Ellis Bates Financial Advisers
Director of Financial Planning, Ben Clapham, discusses how he helped to enhance someone’s life by helping them with their retirement planning.
Here are the top four things you can do to prepare for retirement:
One of the most important things you can do is to create a realistic budget that will help you track your expenses and income. This will allow you to identify any areas where you can cut back and save more money for retirement. By tracking your spending and income, you can create a plan that helps you save for a comfortable retirement.
As you approach retirement age, it’s essential to explore the various ways you can convert your pension savings into a retirement income. There are several options available, such as annuities, income drawdown and immediate vesting personal pensions. Seeking professional financial advice will help you understand your options better and make informed decisions about how to access your pension.
As retirement approaches, it’s essential to reduce exposure to higher-risk assets such as equities. By reviewing your asset allocation, you can adjust your investments to make sure you have a well-diversified portfolio that is designed to provide steady income for your retirement years.
Regularly reviewing your progress is crucial to ensure you are ready for retirement and make the necessary adjustments if needed. Changes in your income, expenses or the financial climate may require you to adjust your plan. By following these four tips, you can set yourself on a path to financial security for your retirement years.
By planning ahead and taking the necessary steps, we can help you build a robust retirement plan. To tell us about your retirement planning goals and discover how we can help you, please book a chat. Alternatively, watch our video on “the benefits of financial advice when planning retirement“.
Taking financial advice can help clear any confusion when planning for retirement. Financial Planner, Gary Davies, explains the overall benefits of financial advice when planning for retirement.
Read our latest article on “financial wellbeing“, which outlines how taking control of your finances and considering financial advice will enable you to meet your financial goals and improve your overall financial health.
More than 24.5 million people are financially disengaged.
Do you often review your finances? Or are you one of those people who just hope for the best? Although managing finances may not be the most exciting activity, keeping track of your financial wellbeing can make a significant difference to your life, both in the present and in the future. Taking control of your finances and considering financial advice will enable you to meet your financial goals and improve your overall financial health.
Worryingly more than 24.5 million people (46%) feel financially disengaged, according to new research[1]. The study also shows that one in 20 adults – the equivalent of 2.4 million people – were previously financially engaged before changing their behaviour[2].
Key reasons for this change include feeling financially secure enough to be less diligent with managing their money (20%), or because other areas of their life have become busier (18%). However, almost a fifth (17%) couldn’t state a reason.
But previous periods of financial uncertainty, such as recessions, were stated as the key driver for people becoming financially engaged (27%), so the current cost of living crisis could mean people keep a closer eye on their money.
Almost two-thirds of respondents (62%) said they regularly check their household budget and their spending, while 73% shop around for the best deal, or use discount codes and vouchers (64%). On average, pre-retirees (those aged 55+ who are still in work) are more financially engaged than the rest of the population (62% compared to the UK average of 54%).
But many are still inactive when it comes to their retirement planning, suggesting people might not know where to start. More than a third (34%) do not currently check their workplace pension while 28% do not currently review their personal pension.
Separate research shows one in five people still reach midlife without having engaged with their retirement at all[1]. Taking small steps to improve your money habits can have a huge impact on your life. It can also help you feel more in control of your financial situation.
Against a landscape of rising costs and record levels of inflation, it can be easy to bury your head in the sand. However, as the research shows, periods of financial difficulty can be one of the leading reasons people take charge of their finances and seeking professional financial advice can help you to create a robust financial plan.
While it’s positive that pre-retirees, in particular, are more financially engaged than the average person, it is concerning that they aren’t engaging in vital steps to prepare for retirement, such as checking their pension.
This is the first step of the decumulation phase; however, some people could be leaving themselves at risk of not knowing their full financial picture or how to actively manage their retirement finances when they get there. The decumulation phase is an important aspect of retirement planning that many people overlook.
During this phase, we convert our assets into income streams that will fund our retirement. With advances in healthcare and an increase in life expectancy, it’s becoming more important than ever to plan for a longer retirement. Investment can play a crucial role during the decumulation phase.
