Within these schemes, both employee’s contributions and employer’s contributions are invested. The proceeds are then used to buy a pension and/or other benefits at retirement.
According to the latest CBI/Mercer Pensions Survey, most employers (86%) continue to see a strong business case for providing competitive workplace pensions, despite the difficulties of the pandemic. The same percentage of companies also said they feel a moral obligation to help employees to save for retirement. The survey was completed by 221 firms across the UK.
Meanwhile, 76% of senior executives who responded to the survey said they believe that, going forward, business contribution rates higher than the current 8% statutory minimum will be required to ensure staff have an adequate income in retirement.
Meanwhile, the UK government says that from October 1, pension schemes with an asset value of £5 billion or above must report the risks and opportunities that the climate crisis poses to their investments.
According to the survey, 47% of UK companies with a defined contribution scheme say that disclosures will be a helpful way to engage staff with their future savings. However, understanding the requirements is low amongst trustees (8%) and employers (5%). Many businesses believe the cost of publishing complaint TCFD-aligned disclosures will be larger than the government’s £15k estimate.
How to secure your pension using cryptocurrency?
The idea of retirement is changing quickly. People are no longer content with working for the same company for decades and then living on a modest pension. Many invest their money, so they can retire early and ensure their retirement funds are much more substantial. If you are up for this, you need to have a good understanding of how to get good returns, and why cryptocurrency as a type of investment is becoming popular.
Inflation is a silent killer
Bank savings accounts don't work anymore. Interest rates around the world are approaching 0% as banks try to stimulate the economy. That means you earn almost nothing for placing money on deposit. It gets much worse than that. The financial crisis in 2008 and the coronavirus pandemic are only some of the events that make governments print more money than ever. 40% of US dollars in existence were printed in just 18 months in 2020/2021, which inevitably leads to inflation. Prices of goods and services will increase over time, effectively making your money decrease in value.
The combination of 0% interest rates and huge money printing means that the old retirement playbook no longer works. If you want to grow your wealth with compound interest over time, you need to invest in other assets. One asset that is immune to inflation is cryptocurrency.
Benefits of cryptocurrencies as an asset
Cryptocurrency has caught the attention of retirees because of its immense returns over the last few years. Investing $1,000 in Bitcoin in October 2016 would have got you a 1.57 BTC, which now amounts to almost $79,000. If you invested the same amount in Ethereum in 2016, it would now be worth about $300,000. These returns on investment are ridiculous. It's why there are so many Bitcoin millionaires in the world. So, what is driving such insane growth in the value of cryptocurrencies? The first reason is the growth of the crypto market. It is expanding quickly, and those that invest early reap the rewards. Crypto still likely has a long way to go in this regard, as the technology has not made it to the mass adoption point yet.
However, there's something else going on. Bitcoin and many other cryptocurrencies have a tightly controlled supply. There are only 21 million BTC that can ever exist. This is written into the Bitcoin protocol and will never be changed. Because of this limited supply, the coin is immune to inflation from money printing as we discussed earlier. In fact, Bitcoin is deflationary in nature, meaning when you hold it, prices will seem to deflate relatively to your currency. This is a great thing for you as an investor.
Another benefit of investing in cryptocurrency is that crypto assets are weakly correlated with other traditional assets. Price changes in the stock market or currency markets don’t automatically bring cryptocurrency prices with them. This means cryptocurrency is a great way to diversify your investment portfolio. It works as a defensive asset to hedge against crashes in other areas of the economy.
Your retirement plan
If you want to add digital assets to your retirement investment portfolio, you’ll need a plan to do it successfully. The first step is to get started. Cryptocurrency is still growing in value quickly, and the earlier you can get in, the better. The market may go up and down after you buy, but remember: this is a long-term investment. Try not to get too caught up in the ups and downs of the market.
If you're new to cryptocurrency, you'll also need to educate yourself. Investing in crypto is a little different from other assets. There are some technological and legal hurdles to overcome. These may be very easy or difficult, depending on where you live. You can follow many crypto influencers to learn more about cryptocurrency. Or, you can also take some of the many online courses to get familiar with specific cryptocurrencies.
The most important thing when investing for retirement is to diversify. When you're going for the long term, anything can happen in the markets. Having all your eggs in one basket is a terrible idea when looking for good returns over decades. So, don't put all of your pension in Bitcoin. This means diversifying beyond crypto (have traditional assets like stocks, gold, etc. in your portfolio) and also diversifying within crypto (having multiple cryptocurrencies in your crypto portfolio).
Risks of long-term investments in cryptocurrencies
Keep in mind that cryptocurrency is a risky asset. Many people have made a ton of money in cryptocurrency, but just as many have lost considerable sums of crypto, too. Cryptocurrency is volatile and can suddenly crash in value. This happened many times in the past. Cryptocurrency is also vulnerable to hacks and theft if you don't look after it properly. Then, there's a simple risk you might 'lose' your cryptocurrency by losing your “keys” (like your crypto password). If this happens, it's gone forever. Many governments haven't yet officially decided on the legal status of cryptocurrency, so the legal risk also exists. If you want to invest in crypto for retirement, you're going to be a pioneer. No generation has done this before. The risks are real, but the rewards can be very large.
Cryptocurrencies on a retirement account
In some countries like the USA, you can already save cryptocurrency on your self-directed Individual Retirement Account (IRA). They work just like regular IRAs, except a self-directed IRA allows you to hold alternative asset classes like cryptocurrency and real estate.
