Personal pension investment and retirement planning has evolved rapidly over the last couple of decades. Fewer people enjoy the guaranteed income that comes with a final salary pension, and you now have to wait for longer to qualify for the state pension. In short, having plenty of money in retirement is on your shoulders, so the more prepared you are, the better your retirement will be.
It can be a boring subject for some. However, the end goal is to make you richer in retirement, which should provide a major incentive to be proactive. With most people dreaming of cruising the Caribbean and driving home on the golf course, with the extra bonus of time and money to spend on grandchildren, it is important to build the financial cushion that will fund it all.
However, a study conducted by the Peoples Pension, has worryingly exposed that many savers are not adequately informed about their pensions, and many are on track to run out of pension steam by the time they reach retirement!
The introduction of The Pension Freedoms in 2015 was a game changer for the pensions investment industry, and has given savers from the age of 55 the choice to do what they wanted with their pension pots. Previously, most would opt to buy an ‘annuity’, which provides a guaranteed income for the rest of the retirees life. However a shift has occurred in recent years, with many people now choosing to keep their pension money invested and draw down an income. Financial experts recommend withdrawing no more than 4 percent of the total pension pot per year. The strength and success of this strategy is very much dependent on the savers ability to invest their funds efficiently and to not draw down too much, as pots can deplete rapidly. Data from HMRC shows that savers withdrew £2.4bn from their pots between July and September last year, an increase of 21% year-on-year. So how can you ensure you use your pension pot efficiently?
Property has been historically represented as good investment for many people. And with savings accounts currently offering little by way of returns, some people are instead pumping their money into bricks and mortar. There are currently 2.7 million buy-to-let landlords in the UK, and 29% of people voted property as the safest way to save for retirement. Property investment offers a safe and secure way of supplementing pension income in retirement and complementing pension holdings, without having to rely on pension draw downs.
Establishing a property portfolio enables savers and investors to plan for retirement by providing a ‘passive income’. This dual income supplements your regular monthly wage ensuring you can save.This regular monthly income will rise with inflation, and there is a strong possibility of capital gains as house prices continue to rise providing a mulit-step process that evolves over time.