It’s important to continue making our money work hard even after we retire, so that we can meet our financial needs and maintain our standard of living. A well-diversified investment portfolio that balances risk and return can help us achieve our retirement goals.
To enjoy the decumulation phase with greater confidence and peace of mind, it’s important to have a realistic projection of income flows and expenses. This means creating a budget that takes into account expected income from sources such as Social Security, pensions and investment income, as well as our estimated expenses for healthcare, housing and other living expenses.
Preparing for retirement can be a daunting task, but by following a few simple tips, you can make sure you’re on track to living out your golden years in comfort and security.
By planning ahead and taking the necessary steps, we can ensure that we have a comfortable retirement. Read our tips on “preparing for retirement”.
Important Information: The value of your investments can go down as well as up and you may get back less than you invested. The tax treatment is dependent on individual circumstances and may be subject to change in future. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.
Source data: [1] Research was carried out online by Opinium Research amongst 4,000 UK adults aged 18+ between 14″20 October 2022. 1,856 participants indicated that they were financially disengaged in the survey. 1856/4000=46%, which equates to 24,541,000 UK adults.
[2] 181 participants indicated that they were financially disengaged in the survey. 181/4000=5%, which equates to 2,390,000 UK adults.
[3] Opinium survey of 4,009 UK adults aged between 40 and 60 years old in the UK was conducted between 28 December–6 January 2021.
Professional financial advice matters by helping you make informed decisions about how to best allocate your resources.
Financial planning is a crucial step towards achieving financial freedom and security. By taking the time to thoroughly evaluate your needs and personal goals, you’ll be able to make informed decisions about how to best allocate your resources.
With a comprehensive professional financial plan in hand, you’ll have the confidence and peace of mind to pursue your short-term goals and work towards your long-term future. With professional guidance, you’ll be inspired to realise that you have far more resources at your disposal than you ever imagined.
According to a recent study, UK consumers who receive professional financial advice can expect to retire on average three years earlier than those who do not seek professional advice, with advised consumers planning for retirement at age 66 as opposed to non-advised consumers who expect to retire at 69[1].
This underlines the positive impact that professional financial advice can have on retirement preparations, with those who seek advice feeling better equipped for their later years. The study identified that twice as many people who seek financial advice create a detailed spending plan in retirement compared to those who don’t take advice, with 45% of advised people falling under this category as opposed to 18% of non-advised consumers.
Financially advised consumers expect to fund their retirement for a longer period, with an average of 23 years, compared to 17 years for non-advised people before pertinent cutbacks must be made. In addition, the study reveals that financial planning tends to be beneficial for people already in retirement.
Almost all (96%) of wealthy retirees who did a great deal of financial planning or just planned their finances slightly say they’re enjoying their retirement, dropping to 72% among those who have done no financial planning.
Regrets for non-advised retirees are more pronounced, with the majority stating that they require more money in retirement compared to their original estimates, and that they wished they had planned more thoroughly, compared to advised people.
Despite having a higher household income, 23% of wealthier pensioners, with an income of between £40,000 and £49,999, wished they had planned more thoroughly, indicating that the value of advice remains consistent regardless of income.
Planning for retirement can be overwhelming, leading to several considerations, making financial advice crucial for people to feel more confident and prepared about their future. The research results underscore the significant variation between the retirement plans and experiences of those who have taken advantage of financial advice and those who haven’t.
The research findings demonstrate the value of professional financial advice in terms of the retirement age and the enjoyment of one’s retired life. Start planning today, and take the first step towards a brighter tomorrow.
Financial planning can certainly feel complicated at first glance, but with the right guidance, it can be a smooth and stress-free process. At every step of your financial planning journey, we’re dedicated to providing you with accessible financial advice to support you in making informed decisions about your finances.
