It’s difficult to picture what your retirement might look like – which is why asking an expert for help could make a real difference.
Taking small steps now could have a big impact over the course of your retirement. By meeting a financial adviser to discuss your hopes, aspirations and concerns, you could benefit from personalised recommendations on building your plans.
Whether you consider yourself ready for retirement, or have no idea if you’ve got sufficient plans in place, evidence suggests financial advice could have a positive impact on your pensions, savings and investments.
Reason one: it could ultimately leave you better off
People who take financial advice could end up around £40,000 better off compared to those who don’t, according to a July 2017 study by the International Longevity Centre with the support of Royal London.
The study looked at two groups of people – affluent, and those considered just getting by. It looked at those who did and did not receive financial advice between 2001 and 2007, and compared their respective levels of wealth between 2012 and 2014.
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On average, wealthy people who received advice were £43,245 better off in terms of their liquid financial assets and pension savings than those who received no advice. Of those just getting by, the difference between getting advice and not doing was £39,895.
Reason two: low interest rates could be affecting your financial future
A combination of low interest rates and rising inflation means savers are seeing the value of their money fall in real terms by keeping it in cash accounts, the Social Market Foundation has warned.
The think-tank’s August 2017 study concluded leaving your savings in instant access accounts for the last five years would have seen your money fall in value by over 4% in terms of its spending power. Such accounts do give you the peace of mind that you’ve got money available for a sudden expense.
In contrast, those who are prepared to accept risk to their capital are likely to have been rewarded by investing for their long-term needs. The study found money invested in the UK FTSE 100 between April 2012 and April 2017 would have increased in value by 47% in real terms.
However, past performance is not a guide to future returns and the actual return realised may be lower due to the effect of investment fees and other charges.
If you have a defined contribution pension, there are big incentives to pay in as much as you can for the future, rather than using savings accounts for your long-term goals.
Your contributions are invested, offering you the opportunity to potentially grow your savings over the long-term, although your capital is at risk and you may get back less than you invested.
Tax relief adds a further 20% to your contribution, with another 20% or 25% available for higher and additional rate taxpayers, depending on your rate of income tax. However, you will still be subject to income tax on any withdrawals above the tax free cash allowance.
Workplace pensions usually come with the added benefit that your employer will also make contributions when you pay in.
Reason three: it can give you greater confidence and clarity
These are uncertain times, as Brexit, low interest rates and rising inflation impact on our lives. Throw in the recent changes to pension rules, and there’s so much you need to consider when planning your retirement finances.
If this sounds overwhelming, it doesn’t have to be. A financial adviser can provide a detailed picture of your financial situation, and offer personalised advice that takes into account your short, medium and long-term needs.
Help is available
At Skipton Building Society, we can help you to think about what you want to achieve in retirement. Our financial advisers will review your plans – including your pension – and explore options for growing your savings and investments. If there’s a gap between your expectations and finances, we’ll advise you of the options that could address it.
With a plan in place tailored to your situation and ambitions, you can feel more confident about the future, find out more.
Gareth Smith, Skipton Retirement Solutions Manager, explains: “The sooner you start preparing for retirement, the more flexibility you’ll have to make meaningful plans.
“As part of our service, we’ll look at different scenarios in retirement and how you can go about preparing for changes in your spending needs over time. We’ll also factor in the importance of planning for rising inflation; because as prices inevitably rise over time you’ll want to be confident of having a level of income to cover it.”
There are Skipton financial advisers based all over the UK, ready to meet you at a time and place of your choosing. We’ll always go at your pace. You’ll never be pressured to accept our advice, and everything will be explained clearly.
It’s worth remembering that stock market-based investments are not like bank and building society savings accounts as your capital is at risk and you may get back less than you invested. The value of your investments and any income from them may fall as well as rise. Past performance is not a guide to future returns. There’s no guarantee that receiving financial advice will leave you better off.
Retiresavvy is brought to you by Skipton Building Society. This article has been commissioned by retiresavvy and any opinions voiced are the author's own.