How to combine work/life balance, job satisfaction and retirement

How to combine work/life balance, job satisfaction and retirement

Two of the biggest concerns faced by workers when they reach their 50s and 60s are those of achieving job satisfaction and a...

How to combine work/life balance, job satisfaction and retirement

How to combine work/life balance, job satisfaction and retirement

Two of the biggest concerns faced by workers when they reach their 50s and 60s are those of achieving job satisfaction and a work/life balance. Recent studies have offered fresh insight into the reasons behind these issues and the best ways to tackle them.

One study conducted by economists at the University of Southern California and California State University explored how work/life balance issues affected those aged between 51 and 79. 14% of women in this age bracket who retired earlier than they intended to did so because they had to care for a spouse or other family member who experienced a health scare. However, this was far less often the case in men, perhaps due to them being more likely to ‘outsource’ the care their spouse needed. In contrast, women nearing retirement age make more adjustments than men when it comes to the health of a partner, taking on more of the caregiving role themselves.

The report also found that a poor work/life balance was also more likely to make women retire than men. Men are also more likely than women to continue working part-time beyond retirement age if their spouse is still working. Women stated they were more likely to continue working full-time in this age bracket if their employer offered health insurance, to the point that researchers described it as a ‘critical pull factor’ in women.

A second study looked at issues around job satisfaction and its relationship to working conditions. The research, carried out in collaboration between Harvard University’s Medical School, the University of California and the nonpartisan RAND Corporation, found that workers nearing retirement age valued other elements of job satisfaction aside from pay and benefits.

Most prominently, those over 50 look for work flexibility, meaningful work, the chance to develop transferable skills, and a work environment which feels supportive. The researchers found that these intangibles were more important than money in older workers’ decisions on whether to continue working: having a flexible working schedule had the same impact as a 9% pay increase, whilst a switch from a physically demanding job to one which involved only moderate physical work was equivalent to a 20% pay increase.

If you’re still employed and nearing your 50s or 60s, or you’re already there, think about what’s most important to you when making decisions about whether you want to retire or carry on working full-time. It’s likely that money will be further down your priority list at this stage of life, so let flexibility, job satisfaction and the chance to spend time with your loved ones take precedence.

X

Too late to start saving?

Too late to start saving?

Not beginning to save towards your retirement until you reach your fifties would not so long ago have been considered leaving...

Too late to start saving?

Too late to start saving?

Not beginning to save towards your retirement until you reach your fifties would not so long ago have been considered leaving matters far too late to put anything meaningful away for your life after work. Previous generations saw building a pension as something to do over an entire career, with contributions throughout your working life coupled with investment growth being the only way to ensure your retirement pot was substantial enough to provide for you throughout your retirement.

However, whilst compound interest still means that anything put away at the start of your career will see some serious growth by the time you need it much later in your life, the reality today for many young people is that they simply have very little to invest when they first begin work. Many may find that they won’t be able to begin saving seriously until they reach middle age.

The reasons for this are several. First of all, your wages are statistically likely to reach their peak for women during their forties and for men in their fifties. Secondly, as the average mortgage term is twenty-five years, most people who bought their home in their twenties are likely to have finished paying it off by the time they reach their fifties. A third key reason is the declining cost of raising children. Whilst it’s unlikely that you’ll stop giving them financial support completely, if you’ve had kids in your twenties or thirties it’s probable that the cost of providing for them will have gone down a great deal by the time you’re heading towards 50.

With considerable tax relief on both ISA investments and pensions, it’s now possible to build a healthy retirement fund even if you only start saving in your fifties. For example, someone with no existing savings, earning £70,000 annually, who started saving the maximum permitted yearly amount of £40,000 at age 50 could amass a pension pot of £985,800 by the time they turn 67, assuming a 4% annual return after charges.

£40,000 a year might sound like a huge amount to save every year, but this amount includes the generous tax relief enjoyed by pension savings. Our £70,000 earner would only need to put away £27,000 of their own money in order to reach the £40,000 contribution, whilst a basic rate taxpayer would need to contribute £32,000 to achieve the same.

