Due to the state of the global financial climate the banking industry now reports that the average adult is only set to replace about 50% of their final earnings on retirement. This means that preparation and a thorough, committed approach to savings and investments is vital in order to ensure that retirement is as financially comfortable as possible.
This report investigates ways in which individuals considering retirement can utilise a range of options, from general investment funds to the benefits of ISAs, in order to boost their savings.
Retirement Budget Review
A report recently released by the Pensions Policy Institute suggests that 45% of those aged 50 and older will need to work well into their 70s to support a comfortable retirement. This is because in recent years living expenses have risen dramatically for people within this age bracket. This is in large part due to factors such as lower-than-expected annuity returns, high unemployment and higher costs of educating and raising children.
It can therefore be argued that it will soon become commonplace for individuals to receive government pension checks whilst continuing to work for a decade or more past their previously predicted retirement age.
For this reason, it is important that those individuals who see retirement on the horizon conduct a thorough review of the budget set aside in order to evaluate if the projected costs for housing, health care and other necessities have changed since initial planning for retirement was made. Professional guidance can allow for a detailed evaluation to take place and for a structured savings strategy to be subsequently implemented.
Savings v Inflation
The base rate for UK savings accounts has been exceptionally low, less than 1%, since 2009 and so as a method used to augment a public pension or SIPP this is arguably an outdated and inefficient approach. Throughout this period inflation rates have also been rising – as of March 2012 the overall inflation rate was 3.5% – further adding to the problem for traditional cash savings accounts.
More sophisticated alternatives, such as cash or stocks & shares ISAs, are savings vehicles that provide the added security of a higher fixed interest rate that accrues daily and is paid monthly, not to mention their annual tax-free allowance.
Guaranteed Payout Annuity Investment
Research shows that five out of six workers approaching retirement in the UK have already taken steps to supplement their government pensions or Self Invested Personal Pensions (SIPPs) with other investments. Diversification of income source helps to maximise earning opportunity whilst also mitigating investment risk.