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Clarke Nicklin Financial Planning

'protecting your wealth and helping your investments grow'

Month

April 2017

Who will be opening a new ISA in 2017?

5 million over-50s looking to make their money work harder

Savers have had it extremely tough over many years now, and yet many still feel uncertain about making the switch to investing. This is largely because people don’t know quite where to start, and they are wary of the risk. However, people need to make their money work harder for them – not just to give them a higher level of income, but also simply to stop their money losing value in real terms.

Investing should be a long-term plan

Ultimately, holding cash which earns less interest than the rate of inflation means that people are losing spending power. And the compounded effect of this over a number of months or years could be much bigger than they realise. If people have a good cushion of cash savings – say, enough to cover 6-12 months’ worth of living expenses – then it may make sense to try investing with some of their additional cash savings. Investing should be a long-term plan, we suggest 3–5 years as a minimum to help even out the rises and falls in the market.

Savers continue to be punished by ultra-low interest rates

Many people look to their savings to boost their income as they move towards retirement or retire completely, but even though savers continue to be punished by ultra-low interest rates, the over-50s continue to believe that cash is king when it comes to their Individual Savings Account (ISA) allowance, according to new research by Saga.

Taking advantage of a tax-efficient account

When asked about their ISA plans, a quarter say they plan to open a new ISA in 2017. Amongst those who plan to take advantage of a tax-efficient account, a third say they will look at a Stocks & Shares ISA, but almost half say they will be opting for a Cash ISA. One in five say they will be looking to open both a Cash and a Stocks & Shares ISA.

Choosing between cash and investing

There are big differences between the sexes when it comes to choosing between cash and investing, with women strongly favouring cash over shares ISAs (58% vs 27%). There is a more balanced view amongst men, with 41% wanting cash and 38% shares ISAs.

Taking out a Stocks & Shares ISA

Regionally, there are also big differences in opinion: more than twice as many Londoners are willing to take out a Stocks & Shares ISA (39%) than those in the North East (24%), While those in the north east (61%), Yorkshire and the West Midlands (53%) are the most likely to opt for cash ISAs.

Reason behind the decision to invest

Just 2% of over-50s say they will be looking to open a Stocks & Shares ISA for the first time. For more than three quarters of these people, low interest rates are the reason behind their decision, while one in ten say they have inherited some money which they would like to invest.

Want to look at the options available to you?

When it comes to making important financial decisions, obtaining professional advice is essential. If you would like to look at the options available, please contact us.

Source data:

Populus interviewed 9,128 people aged 50 over, online between 13th and 19th December2016. Populus is a member of the British Polling Council and abides by its rules.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Pension booster – set goals for your retirement

Those who set tangible goals for the future could be £30,000 better off in retirement, according to new research.

The Set the Right Goals study from Zurich UK found that those that set specific goals for when they are aged 65 or over are more likely to save, and put aside approximately 7% of their salary into their pension, compared to 5% for those without.

Goal-setting and saving

The findings uncovered a definitive link between goal-setting and saving when it comes to pensions. Those of working age with a workplace or private pension who set goals for life when they are aged 65 or over – such as travelling, taking up new hobbies or being in a position to financially support children and grandchildren – save 7.25% of their salary into their pension, while those who don’t know what their aspirations are for the same period save just 5.36%.

Difference in pension pots

Given that an employee with 5–9 years’ experience typically earns £30,708, a ‘goalless’ saver earning at this level would put away just £1,646 per year into their pension, compared with £2,226 per year for those with set goals. This does not include any contributions from employers, who can sometimes match the employee’s pension contribution, meaning that the difference in pension pots could be far greater.

Most emotionally motivated

The results found that certain goals have a greater impact on savings behaviour than others. Where people have an emotional attachment to a goal (for example, saving to support elderly relatives, have children or go on holiday), they are more likely to take positive saving action to achieve them. Saving towards retirement was identified as respondents’ most important saving goal, as well as one of the most emotionally motivated.

Realise your ambitions

For most of us, managing our money day to day occupies most of our attention particularly when rising inflation puts family budgets under ever greater strain. But this research demonstrates that thinking about what you aspire to and having goals for the immediate and long term will inspire people not only to save, but save more. This is why it is so critical to take time out, and visualise your future so that you can then take action to financially prepare and realise your ambitions.

Will you make your goals achievable?

Small steps taken early on can make a huge difference. Saving regularly into your pension or drip-feeding amounts of money into the right investments can generate an income that will make your goals achievable.

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,073 adults. Fieldwork was undertaken between 25 and 26 October 2016. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

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