So, whilst it’s sensible to begin saving as early as you can, it is possible to begin putting money away when you reach middle age and ensure you have enough to provide for yourself later in life. The last ten years of your working life can reasonably be seen as some of the most important in terms of preparing for your retirement.

X

Why retirement is worrying millennials and what steps they are taking

Why retirement is worrying millennials and what steps they are taking

A recent study by HSBC has revealed the main financial worries of the ‘millennial’ generation, recognised as those born...

Why retirement is worrying millennials and what steps they are taking

Why retirement is worrying millennials and what steps they are taking

A recent study by HSBC has revealed the main financial worries of the ‘millennial’ generation, recognised as those born between 1980 and 1997. As its title suggests, the ‘Future of Retirement’ survey focuses primarily on how millennials feel about how they are preparing for life after work, but also delves into the wider issues around money and modern life which are inherently linked to the subject.

In general, millennials see themselves as less fortunate than the generations which have come before them. Over half (52%) felt that they had seen weaker economic growth than previous generations, whilst 60% said they saw themselves as experiencing the consequences of decisions made by those older than them, including rising national debt and the global financial crisis. In relation to retirement, 65% of respondents are worried that they will run out of money when they retire, whilst 46% were concerned that employer pension schemes would collapse without any payout for their generation.

The average age that millennials begin saving for their retirement is 27, with just 13% admitting to not having begun putting money away for their pension yet. 76% said that curbing their current spending was difficult but necessary to save for later in life, whilst 68% are willing to do so. When it comes to investment, nearly half of those surveyed (48%) said they would go for a risky opportunity which had the potential for greater returns further down the line.

Expanding out to look at the concerns of all those currently working, which includes both Baby Boomers (those born between 1945 and 1965) and Generation X (born between 1966 and 1979), the survey found that only 17% were worried they wouldn’t be financially comfortable in retirement based on their current savings, with a worrying 14% admitting to having not been able to save anything. However, over half (52%) said they felt that due to the constantly changing financial climate, their current retirement plans would not be relevant.

When asked about back-up plans, around two thirds (67%) of working people said they would continue working in some way after they reached their retirement, whilst more than four fifths of people (82%) said they were intending to retire two years later than originally planned in order to give themselves greater financial stability. 41% also said they wouldn’t mind taking on a second job or working for longer to supplement their pension pot.

The key guidance from HSBC’s research is that starting to save early is the best way to ensure you have sufficient savings to support yourself after you’ve retired. Another key message is the importance of seeking advice, with many people now using technology to plan their retirement: almost half of those surveyed (49%) have used the Internet to research their options, 35% have used online retirement calculators and 27% have contacted advisers online. Online savings accounts are also popular, with 41% saying that they are using one to put money away.

X

Falling house prices in the UK for the third month in a row

Falling house prices in the UK for the third month in a row

Recent figures have shown that house prices in the UK fell again in May this year, making it the third month in a row which has...

Falling house prices in the UK for the third month in a row

Falling house prices in the UK for the third month in a row

Recent figures have shown that house prices in the UK fell again in May this year, making it the third month in a row which has seen prices go down. Nationwide, the UK’s biggest building society which carried out the research, stated that this is the first time house prices have fallen in three consecutive months since 2009. Following the drop of 0.3% seen in March and 0.4% in April, May saw prices decrease by 0.2%, making the average house price £208,711. The annual rate of price growth also hit 2.1%, down from 2.6% in April and the slowest pace seen since June 2013.

“It is still early days, but this provides further evidence that the housing market is losing momentum”, said Nationwide’s chief economist Robert Gardner. “Moreover, this may be indicative of a wider slowdown in the household sector, though data continues to send mixed signals in this regard.” The building society also warned that it is too soon to know whether the recent downturn can be considered to be more than a “blip”.