One of the biggest advantages of having crypto as a retirement investment is the diversification of your portfolio. The more diverse it is, the more protected your account will be in case of any market downturns. With the crypto market growing in popularity each year, there is also a high chance that it will bring you large financial benefits if you invest in it now. Amongst the main disadvantage of having cryptocurrency as your retirement investment is its high price volatility. Take Bitcoin as an example: in December 2017, its price dropped to $14,000. Although the price increased and reached new heights in 2021, many might pick a more stable alternative to crypto.
Conclusion
Investing for retirement is getting trickier with time. Gone are the days when you can just leave your savings in a bank account and earn high interest from the bank. Now, inflation is silently eating away at the savings of those that aren't aware of it. Cryptocurrencies are a new inflation-proof asset class that provides extremely high returns for long-term investors. Just be prepared for a wilder investment ride than other long-term assets.
Andrew Megson, executive chairman of My Pension Expert, explores the risks of property as a retirement investment.
There is no easy answer to this question. Especially in the current economy, as inflation has continued to climb up to record levels whilst interest rates remain low, there is a clear case to be made for entering the property market. Add into the equation the fact that house prices have rebounded at pace since the first lockdown – allowing buy-to-let properties in the UK to prosper and increase in value by 5.8% year-on-year – property may constitute a sound investment for some.
Clearly, this may provide some impressive returns in retirement. However, it is important to note the various risks that inevitably come when individuals replace a traditional pension with a property portfolio, as Haldane’s suggestion may be reckless for some. With this in mind, what should pension planners consider before taking the leap?
Hidden costs can be more than retirees bargain for
Firstly, it is important to acknowledge that property can be a sound investment for some, offering the prospect for long-term capital growth. That said, it is equally important to note that house prices don’t always reliably head upwards.
In times of economic hardship, like a recession, the market typically slows and causes properties to fall in value. The result of this is that individuals are likely to see their property lose capital. Likewise, in this scenario negative equity becomes a possibility; this tends to happen when individuals have paid more money for the property than it is worth. It goes without saying that this sort of volatility is rarely an issue for those who have a more traditional pension pot. Even throughout the COVID-19 crisis, many individuals have still been able to enjoy positive pension growth this year.
Other important factors that those considering this option should mull over, are the ongoing costs associated with running a property, as these can accumulate, chipping away at retirement funds. Costs can be varied – from landlord’s insurance, maintenance fees for wear and tear, property management, letting fees, or simply even furnishing the property. Letting fees alone are usually somewhere in the region of 15%, and this is before retirees have factored in any void periods where the property is vacant, which is likely to happen from time to time. Together, these costs can amass, leaving prospective retirees financially vulnerable, if they have no plan B.
Considering tax and liquidity risk
Tax burdens can pose further issues. It goes without saying that buy-to-let property owners will normally end up footing a higher tax bill than before, due to legal, stamp duty, and survey fees, as well as several taxation changes affecting landlords and those who own a second (or several) property. For example, there is a 3% stamp duty surcharge for second homes, as well as an increased capital gains tax. These costs can be very steep, making the cost of buying and owning an investment property an extremely expensive business. Put simply, this can lead to diminished returns in retirement.
Furthermore, individuals should also consider liquidity risk – that is, how easy (or difficult) it is for an individual to reclaim their funds when they need them. Often, selling a property can take several months, and sometimes even longer, which means that any people who are relying on the sale proceeds to fund their retirement will need to plan way ahead, and have a contingency plan in mind, on the off chance that the sale falls through, or the markets crash.
Evidently, using a property portfolio to fund a retirement is a very involved process, and can be extremely costly. As such, those seriously considering this as an option must carefully weigh up all these considerations to ensure that committing to property investment is viable and profitable enough to see them through retirement.
The importance of financial advice
Just like any investment, the property investment process carries risk. For this reason, individuals would do well to seek independent financial advice before making any big commitments – particularly because taking out a significant amount of cash from their pension pot to fund a property can entail serious implications and tax penalties.
After reviewing all the relevant information, some individuals may decide that doing away with a traditional pension entirely is too risky. In this eventuality, an independent financial adviser (IFA) will be able to suggest a more suitable investment strategy. Certainly, unlike property investment, retirees are likely to experience more tax relief from a pension pot, as these investments are sheltered from the likes of capital gains tax and stamp duty.
Ultimately, owning a property as part of a wider investment portfolio can be a very prudent option, allowing individuals to make some notable returns. That said, prospective retirees should not put all their eggs in one basket and discount traditional pensions altogether. In many ways, factoring in a more traditional pension may offer more security and tax-efficiency in the long-term.
About the author: Andrew Megson is the Executive Chairman of My Pension Expert, the UK’s number one Advised Retirement Income Specialist. Founded in 2010, My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week.
Annie Button, professional content writer and branding aficionado, discusses the key factors to consider when deciding whether you're financially secure enough to retire.
