Investments and Pensions Planning
With interest rates currently low, being a keen saver isn’t on its own likely to be enough to secure your financial future. If you were to put all your money into a savings account, you’d find that its longer-term value would be eroded by inflation. This means that as each year passes, your money buys less.
By contrast, investing in its simplest form is when you buy something that you hope will increase in value over the years. For some people, investing is about growing their money for the future, for others it’s about generating an income they can access now.
Contrary to what many believe, you don’t need to have a large lump sum put aside to start investing. However, you do need to be aware that unlike cash savings, investments come with the additional risk that their value can fall as well as rise.
Before you begin, there are some important points you should consider. You’ll need to ensure that you have ready access to a cash fund to cover everyday living expenses and unforeseen expenditure. Obviously, there’s no point rushing into investment if you’ve got substantial debts, or if you know you’re going to have to make major financial commitments that will take up all of your spare cash.
As stock market performance is unpredictable, successful investing is all about adopting a longer-term view, and also means introducing an element of risk to your money. Prudent investment involves diversifying your risk by spreading your investments across different sectors and markets, and giving your money time to grow.
Putting a plan in place
There’s a vast array of choice when it comes to investing. So deciding at the outset what you want your investments to achieve, and over what timescale, is important because it will help in determining where to put your money.
Whether you’re new to investment, or consider yourself a seasoned stock market investor, want to put away regular amounts or have a lump sum to invest, we can recommend an appropriate strategy for you. We’ll explain the important features of different types of investments like stocks and shares ISAs, unit trusts, open-ended investment companies and bonds, and the part they can play in a successful investment strategy.
Taking the decision to invest money can seem like a major step, but with our help and advice, building up a portfolio of good-quality investments is an achievable ambition.
The value of investments and the income from them may go down. You may not get the original amount invested.
Right now, retirement might seem a very long way off, but it’s never too early to think about your pension. Ideally, we should all start planning for it from the day we start work. No-one wants to worry about money in their later years, and the way to help prevent that happening is to save regularly into a pension throughout your working life.
Despite pensions never being out of the media headlines, many people still leave their retirement planning well into their middle years. However, the earlier you can start building up a fund for your retirement, the less it will cost you. We can give you straightforward advice on all the different types of pension arrangements such as:
- Personal pension plans,
- Self-invested personal pensions
- Small self-administered schemes
- Workplace pensions
Plus, if you’ve had several jobs over your working life, we can help you decide whether you’d be better off moving your pension savings to just one scheme to improve your retirement prospects.
Why you need to think about your pension
There are some simple but compelling reasons why you should think about pension planning now:
The state pension
The flat-rate state pension amounts to around £8,000 a year. Plus, by 2028, the age at which you can claim it will have risen to 67.
If you make contributions to a pension, or if your employer deducts your payments from your salary, you automatically get 20 per cent tax relief as an additional deposit into your pension pot. If you are a higher-rate taxpayer, you can claim an extra 20 per cent, while those paying additional-rate tax can claim back an extra 25 per cent.
Compound interest helps your savings grow
The sooner you start making contributions, the longer your money will have to grow. In today’s climate of low interest rates, compound interest can play an important part in investment growth.
A workplace pension is equivalent to getting a pay rise
If you save into a workplace scheme, your employer should match some or all of your contributions, providing a welcome boost to your pension.
A tax-free lump sum when you retire
When you retire, you can withdraw 25 per cent of your savings in the form of a tax-free lump sum.
So, if you’re self-employed, an employee, work part-time, a company director, run your own business or have accumulated pension pots with past employers, we can offer you advice. After all, retirement should be an enjoyable and fulfilling stage of life, not a time spent worrying about money.
A pension is a long-term investment and the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.