Considering whether the slowdown could be a result of the snap general election being called, Gardner was confident that the two were not linked: “Housing market trends have not traditionally been impacted around the time of general elections. Rightly or wrongly, for most homebuyers elections are not foremost in their minds while buying or selling their home.”

Nationwide have also suggested that house prices will continue to slow, and that inflation rises will put pressure on household budgets, leading to weakened household spending. However, the building society has predicted that house prices will increase by around 2% overall throughout 2017, buoyed by a shortage in the supply of housing across the UK. Whilst this offers some reassurance, this figure is considerably lower than the 4.5% rise seen in 2016.

X

How good financial planning enables a career change

How good financial planning enables a career change

James Kemp knows how to pace himself. He should do. He’s a keen runner and has been an organiser and participant in Park Runs...

How good financial planning enables a career change

How good financial planning enables a career change

James Kemp knows how to pace himself. He should do. He’s a keen runner and has been an organiser and participant in Park Runs since their early days. However, when it came to saving for his pension he didn’t know whether the pace he’d set would take him through the retirement line comfortably or leave him and his family short of the lifestyle goals he’d targeted.

X

Selling Your Business – It’s Not About Timing

Selling Your Business – It’s Not About Timing

Ernie the entrepreneur wants to retire. Ivor the investor offers him £5 million to buy his business. That’s a whole lot of...

Selling Your Business – It’s Not About Timing

Selling Your Business – It’s Not About Timing

Ernie the entrepreneur wants to retire. Ivor the investor offers him £5 million to buy his business. That’s a whole lot of money to Ernie but he decides to wait just in case he can get a better price from someone else. Next year, Ernie is offered £4 million by Connie the competitor. It’s still a lot of money to Ernie but he wishes he’d taken Ivor’s offer.

If you are trying to time the sale of your business so you get the highest possible price, you are likely to be left in one of two camps: either wondering if you could have got more if you’d waited longer or wishing you’d taken an earlier offer. A simple shift in mind-set could banish these musings.

If you went into the sale of your business knowing exactly how much you needed in order to live the personal lifestyle you desired, the decision would not only be much easier, it would follow the kind of logic on which sound business decisions are made.

When Chris Daniels received an unexpected offer to sell his £25 million turnover import and distribution business, his solicitor sent him to Freedom Financial Planning’s Andy Nevett.

“Over the years I’d had three or four different independent financial advisers but my experience and my feeling towards the whole industry was not very positive.” Said Chris. “I was looking for someone I could trust who would do more than a one off meeting, who would actively manage what would hopefully be some more significant investments.”

Andy and the team at Freedom Financial Planning take a different approach when it comes to managing wealth. Long before there any discussions about their unique approach to actively managing investments, Andy gets to know what is important to his clients, what their dreams are and how they like to live their lives. Knowing this he works out how much money his clients will need to keep this lifestyle for the rest of their lives. He calls this ‘knowing your number’.

Andy explained how he armed Chris with enough information to decide whether the offer he had received was worth taking:

“We worked out the cost of his lifestyle, not just for this year, but next year and the foreseeable future, so that Chris knew his number. Once he knew how much he needed for his lifestyle, for him and his family, he could confidently go away and negotiate the sale of his business.”

After almost 25 years spent building the business, Chris was keen to devote more time to his family, buy a yacht and travel the world. The sale of his business would allow him to do this. However, the decision to sell had to make financial sense too.

“Most business owners do it because they enjoy their business but it comes a point where you want to get away from the desk, want to not have to answer that email at 7 o’clock in the morning or take that call at 9 o’clock at night. But you’ve got to have the confidence that you’ve got the funds to do that and Freedom Financial Planning just gave us that confidence to make that decision.”

If you are looking to sell your business sometime in the next five years, ask Freedom Financial Planning to work out your number, as you never know when you will get an offer. Call Andy and the team on 01663 747000.

X

Retiring in England? Here are the top destinations

Retiring in England? Here are the top destinations

Whilst the impact of Brexit is yet to be known, one thing that may become trickier is relocating to the continent after Britain...

