Planning for the Future | Living North

Planning for the Future

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Money Planning
Graeme Leigh is Practice Principal of financial planning consultants Orchard Financial Management. Here he looks back at what has changed in those 20 years and offers his financial planning advice for the future

In the 20 years I’ve been working in financial services, not very much has changed on the face of it. On the 26th April 1991, the government declared the recession officially over, but as it turned out they were a little premature. Our wants and needs remain the same 20 years later, perhaps exchanging our Sony Walkman for an iPhone instead. However, something has changed. The knowledge that we are tending to live longer than ever before is great news, but with this comes the added worry of having enough money to live on. 

Did you know that the average pension fund in the UK is only around £30,000 for those that have a personal pension? Clearly this is a very small amount, considering it is supposed to provide an income for many years to come. With annuity rates falling for the past five years and final salary schemes being closed across the board, this is not good news and swift action must be taken. If a reasonable standard of living is to be achieved in retirement, then do not let yourself be included in that average pension statistic. 

Relying on downsizing in property, whether it be size or value of the property, rarely works in reality. Many people do not want to move out of such a long cherished home due to happy memories, and assuming a sale could be achieved, the old adage ‘my pension is in bricks and mortar’ is actually rarely helpful when you try to get those bricks in your wallet or spend them in the supermarket. Helping you plan for retirement is crucial, and the right type of advice can make a huge difference. Remember that pension funding is only a small part of your retirement plan. If you are self-employed, consideration should be given to having either a stakeholder or personal pension in place to produce an income and provide some security in retirement. 

The government have introduced Auto Enrolment pensions for those who are employed, but this only provides a false sense of security as these type of pensions are set at eight percent gross, which is not enough funding to provide a reasonable amount of income in retirement. 

The increased state requirement age of up to 68 (depending on your year of birth), will have far reaching consequences that will not be felt for years to come. Others who are expected to retire at 60 are now in staggered retirement until 65 as the change has already begun. 

The so-called ‘T-shirt’ pensioners are a relatively new phenomenon. Never before have so many people reached retirement in good health, and this statistic will dramatically increase over the next ten years. Mick Jagger at 69 is leading the way for T-shirt pensioners, and while he seems in extremely good health, he is not reliant on a state pension and enjoys an estimated £190million fortune. The rest of us, however, need to start setting money aside in preparation for retirement. 

If you are reaching retirement age and want to maximise the potential from your pension fund, or perhaps you have several pensions in different places and wish to simplify matters by having them all in one place, you will need to make choices on your annuity now. Getting this right is paramount to having some security in retirement. 

Published in: November 2013

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