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Clarke Nicklin Financial Planning

'protecting your wealth and helping your investments grow'

Month

May 2016

Smart Investing – 5 ‘Healthy habits’

Be SMART! A survey conducted in association with Cicero group highlights ‘The five key habits of a smart saver and Investor’

Source data

BlackRock Investor Pulse was conducted in association with Cicero Group between July and September 2015. A nationally representative sample of over 31,000 people in 20 countries was surveyed. They were aged between 25 and 74 years old. 4,000 were UK residents and, of this 4,000, 750 met the criteria for investors – having investable assets of more than £100,000 or an income greater than £100,000 as an individual, or £150,000 as a household. The results of this survey are provided for information purposes only. The conclusions are intended to provide an indication of the current attitude of a sample of ‘wealthy investors’ in the UK to saving and investing and should not be relied upon for any other purposes.

 

 

 

 

 

Future retirement strategy – Workplace pension v Lifetime ISA

There is considerable media coverage at the moment focusing on Auto Enrolment and the new Lifetime ISA (LISA) which is scheduled to commence April 2017. The main concern is centring on the impact LISA’s will have on future pension savings and their potential to derail Auto Enrolments success.

Research from NOW Pensions has revealed that among young savers 30% plan to save in both a workplace pension and LISA when it launches, with 16% just into a workplace pension. A further 9% would stop contributing to Auto Enrolment altogether to shift to the LISA next April.

Clarke Nicklin Financial Planning Partner & IFA Scott Herbert comments ‘There are attractions to both LISA’s and pension saving depending on your age, income, employment status and circumstances, and with retirement on average stretching over three decades it is important to get it right. Once you are armed with the right information you will have the ability to make informed choices to consider what the best options are.’

As always the best way to invest for the future is to formulate a bespoke plan designed specifically for you. It is also vital to continuously review your pension and other investments, and monitor the level of funding required to ensure you will be comfortable in retirement.’

We have advised many companies on Auto Enrolment, and as part of our service we offer a pension and financial planning review to all employees to ensure they fully understand all opportunities and any implications.’

Many of the population may feel that a choice may have to be made between the two options due to their levels of disposable income.

There has never been a more relevant point to seek financial advice. This advice will clarify the long and short term options available to individuals based on specific needs and objectives.

Auto Enrolment

  • Age limit between 22 and state pension age
  • Employees and employers initially contribute a modest 2% of earnings, which increases to 8/9% by 2018
  • Annual allowance is up to £40,000 per annum with some stipulations. It can be complicated to work out

Lifetime ISA (from April 2017 and subject to change)

  • Must be opened between the ages of 18-40, can contribute until 50 and obtain tax relief
  • Government contribution gives 25% bonus each year up to a maximum of £1,000 (this could potentially change) up to 50th birthday
  • Must be used to buy your first home or it is locked until you reach 60 (unless you want to sacrifice the bonus and pay 5%)
  • Potentially more beneficial for self-employed whom do not receive the benefits of statutory appropriate for employers benefits and NI contribution relief.
  • Annual allowance is up to £4,000 per annum (£20k annual ISA limit)

Both Scott and Tax Partner Paul Draper are hosting a free ‘Lifetime journey of investment planning’ breakfast seminar on Wednesday 22nd June 2016. Please email Julie@clarkenicklin.co.uk to book or for further information.

This article is for information purposes only and should not be construed as advice. Please seek professional financial advice before acting, or not acting, on this information.

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Income matters – Facing retirement with an annual income shortfall of £12,600!

The UK’s mass affluent investors* face an average annual income shortfall of £12,610 in retirement. This jumps to a staggering £28,000 shortfall among the mass affluent millennial population, according to the BlackRock Investor Pulse survey.

Outliving savings

Nearly three quarters of mass affluent Britons say it’s important for them to earn an income on their investments, yet they still allocate 41% of their assets to cash. Perhaps unsurprisingly a third of mass affluent Britons are concerned about outliving their savings in retirement.

Mind the income gap

Mass affluent investors say they will need an annual income of £32,456 in retirement and expect that a pot of £396,910 will achieve this. In reality, they face an annual income shortfall of £12,610. This gap widens further among the millennial age group, who face the biggest disappointment. They want an income of £43,103 a year and think £300,934 will be sufficient, but will in fact experience a shortfall of £28,057 annually. Even factoring in the State Pension, millennials are still going to be short by more than £20,000.

It’s not just the retirement pot people underestimate, but also how long they are going to live. The average mass affluent millennial expects to live to 80, but one in five of them will live to 100** – twice as likely as their grandparents. Furthermore, they believe they’ll be able to retire at 61 – an unlikely ambition given the annual income shortage they are already facing. While those aged 35 to 44 have a more realistic expectation in believing they’ll live to 84, there is still an 18% chance that they’ll reach 100. This indicates that many are not factoring in how far their savings will need to stretch.

Advice is more than a one-hit wonder

Increasing life expectancy and the introduction of the pension freedoms has lengthened the period of time in which people can receive advice. However, 34% of mass affluent investors have only used an adviser for a one-off event.

Advice is golden

Long-term low interest rates and the recent focus on pensions have pushed the need for income into the spotlight. Saving for your retirement is one of the most important financial plans you can make.

Source data

*Mass affluent investors are defined as either having £100,000 personal income, £150,000 household income or £100,000 investable assets.

**ONS – How long will my pension need to last? http://visual.ons.gov.uk/how-long-will-my-pension-need-to-last/

BlackRock research conducted from July to September 2015 among a nationally representative sample of 30,500 financial decision-makers in 20 countries, aged 25 to 74 years old. Sample for UK: 4,000. The results of the survey are provided for information purposes only. The conclusions are intended to provide an indication of the current attitude of a sample of UK citizens to saving and investing and should not be relied upon for any other purpose.

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