However, before you hand in your notice for the final time and embark on a life of volunteering, travelling, charity working, fishing or whatever you envisage yourself doing, it's important to weigh up whether now is a good time to retire or not. Choosing to retire is a big decision, after all, and it is one in which many workers are actually a little scared of making. This is largely due to the horror stories that many people will have heard about those who retired too soon, resulting in a combination of financial, income and lifestyle restrictions as a result. What's more, with the coronavirus pandemic adding another layer of uncertainty to the world's economics, the decision-making process has become even more complex for pre-retirees weighing up whether now is the right time or not. So, with this in mind, we thought we’d try and address one of the key questions many people ask when deciding when to retire: how do you know if you’re financially secure enough? Join us as we discuss how you can work this out for yourself.
Think about your bills, bills, bills
To determine your financial stability, your first port of call should be to look at your incomings, outgoings and bills, bills, bills. If you still have mortgage repayments to make, for example, ask yourself how you will be able to fund them during your retirement. Would it make more sense to pay off your mortgage up-front before you retire, freeing up a lot more money for your post-retirement plans? Or will you still be unable to for a few years yet?
You will also need to consider the other utilities costs as well. While you should see your commuting costs come down during your retirement, spending longer at home could increase your gas, electric and entertainment bills significantly. Therefore, weigh up whether your pension pot will be able to cover these costs.
Weigh up what you want
It’s all well and good making the decision to retire but it’s imperative you don’t underestimate what that will actually involve. The amount of money you need will largely depend on how you foresee your retirement going. If, for example, you fancy travelling the world in your newfound downtime, that will cost a lot more than simply spending more time in your home and garden.
As such, it’s important to follow the three tips listed below:
1. Know what you have. Put simply, you need to understand what exactly your pension can do for you when you retire, especially when accessing it under the updated Pension Freedoms Rules. Only you will be able to determine whether what you have available is enough to support the retirement lifestyle you want to lead.
2. Know what you want. Along a similar theme, while you don't need to explicitly decide what you want to do in your retirement in advance, it will certainly help when it comes to addressing doubts over your post-retirement financial security.
3. Know how long to plan for. Almost 80% of people aged over fifty underestimate their life expectancy. As such, it's important to think realistically about how long your retirement is likely to be and how long you'll need to keep your pension running.
Think about your family
If you have children, answering questions about your financial security when retiring could depend a lot on them and their circumstances. If, for example, you have aspirations to help fund the home purchases of your children or grandchildren, it’s important to include these when deciding whether to retire or not. While taking out an equity release mortgage can help during these moments, if your pension income is unable to cover the repayments you’ll need to make for releasing equity on your home, you may be unable to help in the way you’d like. Therefore, be realistic about what you think you will – or won’t – be able to afford to help your family out with after you’ve retired.
Final thoughts…
Deciding when to retire is one of the biggest decisions you’ll ever make, and is certainly one you don’t want to rush. However, taking the time to make sure you are financially secure to retire should provide you with the reassurance you need to make the best decision for your future.
Consider Your Plans
What does retirement look like to you? Do you want to stay in the home that you currently live in and spend a lot of time with your grandchildren? Do you hope to move to a place that has a big population of retirees, like Florida or Arizona? Or maybe, like some American retirees, you hope to move to another country where the cost of living is lower. Maybe you want to go back to school, start that business you never had time for or go mountain climbing.
The possibilities for retirees are greater than ever before, so don't fence yourself in with thinking about what you are supposed to do. If you don’t yet know exactly how you want retirement to look that is okay too, reading investment books can help you learn how to best save now regardless of how your retirement looks in the future. Knowing what kind of a lifestyle you want will help you with the rest of your planning. Revisit your plans every so often to see if you still envision the same kind of lifestyle or if you need to make some adjustments.
Know Your Assets
Understanding what you have, and its value is also important. For example, if you plan to sell your home and move, you should have a realistic idea of what your house is worth. You may have some assets that you do not realise are valuable. If you no longer need your life insurance policy because your children are adults, you can look into selling the policy for a life settlement. You can learn more about how to leverage those assets for you and review a policyholder's guide to modified endowment contracts.
Max Out Your Retirement Contributions
Whatever your age, you should be contributing as much as you can to a retirement fund and not buying into some common lies we tell ourselves about retirement and saving for it. This is particularly true if you have an employer-sponsored account that includes matching funds. If you are young, the money that you put away now has the potential to grow exponentially and provide you with a substantial amount of savings to retire on. If you are nearer retirement and worried about having enough saved, it might be possible for you to make larger catch-up contributions to your account.
Check Your Social Security
When you are figuring out how much you have for retirement, don't forget about Social Security. You can use a quick calculator at the federal government website to get an idea of what your payments will be. The Social Security Administration also periodically sends this information out to you. Other things could affect your payment as well. For example, if you are divorced from someone you were married to for more than 10 years and they made substantially more than you, you might be able to draw on their benefits. This does not affect the benefits that your ex-spouse can receive.
As you enter retirement, you may feel as though you are already set for life. With all the money you have saved and the pension checks you will be receiving, managing your money should be the least of your worries. However, investing doesn't end with you hanging up your boots. It's a process that continues well into the future. After all, you still need to prepare for any contingency that comes your way and, more importantly, build a fortune you can pass onto the next generation.
Money doesn't keep on flowing when you retire, so it's important to put your savings and pension funds to work. Here's a guide to help you along this path towards gaining financial freedom and stability as well as giving your loved ones something they can inherit.
Set clear financial goals
What will you want to achieve once you have retired? Will you travel the world? Will you move into a quieter and healthier community? Everyone has a clear vision of what they are going to do during retirement, but living the good life shouldn't be the only thing in mind.
