could present an opportunity.

Should you start considering climate change in your investments?

As an investor, you may already consider other factors that aren’t financial when you’re making decisions. Adding climate change to these considerations can help align your portfolio with long-term outlooks.

However, it’s just as important to keep things like your risk profile and goals in mind. If you’d like to talk about how climate change could affect your investments over the long term, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

You may have seen inflation in the headlines recently. While the cost of living rising is normal, the rate of inflation has increased over the last few months.

The Bank of England (BoE) has a target to keep the annual rate of inflation around 2%. However, the current rate of inflation is 4.2%, the central bank’s figures show. The rate of inflation used is the Consumer Price Index (CPI), which collects the prices of around 700 items. This is then used to calculate how prices have increased.

There are steps the BoE can take to reduce inflation. One of these is to increase interest rates. While there have been hints that interest rates could rise, the Monetary Policy Committee (MPC) decided to keep rates at historic lows in November. An interest rate rise would have been welcomed by many savers who have suffered from low interest rates for more than a decade.

With the MPC deciding to hold interest rates for now, it’s worth seeing if you’re getting the most out of your savings.

Most accounts will be offering an interest rate that is below the rate of inflation. Over the long term, this gap can mean your savings lose value in real terms. While the figure may grow as interest is added, inflation means that it will buy less. For short-term savings, inflation will have little affect but if you’re saving over several years, it can add up.

Are you getting the most out of your savings?

While you may not be able to change the interest rate, there are some steps you can take to give your savings a boost.

1. Take advantage of offers to move your account

Some banks and building societies offer new customers incentives to move. Taking advantage of these could give your savings a boost.

These incentives could be a one-off deposit to your account or a higher rate of interest for a defined period. Even a small incentive can help you keep up with inflation. Keep an eye out for offers that you’re eligible for. While switching accounts can seem like a chore, it’s often a simple process and banks can even transfer direct debits and standing orders for you.

2. Shop around for the best interest rate

Interest rates might be low across all providers, but there are still differences. Shopping around to find the best interest rate you can access can help you to close the gap between how much your savings are growing and inflation. As with the above, it’s often easy to switch your account.

3. Consider savings accounts with restrictions

Some savings accounts will offer a higher rate of interest but come with restrictions. This may include how much you can put into the account each month, or your savings being locked away for a defined period.

You should assess whether these types of accounts match your goals and would still leave you with an emergency fund. If they do, they can give your savings a welcome boost that could help you bridge the gap.

When to consider moving your savings to investments

As well as reviewing your savings, you should also consider if investing is right for you.

Investing does expose your money to some risk and volatility. However, if you’re saving for a long-term goal, it also presents an opportunity to earn returns that are higher than inflation to preserve your spending power.

If you have an emergency fund in an accessible savings account and your saving goal is more than five years away, investing the surplus savings may be right for you.

While all investments do carry some risk, the level of risk varies. So, it’s important to weigh up how much risk is appropriate for you. We’re here to help you understand investment risk and create a risk profile that matches your situation and goals. We’ll consider areas like your other assets and general attitude to risk.

If you’d like to discuss whether investing and getting the most out of your money, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The pension gap between men and women is closing. But, once life expectancy is taken into consideration, women still need to save an extra £185,000 for retirement, on average, according to the Scottish Widows 2021 Women and Retirement report.

The report finds that young women in their 20s today can expect to have around £250,000 in their pension by the time they retire. For men, the figure is £100,000 higher at £350,000. On top of this, women are expected to live for longer and pay for the associated care costs of this, so they need to add a further £85,000 to be financially secure throughout retirement.

To reach this goal, women in their mid-20s today will need to save an extra £2,500 each year, or £210 a month, until they retire.

Jackie Leiper, managing director of workplace savings at Scottish Widows, said: “It’s well known that the gender pay gap has a damaging affect on women’s retirement prospects. But women face a double whammy: even if we close the pension savings gap, pension equality would still not be achieved, because women need to fund a longer retirement and spend more on associated care costs.”

One of the reasons highlighted for the pension gap is the gender pay gap. The median salary for a man is £31,400, for a woman, it’s £20,500. It means even if men and women contribute the same portion of their salary to a pension, women are much more likely to face financial insecurity in retirement. Taking control of your pension before you retire can help you achieve long-term goals and have confidence.

3 things women can do to improve their financial security in retirement

1. Don’t forget about your pension when taking a career break

One of the reasons women have smaller pension pots on average is because they’re more likely to take a career break. Whether to raise a family, care for elderly relatives, or another reason, this can affect your retirement plans.

It can be easy for pensions to slip your mind when you’re not working, as contributions will often be automatically deducted from your paycheque. But this doesn’t mean you have to stop adding to your pension when you’re not at work. You won’t benefit from employer contributions, but you will still receive tax relief to deliver a boost to the money you put in.

You can add pension contributions to suit you. This could mean setting up a direct debit to take a specified amount regularly or adding one-off sums when you can. This flexibility means you can stop and start pension contributions depending on your circumstances.

2. Boost your current pension contributions

The report also measures the proportion of men and women that are deemed to be saving adequately for their retirement. This is defined as those saving a minimum of 12% of their pensionable earnings into a pension. This figure compares to the minimum auto-enrolment contribution of 8%.

The good news is that the gap between men and women saving adequately for retirement has closed. 6 in 10 men and women are now found to be saving enough for a comfortable retirement. Yet, that means 4 in 10 could still face financial struggles when they retire.

If you have the means to do so, even a small increase in regular pension contributions can have a large impact. These contributions will benefit from tax relief and be invested with the goal of delivering long-term growth. Over a career, the effect of compounding means your pension contributions can grow significantly.

3. Have a clear target for your pension

While the report gives an idea of how much women need to save for retirement, it can vary a lot for different people. If you’re still working, retirement can seem like a long way off, but thinking about your plans now can help you set a clear target and give you confidence that you’re on track. Answering questions like the below can help build an accurate pension target that’s right for you.

At what age would you like to retire?
Do you want to transition into retirement?
What kind of retirement lifestyle would you like?
What will your financial commitments be?

By taking this information, along with areas like life expectancy and expected investment growth into consideration, you can better understand if the steps you’re taking now will mean you can reach your retirement goals.

Getting to grips with your pension can be challenging. If you’re not sure where to start, we’re here to help you. Whether you’re still working or are ready to retire, we can offer advice and guidance to help you make the most of your pension contributions.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.