Is the country facing a quiet crisis? Can careful financial planning stop it?
I saw a scary statistic came out recently. The number of households aged 55-64 who are privately renting jumped a whopping 82% in the last 18 years. That figure rises for 45-54 year olds which is up 98% and 65-74 year olds is up a mammoth 128%. What does that mean in retirement?
The trend is undoubtedly heading in one direction and there seems to be little substantive or bricks and mortar response from successive governments to get hold of this trend.
Let’s take Newcastle (one of the most “affordable” regions). You can now expect to pay around £900/month in private rent for a 2-bedroom property. If you look at an elderly couple and only their State Pensions, let’s say they have the max pensions available to them right now at about £12,548. Two of those will be £25,096, tax free as under the personal allowance. Total rent will be £10,800 or a huge 43% of their income. Start adding in council tax, utilities, car, etc and very soon you are in poverty.
What can be done for your retirement?
In short, plan. Plan well.
I may sound like a broken record but the more and the earlier you plan, the more peace of mind it is going to give you. You may already be in a position where your retirement is taken care of, but how about your children or grandchildren?
The power of compounding those investment gains can be an incredibly strong tool. If you have a new grandchild, a contribution of £3600 into a pension over 65 years at a rate of just 4% would come out at c.£48,260. Imagine the cumulative effect of that were you to do that each year until their 18th birthday? They may well end up with a fund of £632,000. That is some leg up and future you are protecting for your family. Of course, inflation is going to have a huge effect but it is better than hoping we get a government that puts the needs of the country ahead of themselves.
It is almost like an insurance policy for the future. Yes, one you are not likely to see but still one you can rest knowing that your family is taken care of.
What about if you are looking to retire yourself?
Again, plan ahead. Speak with someone. Most financial advisers will take that complimentary meeting with you first up and a good one should leave you feeling more informed than when you came in. A very good one will have you leaving wanting to know more and wanting to do something about it.
Knowing of an issue is better than hoping it goes away. Infinitely better than one hoping those lottery numbers come in.
It is never too early to plan. It is always worth planning late, if that is the only option open to you. Your existing pension or workplace pension provider is unlikely to fully inform you as to your options, never mind which ones would be best suited to your circumstances.
Look local for your financial adviser. Look for independence, it means they work for you and not for you but also someone else. Make sure you connect with them and they understand your situation. Again, a good one will be honest with you and not just promise “…their best” and leave you feeling unconvinced.