Financial stability and building enough inheritable wealth should also have a place in your list of goals during retirement. Your main goal here is to maximize whatever fund sources you have. From this, it will be easier for you to develop a sound investment strategy that works for you in the long run.
Start early with a risk-proof plan
Sound financial planning should start long before you retire. As you enter the last years of your career, you need to take this time to work out your financial plans for after. You may have already saved enough cash in your retirement account, but you need to know how to allocate and spend them on stable investment vehicles.
Sound financial planning should start long before you retire.
Why is it important to plan early? The answer is simple: Inflation. As you save money in your retirement savings, these funds will lose value over time, depending on current and forecasted economic situations. In other words, your retirement money is at the mercy of the economy at-large. You can’t just keep cash in the bank. You should also look for investment vehicles that are guaranteed to grow your cash.
It’s always sound advice to do your research as early as possible, compare potential investment options, and come up with a financial game plan that serves as a hedge against economic volatility.
Avoid getting too aggressive
As a retiree, the world is your oyster! You can do whatever you want with the wads of cash you have. While you may have the freedom to choose an investment option that’s supposed to generate high yields, being too aggressive sets you up for failure.
In today’s financial environment, the best rewards often go towards strategic players — and not players who go all-in. Financial advisers will tell you that as a good rule of thumb, you need only to go for investments that provide enough cash flow to keep you within your goals. The worst thing you can possibly do is to invest all your assets without maintaining enough reserves for future expenses. You know exactly what happens if you put all your eggs in one basket.
Diversify
It matters a lot to know where you invest all your retirement in. If you started early with retirement planning, you may include stocks, bonds, and other securities in your financial strategy.Then again, building a solid portfolio shouldn’t rely heavily on securities as these are highly vulnerable to volatility. It’s sound advice to invest in things you are familiar with, but narrowing your strategy to a single asset class won’t secure you for the long-term.
[ymal]
Diversification is still an effective strategy for reducing risk and limiting your exposure to economic disruptions. Along with securities, you should also look towards alternative investments that work well against uncertainty. These passive income options include real estate (specifically, commercial properties and rental housing), trusts, and qualified opportunity funds. You can also look into precious metals, variable annuities, and even cryptocurrencies like Ethereum and Bitcoin.
When it comes to securing your future as a retiree, it pays to broaden your investment horizons. Still, before you start diversifying your portfolio, take time to study each vehicle and the ways you can maximize them.
Avoid the “hype train”
When it comes to investments, people will always flock to where influencers go. For someone who is new to investing, keeping up with other investors might seem like an effective way to manage uncertainty. However, putting all your assets in hyped-up stocks will only set you for a very hard drop if these stocks result in bubbles.
As a retiree, you wouldn’t want to jump into the hype-train thinking it’s a sustainable way to maximize your retirement funds. Nothing ever comes out of being too aggressive. You may have a lot to spend in your retirement, but overlooking certain details and making emotional decisions in the process spells trouble. It only increases the risk of losing everything you have as well as everything you are supposed to earn during retirement.
At the end of the day, planning for your retirement helps you build a more stable future even in the midst of economic disruption. To live comfortable well into the later years of life requires foresight, wisdom, and sound planning.
Andrew Megson, executive chairman of My Pension Expert, offers his advice to savers aiming to get the most out of their finances for retirement.
The beginning of the new year has been just as turbulent as the one that came before it. Indeed, COVID-19 cases and hospital admissions are increasing once more, consequently driving the UK into its third lockdown since the beginning of the pandemic.
Yet despite this sombre start to 2021, the arrival of a new year presents marks a fresh start for individuals everywhere, with many taking the opportunity to better themselves – especially when it comes to the state of their retirement finances. After all, January remains a popular time for older members of the workforce to consider setting their retirement date.
Inevitably, many people are wondering what they can do to ensure that their pension pot remains in good health. So, here are some pension planning tips worth considering in the new year, to help savers secure a relaxed and financially secure retirement.
Devise a suitable retirement strategy
It might seem like a fairly elementary suggestion to make, but developing a sustainable retirement plan is a vital factor many adults dismiss. According to a recent My Pension Expert survey of over 900 UK adults aged 40 and over, a staggering 42% admitted that they had no clear retirement strategy in place.
In these circumstances, it is vital to seek some independent financial advice. An adviser will be able to offer a helping hand when it comes to devising a retirement plan that suits their client’s specific needs.
It might seem like a fairly elementary suggestion to make, but developing a sustainable retirement plan is a vital factor many adults dismiss.
Take the hassle out of savings
We are all inundated with a million and one things to do during the working week, so often the subject of pension contributions is left in the sidelines. As such, individuals should consider how they can make saving for retirement as hassle-free as possible.
If you have a workplace pension, this shouldn’t be too tricky. The way this usually works, employers simply deduct an agreed sum from an employee’s salary to count as their pension contribution. The result is that this is an easy process, unless individuals want to increase their contribution at any time.
Alternatively, those with a personal pension should consider setting up a direct debit to replicate this process. In this way, contributions can be made with minimal effort.
Tracking down old pension pots
In today’s increasingly fluid jobs market, it is common for individuals to have worked for up to 10 (or more) different companies throughout their career. So, by the time an individual has reached retirement age, they will have amassed a number of pension pots. As a result, it can be easy to lose track; indeed, nearly a third (31%) of UK adults aged 40 to 54 have lost track of their pension pots, according to recent research from My Pension Expert.
