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Financial Independence Welcome the Most Important Financial Decision You Will Ever Make FINANCIAL GUIDE A GUIDE TO ACHIEVING FINANCIAL INDEPENDENCE Longevity should be a blessing, but how will you make sure you don’t outlive your savings? A guide to achieving Financial Independence Welcome The most important financial decision you will ever make elcome to ‘A guide to Achieving Financial Independence’. Helping you take Planning for your retirement is possibly the most important control of your future Wfinancial decision you will ever make, with life expectancy increasing year on year, we are now seeing the potential to spend almost Even if your retirement planning is up as many years enjoying retirement as we have spent saving for it. Planning and running, that’s not the end of the for it correctly will provide you with the standard of living you wish after story. It’s important that you review your contributions, particularly if you you stop work. have a change of circumstances. If One way of looking at this is to think about the number of paydays you don’t know how your planning you have before you retire, and the number you hope to have afterwards. is doing, you can’t know what your Imagine you start your pension planning when you’re age 20, and you plan future will look like. We can work to retire when you’re age 65. You have 540 paydays between starting your with you to develop strategies to accumulate further wealth in order pension plan and retiring to achieve financial independence. for you to enjoy your retirement years. There’s always a danger that we’ll underestimate how much we are going To discuss how we can help you take to need so that we can do what we want to do, when we want to do it. control of your future and plan to Most of us probably feel we could also do with a little more money during achieve financial independence in or working years. Will that change so much when you stop working? your retirement years, please contact us for further information. A sensible rule of thumb is typically to aim for a retirement income of around two thirds of your earnings when you retire. Either way, you need to decide how much you want, so you can plan and it is often easier to think in relation to your current earnings and decide how much of your salary you would want to maintain. Then you need to consider how much you are already expecting from existing sources; this could include State Pensions, a mix of investments, property and savings that you have already built up which will be available to you when you eventually stop work. 02 A guide to achieving Financial Independence Contents 02 Welcome Minimising potential taxes and The most important financial decision you will ever make 16 duties on your death Immediate access to your pension funds, allowing you to 04 A new type of retiree take out what you want, when you want it First post-war ‘baby boomers’ pass the old Default Retirement Age of 65 Occupational workplace pensions 18 “So what do I do with my money?” 05 Saving for your retirement The sooner you start saving for your retirement the more Workplace pensions secure your future will be 20 Frequently asked questions 06 State Pension 22 Self-Invested Personal Pensions A regular payment from the government that you receive Taking more control over your pension fund when you reach State Pension age investment decisions 08 Private personal pensions Pension consolidation To afford the lifestyle you want when you retire, you need to 23 Bringing your pensions under one roof do something about it today 24 Generating an income from 10 Buying your annuity your investments An important one-off decision that has long-term An important requirement, especially if you’ve retired or consequences if you get it wrong are approaching retirement Different types of annuity Will you be able to enjoy your 12 Valuable options that allow you to tailor the 26 retirement without the constant worry income you need about making ends meet? More over-55s are increasingly working past retirement age as 13 Retirement income guarantee living costs hit savings Additional income protection 28 Outlook for the New Centenarians 14 Gender neutrality Financial pressures to snowball for future generation Women could increase their pension income by over 20 per cent 15 Income drawdown When you’re not ready to convert your pension fund into income A guide to achieving Financial Independence 03 A guide to achieving Financial Independence A new type of retiree First post-war ‘baby boomers’ pass the old Default Retirement Age of 65 Securing your eventual financial independence in retirement to travel more, while 42 per cent are focused on spending more requires making sure that your plans enable you to achieve this time in their gardens. goal. Whatever provision you already have in place must be Socialising is high on the agenda for many over-55s in regularly updated as your circumstances and requirements change, retirement, with 37 per cent planning to invest extra time in their and you need to ensure that you are still saving enough. But for families and 33 per cent keen to socialise more with friends. many retirees’ the future looks less certain. The UK is witnessing the march of a new type of retiree as the The most common motivation first post-war ‘baby boomers’ pass the old Default Retirement Age They also have philanthropic intent: two-thirds (66 per cent) of 65. According to Aviva’s latest Real Retirement Report, more of over-55s would be interested in carrying out charity work or than one in three (39 per cent) over-55s are continuing to receive volunteering once they have retired. The most common motivation a wage and nearly half are intent on using their extra earnings to is to give something back to the community (49 per cent) and to travel more when they finish full-time work. stay active by getting out of the house (48 per cent). Data from the latest census in 2011 showed there were 754,800 people aged 64 in England and Wales, and A new model for later life almost 6.5 million people are turning 65 over the next decade It’s clear that the first baby boomers are setting out a new model compared with 5.2 million in the previous decade. The spike for later life, and getting the most out of their improved physical is due to the post-war birth rate soaring when the armed health and the freedom to continue working for longer. Many forces returned from the Second World War, with the new-born people find that staying active in a job helps to keep them young generation dubbed the ‘baby boomers’. at heart – with the bonus being that it boosts their earning and savings potential in the process. Pushing back the boundaries The key to making the most of this opportunity is for people Allied with improved health care, more people are remaining to start planning for their 60s and beyond well in advance. In this active as they approach retirement age, and the report shows how way, rather than accepting the old retirement stereotypes, you can they are pushing back the boundaries at work and in their leisure have the freedom of choice about whether you continue to work time. 23 per cent of 65- to 74-year-olds were still wage earners in or not, rather than feeling forced to carry on out of the demand to December 2012, compared with 18 per cent when the report first meet financial commitments. launched almost three years ago in February 2010. Flexible for the future Fuelling the rise of income and savings Everyone enjoys using their wealth in different ways. For you, it With 55 per cent of 55- to 64-year-olds also still in employment, might be the joy of travel, helping others through philanthropy, compared with 41 per cent in February 2010, this trend looks sharing your success with family and friends or your passion set to continue as more baby boomers pass the age of 65. It has for collecting. It might be the simple freedom to do what you already fuelled the rise of income and savings among over-55s want, when you want. Whatever your priorities, we can help during the last three years. The typical over-55 now has an income you use your wealth by ensuring it’s working for you now and is of £1,444 each month along with £14,544 in savings (December structured to be flexible for the future. 2012), compared with a monthly income of £1,239 and savings of £11,590 in February 2010. Whether you’re approaching retirement or already Enjoying the fruits of your labour retired, find out how you can afford the retirement you Despite 80 per cent being concerned by rising living costs over want. Please contact us to discuss your requirements. the next six months (December 2012), the UK’s over-55s are determined to enjoy the benefits of extending their working lives. Nearly half (44 per cent) plan to use their extra time in retirement 04 A guide to achieving Financial Independence A guide to achieving Financial Independence Saving for your retirement The sooner you start saving for your retirement the more secure your future will be Saving for your retirement may not seem important when you’re starting out. But the sooner you start saving for your retirement the more secure your future will be.
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