Retiring in England? Here are the top destinations

Retiring in England? Here are the top destinations

Whilst the impact of Brexit is yet to be known, one thing that may become trickier is relocating to the continent after Britain leaves the EU. It’s a change that will affect those at the end of their working life as well as those near the start, as in the past many have chosen to live outside the UK for their retirement years. Thankfully, whether your plans to move to Europe have to be shelved, or you were always intending to spend your retirement in the UK, there are plenty of popular retirement destinations throughout England to consider.

North Yorkshire’s rural district of Craven is a popular retirement choice. Taking in the market town of Skipton, together with the larger towns of High Bentham and Settle, as well as a sizeable area of the Yorkshire Dales, Craven offers the best of both town and country living. The high street in Skipton is a past winner of the ‘greatest street in England’ from the Academy of Urbanism, which considers such factors as environmental and social sustainability, local character and distinctiveness and user friendliness. The average house price is around £205,000, with a detached house costing about £310,000.

West Devon is another area to consider. The variety of landscapes is by far the most attractive feature of this part of England, with chocolate box villages, agricultural landscapes and Dartmoor National Park providing a picturesque backdrop to your retirement. Average house prices come in at just over £250,000, although you can find semi-detached properties for under £200,000. One drawback is that travel can be an issue, with no mainline stations in the area and at least a three hour train ride into London from the nearest stations Exeter and Plymouth, so bear this in mind if you have reason to venture out of the county regularly.

If you’re looking for somewhere with a name as evocative as the place itself for your retirement, then Eden in Cumbria could be the right choice. A rural haven, Eden offers you part of the Lake District National Park, the lakes and mountains of Ullswater, the beautiful countryside of the Eden Valley and the breathtaking landscape of the North Pennines. Eden also has only 63 people per square mile, making it the place with the lowest population density out of England’s 324 local government districts. The average house price is a remarkably low £190,000, and you could easily pick up a flat for under £125,000.

X

4 steps to keeping track of your pension

4 steps to keeping track of your pension

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at...

4 steps to keeping track of your pension

4 steps to keeping track of your pension

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at least one, with some admitting to have forgotten the details of all of them. With around two thirds of UK residents having more than one pension, this amounts to approximately 6.6 million people with no idea how much they’ve put away for their retirement. Double the amount of people admit to not knowing how much their pensions are worth.

It’s an undesirable side effect of the modern working world. Whereas in previous generations someone might stay at a single employer for their entire working life, the typical worker today will hold eleven different jobs throughout their career, which could potentially mean opting into the same number of pensions through as many different providers. The new legal requirement for all employers to offer a pension scheme through auto-enrolment is likely to add further complexities.

As a result, the Pensions Dashboard is set to launch in 2019 in the hope that it will make it easier for savers to keep track of their pensions in one place. Until then, however, there are four relatively simple steps to help you track down information on any pensions you’ve forgotten about:

  1. Find your pension using the DWP Pensions tracing service at www.gov.uk/find-pension-contact-details. Start by entering the name of your former employer to discover the current contact address for them. You’ll then need to write to them providing your name (plus any previous names), your current and previous addresses and your National Insurance number.
  2. In the case of a pension scheme which hasn’t been updated for a while, you’ll be required to fill out an online form to receive contact details. You’ll be required to give your name, email address and any relevant information to help track down your pension details. This could include your National Insurance number and the dates you worked for the company.
  3. You can also receive a forecast of your State pension either online or in paper format by going to www.gov.uk/check-state-pension. After entering a few details to confirm your identity, you’ll be told the date you can access your State pension and how much you’ll receive.
  4. Finally, and most importantly, once you’ve managed to track down all of your pension information, get some advice. Consolidating your pensions might be tempting to make managing your savings easier, but you also want to make sure you don’t lose out on any benefits by doing so. Before you make any decisions regarding your pensions, seek professional independent advice on what to do next.
X

Women face gender gap in pension contributions as well as pay gap

Women face gender gap in pension contributions as well as pay gap

Whilst the pay gap experienced by women in comparison to men is most likely a problem you’ve heard about, another gender gap...