To make things simpler, the government offers a helpful tracking tool, which should go some way to help pension planners locate their missing pots. Although at the moment the service cannot tell individuals the total value of the pension pots that they have accumulated, it does provide users with the contact details of their provider.
Shopping around for the right option
The world of pensions can seem like difficult terrain to navigate. Consequently, many savers fail to shop around for a pension provider, instead settling for one that does not suit their needs. However, there are plenty of different options available; consumers just need to make a habit of conducting their own research. After all, pension planners are able to transfer their pension pot at any age, so there’s no need to put off conducting research until a later date.
[ymal]
However, some pension providers will impose fees on clients who transfer their funds, so this is something to keep in mind if you’re thinking of changing providers. Savers should always ensure that you read the small print to see if this is the case or seek independent financial advice if they are unsure.
Keep an ear to the ground
Ultimately, planning for retirement can be complex - particularly in the current climate, where economic turmoil and changing markets are complicating matters even further. With further changes expected to pension policies, tax relief, the triple lock system, and even the potential for negative interest rates, it might seem more difficult than ever to get a handle on retirement finances.
So, it will be beneficial for savers to make a conscious effort to keep up with the latest pension news, and potential changes to pension policies in the new year. In this way, savers are less likely to be in for a shock if any changes are made, and will be able to adjust their retirement strategy accordingly, which should make for a more financially secure retirement. As policies can often be quite complex, savers shouldn’t be afraid to ask for a helping hand if they need some assistance cutting through the jargon.
While 2021 hasn’t been smooth sailing thus far, this doesn’t have to be the case for people’s pensions. After all, there is no time like the present for savers to strengthen their pension pots, and achieve some peace of mind amidst all the chaos.
Tell us about your career path and what brought you to the world of finance?
I started in the Insurance, Retirement & Financial Service industry at age 20 after getting laid off from my previous employer by answering an ad for a captive company. Coincidently, it ended up being complete luck because I was studying Business Management and Marketing at college at the time and had never even looked into a career in finance prior to this. I ended up loving my new career choice and after only three years, I had worked my way up to Regional Manager. Once I learned I could go independent and offer my clients better and more versatile products, coupled with a lower rate and/or a better return on their retirement, it was time for a move. So, in 2005 at age 23, I started Postema Insurance & Investments, LLC.
Within a short period of time, I saw myself training a wonderful group of agents and growing at a rapid pace. We currently have offices located in Ohio, Indiana, and Florida and continue to train weekly to be the best representatives we can for pre-retirees, as well as retirees. As we assist our clients by providing in-house comprehensive financial education, we understand service is key so they may have a thorough understanding of their individual financial situations.
What was your main motivation behind setting up Postema Insurance & Investments and your other businesses under the Postema umbrella?
The main motivation was to help pre-retirees and retirees by “Protecting Everything You’ve Worked For”. We wanted to make a considerable impact in our industry through the process of education and training including topics like IRAs, 401k’s, life insurance, income planning, medicare options, and supplemental insurance (including The Affordable Care Act).
Five years after we opened, we then started a Property & Casualty division to assist clients with car, home, rental and business insurance. My goal was to establish a one-stop-shop for all of my clients’ financial and insurance needs. This is how the other Postema companies formed, advancing us one step further towards meeting that goal.
Postema Capital Lending: During the pandemic, we noticed from our clients there was a vast need for commercial real estate, equipment loans, business lines of credit, home mortgages and home equity loans. Thus, we launched Postema Capital Lending.
Postema Accounting Solutions: Postema Accounting Solutions is the accounting and tax division of the Postema businesses. In an effort to provide a one-stop location for clients’ insurance and financial needs, having in-house accounting and income tax experts was a logical addition.
The tax consequences of adding money (as well as withdrawing money) from investment products should always be examined prior to making a decision. Clients have the ability to check with our tax and financial/retirement experts so they can reach an educated decision when choosing the best course of action for their particular financial situation.
There are also numerous advantages to having everything in one location when income tax time arrives. Our clients have the opportunity to have someone already familiar with their financial situation prepare their income tax return for a very reasonable rate, rather than dealing with a different individual each year. Under these circumstances, vital pieces of information are less likely to be missed.
Postema Accounting Solutions provides our clients access to tax and accounting experts to ask questions pertaining to their specific situations year-round, not just during income tax season further solidifying the benefits of this division.
Postema Marketing Group: I started Postema Marketing Group in 2009 along with Joe Santore, who in my opinion is one of the greatest marketers and trainers in helping agents with retirement and income planning for their clients. Together with Joe and the rest of the team, we have trained thousands of agents and agencies across the country on how to ethically consult in areas of finance, retirement, taxes and insurance. I consider it an honour to be a part of an industry that is often shunned.
Many advisers skim through the products, but you need to educate yourself on what you need vs. what you want.
What are the financial actions you advise people to take in the current uncertain environment?
Start to look at conservative or guaranteed options available out there and make sure you understand the difference between the two. Many advisers skim through the products, but you need to educate yourself on what you need vs. what you want. Do not be afraid to ask the hard questions. If anyone has questions, please do not hesitate to shoot me an email about your interests or concerns and I can send you a free book. Also, remember to see what stage you are in as far as the grand scheme of things. Are you in the Accumulation Phase or the Preservation and Distribution phase? Greed gets you nowhere if the accumulation phase is finished and you try to keep getting more.