Our Financial Advisers use sophisticated cash flow forecasting software which helps you to visualise your expenditure, income and preferred lifestyle. It also allows us to simulate different scenarios and stress test how much financial resilience you may have to factors outside of your control, such as life events, economic changes and volatile markets.
If you have any concerns about your financial future or would like to find out more, please contact us.
Source data: [1] Boxclever conducted research for Standard Life among 6,000 UK adults. Fieldwork was conducted between 6 Sept–16 October 2022. Data was weighted post-fieldwork to ensure the data remained nationally representative on key demographics. Comparisons to data from last year are taken from Boxclever research among 4,896 UK adults conducted between 16-23 July 2021.
The benefits of cash flow modelling are forecasting your future finances. Cash flow modelling is a way of planning and analysing your financial goals and sits central to the financial planning and estate planning process and is a powerful tool to help bring your retirement planning goals to life.
Check you are entitled to full State Pension, deadline extended for topping any missing National Insurance Contributions.
The deadline to top up missing national insurance years between 2006 and 2016 has been extended to 5th April 2025, with the price of doing so remaining frozen at current costs during this period. This means that you will have more time to check your record and see if you can increase your State Pension when its time to claim.
Thanks to ‘transitional arrangements’ brought in when the new state pension system started in 2016, you have the opportunity to check your NI forecast and make any adjustments necessary.
Why NI years are important in calculating the amount of State Pension you will receive
The maximum amount of full State Pension you can receive as of April 2023 is £203.85 a week, but how much you will get depends on how many ‘qualifying’ NI years you have.
Many will likely need 35-40 qualifying NI years, and the ‘transitional arrangements’ mean you can pay extra contributions to plug any gaps in your NI record dating back to 2006.
If you are male and born after 5 April 1951 and female and born after 5 April 1953 you have until 5 April 2025 to buy additional contributions, after which you can only fill gaps going back six tax years.
If you were born before these dates, you have up to 6 years after you reach State Pension age to top up contributions and to increase your State Pension.
Step 1
If you have not yet reached state pension age, go to the State Pension Forecast Calculator to check out your NI payments record https://www.gov.uk/check-state-pension
Step 2
Consider buying extra contributions for any gaps showing on your record.
The standard cost of buying ‘Class 3’ National Insurance contributions is £15.85 for a week of missing contributions in the 2022-23 tax year. It would cost you £824.20 for an entire year.
If you are looking to fill gaps that occurred in the past two tax years, you would pay the rate from those years. Voluntary contributions for gaps in 2021-22 cost £15.40 per week, for gaps in 2020-21, the cost is £15.30 per week.
For those able to fill gaps between 2006 and 2016 (men born after 5 April 1951 and women born after 5 April 1953), the cost for a week is £15.40.
Step 3
Who should buy additional contributions?
If you are close to State Pension age and do not have enough qualifying years to get the full State Pension
If you know you are going to ‘run out of time’ during the remainder of your working life to be able to secure the necessary number of qualifying years to receive the full State Pension
If you are self-employed and don’t have to pay Class 2 contributions because you have low profits or live outside the UK, but you want to qualify
It is always important to seek qualified, independent financial advice when planning for your retirement or when trying to calculate your retirement income.
Regional Manager and Financial Planner, Dax Bayley, outlines how financial advice can benefit you in your retirement planning.
We will work together to create a holistic, comprehensive financial plan to achieve your goals.
To find out more about how Ellis Bates Financial Advisers can help you answer questions such as ‘how much do I need to retire?’ or ‘what are my retirement options?’, then please get in touch.
There are several benefits to putting a Property Protection Trust in place. It allows you and your partner to own 50% of your property each, so when one of you passes their share can be passed to their chosen beneficiary, whilst protecting the surviving partner’s lifetime interest in the property.
If you would like to find out more about our inheritance tax planning services, then please get in touch.
We offer a range of retirement planning services, including a handy retirement calculator to see how much you need to save for retirement. Alternatively, find out more about how our cashflow modelling service can help you visualise your expenditure, income and preferred lifestyle in retirement.