Women face gender gap in pension contributions as well as pay gap

Women face gender gap in pension contributions as well as pay gap

Whilst the pay gap experienced by women in comparison to men is most likely a problem you’ve heard about, another gender gap has emerged which is just as concerning. Recent figures suggest that, on average, women are receiving smaller pension contributions from their employers than men. Between 2013 and 2016, women benefitted from pension contributions at a rate of 7% of their yearly salary, considerably less than the 7.8% received by men.

The gap between men’s and women’s average annual pension contributions also widens as the age bracket increases. Men under 35 received £217 more towards their pension than women of the same age, a figure that increases to £594 for those aged 35 to 44. This then increases again to £1,287 between men and women aged 45 to 54, and again to £1,680 for those between 55 and 64.

Over the four year period examined, the average woman therefore received £2,489 from their employer towards their pension, over £1,000 less than men who received an average of £3,495. Worryingly, if these figures remained constant throughout a typical woman’s working life, this could result in a shortfall of £46,689 compared to the pension typically earned by a man. This figure becomes even more worrying when factoring in the statistic that women on average are still living longer than men, meaning that most women will be faced with making a smaller pension stretch over a longer period of time than many men.

The study, one of the largest ever conducted into workplace savings and taking in over 250,000 pension plans, has revealed three key factors in the significant difference between men’s and women’s pension pots. The first is that women are still more likely than men to opt for a break in their career to raise a family. Secondly, men still typically work in sectors where pension schemes are either more generous or better established. The third is linked back to the issue of the gender pay gap: as women are still earning less than men on average, this leads to employer contributions as a percentage of salary being lower.

The fact that there were significantly more men (154,999) than women (95,262) in the UK-wide study also suggests that a larger number of men are receiving pension contributions at all than women. The Department for Work and Pensions has responded to this figure stating that auto-enrolment will help to redress the balance; but has also conceded that, in light of the study’s findings, more needs to be done to bring pension contributions for women in line with those enjoyed by men.

X

What does the Budget dividend cut mean for you?

What does the Budget dividend cut mean for you?

One of the most significant announcements made by the Chancellor Philip Hammond in the recent Spring Budget was the change to the...

What does the Budget dividend cut mean for you?

What does the Budget dividend cut mean for you?

One of the most significant announcements made by the Chancellor Philip Hammond in the recent Spring Budget was the change to the amount of tax-free dividends that can be received by both company directors and shareholders. From April next year, the current amount of £5,000 will decrease to just £2,000. Whilst this is set to raise an extra £930 million of revenue for the Treasury in 2021/22, making it the biggest tax earner announced in the Budget, it has been criticised for demotivating growth and investment for businesses.

The current rules were introduced in April 2016 and mean that an individual receives a tax break on the first £5,000 of annual income from dividends. Anything above that is taxed at 7.5% for basic-rate taxpayers, rising to 32.5% for those on the higher rate and 38.1% for those paying additional rates of tax.

The chancellor has described his changes as addressing the unfairness of the current dividend allowance put in place by his predecessor, George Osborne. However, as many small traders pay themselves through dividends, alongside taking a salary from their company, the move has been seen as punitive towards those who have decided to strike out on their own in business.

The reduced tax-free dividend rate is also set to impact those who have reasonably sized stocks and shares investments outside ISAs. The Treasury estimates this to be around 1.1 million investors, approximately half of all people affected, and that on average annually they will each lose around £320.

However, there is a positive note for investors thanks to the increase in the ISA allowance. From April this year, the amount is set to rise from £15,240 to £20,000, and all dividends generated within ISAs will still be tax-free. By making smart use of the new allowance, most investors will be able to avoid feeling the effect of the changes to dividend tax.

X