In what ways have the events of 2020 affected your work and your companies?
Thankfully, our business has not taken a hit during the pandemic. We know we are so blessed compared to other companies who have suffered because we have had back to back appointments with our clients who have needed our financial advice and help during this unprecedented time. Right now, one of our most important tasks is ensuring that the proper precautions and safety procedures are in place to protect our clients and our staff.
What are your key tips for achieving success in the finance sector?
Education is key to both yourself and to your clients! There is nothing more disturbing than someone in this sector who baulks on education because it is extremely unfair to the client (and also the agent). Also, do not forget self-improvement and motivation for yourself so you can be the best representative you can be for everyone involved.
In addition to all these amazing companies you’ve founded, you’re also a bestselling author. Please tell us about your books.
I started writing retirement and financial in 2012 when I wrote my first #1 bestseller Retirement You Can’t Outlive. Since then I have written over 15 #1 bestsellers with many becoming #1 international bestsellers in Amazon’s Finance, Retirement, Budgeting, Legacy Planning, Self-Help, Motivation and Nutrition categories. I have also created numerous seminar programs for our agents and clients nationally.
What’s next for you? What are you currently working on and what do you hope to achieve in the future?
I am terrified for our baby boomers with all the bad advice that is given today. We want everyone to be educated to make the right choices, which is the purpose of writing my books. We want to teach so clients know the questions they need to ask their adviser. We want to help as many people retire and protect all they have worked for safely and securely. With proper planning, their wealth will be passed on to future generations wisely. In the next two years, our goal is to open an additional ten offices throughout the US to continue to provide the proper education on financial services.
The coronavirus outbreak has waylaid the best-made plans for the finances of many people, so successfully managing your money through 2020 is now looking to be much trickier than it was before. However, many of the same principles still apply.
Whether it's saving for a rainy day or creating a budget to help you take control of where your money is going, managing your finances will help you stay on top of your bills and create a financial cushion for your future. You can start taking steps to become more financially literate at any time, so this guide will provide you with some tips on how to manage your money effectively in 2020.
Learn how to budget
Whether you choose to write out your budget with a pen and paper or you prefer to go digital and use a spreadsheet or an app, having a budget in place each month is vital to managing your money efficiently. Budgeting is a great way of seeing clearly what you have coming in and going out, so you can see if you’re overspending in a certain area and redirect that money to savings or debt payments.
Pay off your debts
Many people have additional payments to make each month in the form of loans or cards, so you should make 2020 the year that you tackle your debts. It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards. Some examples of debts you should look to pay off include credit cards, store cards which typically have a very high rate of interest, and personal loans.
It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards.
A good tip if you have a few debts is to list out all of the loans or cards you have, along with the minimum payments you need to make as per the terms of your agreement, and the interest rate. You can then categorise these from highest to lowest, so you have a clear view of what needs to be paid.
Monitor your credit rating
If you haven’t been checking your credit score on a regular basis, this is the year to start that habit. You can use online tools to get a free credit report that will show you any errors or potential fraud that you may be victim too, as well as give you a good overview of your finances. It’s important to have a good credit rating for larger future purchases such as a mortgage on a property, so it pays to check in every so often and see how you’re performing.
Consider your retirement
So many of us push the idea of saving for retirement to the bottom of our priority list because if feels like such a distant problem. But you can never start saving too early and having a plan in place from an early age will provide you with greater security when the time comes to leave your career.
Pension specialists Reeves Financial point out that "no matter how old you are it is never too late to think about financially planning for your retirement and paying into a pension scheme. It is actually a tax-efficient way of saving money”. So, if you’re currently without a pension plan, now is the time to do your research and set one up so you can begin preparing for the future.
[ymal]
Set up a savings goal
Some people can find it difficult to get motivated by savings, and it’s understandable – there are often things we want or need to spend our money on more immediately. But it’s often easier if you set a goal so you know what you’re working towards. The first step with any savings plan is to have emergency savings in place – money set aside should something happen out of the blue, such as your car breaking down or if your boiler breaks.
Aim to have two to three months’ worth of expenses set aside in an easy-to-access account for these moments. After you have that saved, you can think about longer-term goals you may have, such as taking a holiday, planning for extra money to have on hand when you have a child or for a wedding. You’ll be surprised how quickly your money piles up, even if you just save £50 a month towards your goals.
Final thoughts
It can be all too easy to bury your head in the sand when it comes to money, particularly if you’re worried about your finances. But having control over your money and how you manage it is the best solution to help you tackle your worries head-on and plan for the future. With these tips, you’ll be in a great position by the end of the year to feel more financially secure and able to start building your nest egg.
Andrew Megson, Executive Chairman of My Pension Expert, discusses how one can best safeguard their pension in a time of crisis.
Pension panic: it is a common occurrence as people approach retirement. However, the onset of the coronavirus pandemic has created a new surge of it rippling throughout Britain.
As of mid-June, more than one in four UK workers had been furloughed, while over 2.6 million self-employed people had applied for financial support from the Government. Worse still, unemployment is set to reach 3.5 million by the end of 2020, according to British business executives.
These startling statistics illustrate just how many people’s livelihoods have been affected by the pandemic. The crisis has brought about financial hardship for millions, which in turn has resulted in a significant increase in consumer demand for financial advice, credit and support.
For many people, their pension pot has taken on added importance. Whether seeking access to these funds in the short-term or re-evaluating their long-term strategy, pensions have been put under the spotlight.
What is pension panic?
You might have seen or heard the term pension panic over recent weeks, but what does it mean?
Well, firstly, it is important to note that pension panic is not a new phenomenon brought about by COVID-19. It essentially refers to people who get closer to retirement age and realise – or feel – that they are not financially prepared. They worry if they have enough money to retire comfortably, if their pension pot is “working hard enough” for them, and how (and when) can they access their cash.
[ymal]
Yet there can be no denying that these important questions have become more prominent as a result of the pandemic – sudden changes in people’s financial circumstances has understandably resulted in a palpable sense of pension panic among an increasing number of consumers. This in turn can lead to potentially rash, ill-advised decisions.
Watching out for pension scammers
Sadly, pension scammers have also been seeking to capitalise on this panic.
Most consumers think they are savvy enough to spot a scam; however, if they are swept up in a pension panic, it can be easy to overlook the red flags. Indeed, research carried out by Action Fraud revealed that there were more than 2,100 case of fraud in the first five months of 2020, with losses resulting from fraudulent activity amounting to £5.14 million.
Pension scammers will come in many shapes and sizes. Some claim to offer “free pension reviews”, always concluding that victims’ pension pots could offer higher returns if placed in unusual investments such as biofuels, forestry or storage units. Others promise consumers an instant injection of cash by falsely telling them they can access their funds before the age of 55 (early pension withdrawal could result in a tax bill of 55%). There remain many, too, who simply try their luck by illegally cold-calling potential victims in a bid to get their hands on people’s hard-earned savings.
Pension savers must remember that if they have any suspicions about the legitimacy of a website or business then they can search the company on the Financial Conduct Authority’s (FCA) Financial Services Register. If they are not on the register, then it is likely a scam.
Combatting pension panic
So, putting scammers to one side, how can one avoid being overcome by pension panic and making ill-fated financial decisions? In short, people must seek advice. Independent, considered, tailored advice from a trained individual or a reputable company.
The FCA strongly recommends seeking financial advice if an individual wants to cash-in a pension worth more than £30,000. But this does not mean those wanting to cash-in a smaller sum should overlook advice.
Why would people be reluctant to seek advice? Some consumers might think advice is unnecessary – that they can devise their own pension strategy without consulting anyone else. Others will simply have been enrolled on their employer’s pension scheme and given it little further thought. And a sizeable proportion of consumers rule out pension advice because they believe it would be too expensive.
The FCA strongly recommends seeking financial advice if an individual wants to cash-in a pension worth more than £30,000.
This is untrue. In fact, this is a dangerous mindset that must be avoided. Pension advice is necessary for all, and it does not come with a prohibitively large price tag. The question really is whether you can afford not to get pension advice.
Everyone needs pension advice
It may seem like an obvious point, but there is no one-size-fits-all model for retirement finance. While some consumers may know the basics, they might not understand how to maximise their pension pots to achieve a more comfortable retirement.
People may assume the most logical option for them is to leave their pension pot as long as possible and watch its value increase over the years. However, this might not be the best route for them and could cause them to lose out financially.
There is a plethora of options available. Annuities, for example, are a retirement income product that is bought with a pension pot; they could offer retirees peace of mind by providing fixed monthly income for the rest of their lives (or for a specified period agreed with the annuities lender). Alternatively, flexible drawdowns could provide over-55s with the freedom to choose an income to withdraw from their pension which suits their exact circumstances.
The right option always comes downs to individual circumstances. And this further underlines the benefit of financial advisors who review all the possible options and explain them to consumers in simple, jargon-free terms. Only then can a well-informed decision be made.
Knowledge is power, or so the old cliché goes. This rings true in the world of pensions – panic often stems from a lack of knowledge about your pension and the options available. Speaking with experts and gaining their advice gives consumers knowledge and, in turn, power. This will help fight off pension panic and ultimately ensure the best possible outcome for one’s retirement.
If you are hitting your fifties now, and you don’t have a pension pot or any savings, you’ll be pleased to hear it’s not too late to do something about it.
In fact, it is never too late to start saving for old age. Obviously, the sooner you get started the better, so why not make that now?
In this article, I’ll be looking at some of the pension and saving options for late starters. Whether you’ve just hit the big five-oh milestone, or you are creeping towards retirement, there are still ways to build a savings pot and make your money work better for you,whether that’s through a pension, learn from an investment blog or otherwise.
First up let’s take a brief look at the State Pension.
What pension will you get from the State?
The State Pension is a regular payment from the Government you can claim when you reach State Pension age. The amount you get is based on how much you have paid in National Insurance contributions.
The State Pension age has undergone radical change in recent years. Women used to be able to get the State Pension at age 60, and men at 65. From November 2018, both men and women have to be 65, but this is gradually increasing, depending on when you were born. The State Pension age will reach 67 for both men and women by 2028. It could change again in the future.
The full amount of the current State Pension is currently £168.60 per week. Check how much State Pension you could get here.
A pension is actually a tax-efficient way of saving money
Independent Financial Adviser (IFA) and pensions specialist Adam Reeves, says “No matter how old you are it is never too late to think about financially planning for your retirement and paying into a pension scheme. It is actually a tax-efficient way of saving money.”
If you are a UK taxpayer, you will can get tax relief on pension contributions of up to 100 per cent of your earnings or £40,000 annual allowance (whichever is lower).
Pension tax relief is paid at the highest rate of income tax you pay, so for basic-rate taxpayers it is 20 per cent, for higher-rate taxpayers it is 40 per cent and for additional-rate taxpayers it is 45 per cent.
What does this mean? If you are a basic-rate taxpayer if you contribute £100 from your salary into your pension it will only cost you £80 – the government pays £20 (the tax you would have paid on the £100 of your salary). Higher-rate taxpayers benefit more.
See more about tax relief on pension contributions here. As you can see, the tax relief available on pensions is particularly attractive to higher earners and additional rate taxpayers.
[ymal]
What is a private pension?
Sometimes called a personal pension, and commonly referred to as a ‘Self Invested Personal Pension’ (SIPP), a private pension is a type of investment scheme. You make monthly or one-off payments into a pension plan. Your pension scheme provider adds tax relief to that. The money you put in to the pension plan is invested in a range of assets, such as bonds, shares, property and cash.
How much you get from your pension plan will depend on how much you save, how it is invested and the type of pension plan you have.
It is important to seek independent advice when considering any pension scheme or other form of investment as there are risks. The return on your investment can go down as well as up.
Workplace pension schemes
If you are working in the UK, are aged 22 or over, are under the State Pension age and earning more than £10,000 a year, then you are likely already signed up to a workplace pension scheme (unless you have opted out).
Many workers are now covered by pensions auto-enrolment. This is a government scheme to help people save for later life.
Since 1st February 2018, all eligible workers in the UK must be enrolled in a workplace pension scheme. The amount you and your employer contribute has been increasing since the scheme was introduced. From 6th April 2019 your employer pays 3 per cent of your qualifying earnings and you pay 4 per cent of your qualifying earnings.
If you have previously opted out, you can rejoin, but your employer only has to action one request from each member every twelve months. See more about rejoining your auto-enrolment workplace pension scheme here.
What are the alternatives?
As well as considering a private pension, there are lots of other money-saving tips for over-50s. Now is the perfect time to give yourself a money makeover. Any savings you can make in your expenditure now can be saved for your retirement.
ISAs are another tax-efficient way of saving money. The term ISA stands for Individual Savings Account. It essentially allows you to save money tax-free. See if an ISA could be right for you here.
Profile Pensions has investigated how employer contributions to pensions vary based on industry and gender and which sectors offer the best pension planning with high contributions from employers.
The Best and Worst Industries for Employer Contributions
The financial and insurance industry has been revealed as the most advantageous option for obtaining support. Although, as a sector renowned for its remunerative staff benefits, it’s no surprise that employer contributions are at an average of 9.5%. The education industry also fares very well in terms of pension options, with teachers receiving a rewarding 9.3% average contribution. This is followed by the electricity, gas, steam, and air-conditioning supply industry, however, this is significantly lower than the prior two with average contributions of only 7.1%.
At the other end of the scale, agriculture, forestry and fishing jobs offered the minimum legal contribution of just 2%, making it them worst occupations for creating a satisfactory pension pot. As an industry which is also climate dependant, this further defers individuals seeking a financially secure retirement after an unpredictable career. The accommodation and food services sector received a similarly low employer contribution of just 2.1%. While the arts and entertainment industry had the third lowest employer contribution, where it reaches only 2.5% on average. Although as a notoriously competitive industry, it’s anticipated that employers can get away with such a low contribution and a major factor to consider when navigating the risky world of entertainment.
Not All Pensions are Created Equal: The Gender Gap
Gender stereotypes still exist across industries with men receiving an overall higher contribution rate than women, at 4.6% compared with 4.4%. Education, as a female dominated industry, was the only industry where women outperform men in terms of employer contribution, where they receive 1.4% more annually. These high pensions also mean that teachers are likely to fare better in retirement than those in typically high-earning careers like real estate or finance. In technical areas, men acquired higher contributions and in the electricity, gas, steam, and air-conditioning supply industry, men had an employer contribution of 7.4% compared with 4.2% for women.
When looking at the gender differences, it’s clear an effort to increase the employer contribution in the male permeated professions should be made in order to incentify women to pursue these types of careers. Generally we know women are more likely to have lower incomes and more interrupted careers as a result of their caring responsibilities. Ensuring the pension contributions doesn't penalise them is as much of an organisational culture issue as it is a government policy issue.
Interested in Better Contributions? Here are the Jobs and Salaries Available in These Generous Sectors
We have crunched the numbers on the jobs available and average salaries for the most generous industries. The education industry has 102,805 jobs available in the UK, making teaching the most in high demand profession. When combined with the competitive employer contribution, it’s one of the best options for graduates seeking stability when finding a job and creating a secure retirement package. On the other hand, the administrative and supportive services sector has the lowest average salary bracket, equating to only £544 in contributions each year; an unattractive choice in terms of wages both during and post career.
The mining and quarrying industry offers the most enticing average compensation for it’s workforce with an annual salary of £39,51, although has only 2404 available positions in the UK each year. Similarly, the agricultural, forestry and fishing sector has an average income of £29.451. However it has the fewest number of jobs available and lowest employer contribution compared to any other industry, making it a very risky option in the long term.
