INCOME VERSUS GROWTH: Don't Put Your Nest Eggs in One Basket There's More to Retirement Planning Than a Pension, Writes Tony Lyons
Lyons, Tony, The Independent (London, England)
Saving for retirement isn't just about throwing money at a pension. You need to make a range of investments and make sure you leave some of your money in a place where you can get to it in an emergency.
"Be flexible," says Philipa Gee of Gee & Co, an independent financial adviser. "Build yourself a portfolio of investments wherever you can, being as tax-efficient as possible."
The Government is setting up low-cost "stakeholder pensions", likely to be introduced in April 2001. If you have not got a company or personal pension, you can either wait for a stakeholder or keep an eye out for pensions that already fit the low-cost, flexible guidelines set out by the Government. Virgin Direct's pension and a new product from Friends Provident and Hargreaves Lansdown both claim to offer pensions that meet the standard. To give some idea of the figures involved, aiming for a nest egg of pounds 100,000 at retirement sounds a lot. But at the moment this would only buy an annual income of around pounds 5,800 for a man of 60 with a 55-year-old wife, or pounds 6,300 a year if they were five years older. If the annuity was indexed to grow at 5 per cent a year, then they would start at pounds 2,600 and pounds 3,300. And to end up with that pounds 100,000 nest egg at retirement, BEST Investments has worked out that if you are 25 you would need to save pounds 90 a month if you want to retire at 60, or pounds 68 if retirement age is 65. Start saving 10 years later and the monthly savings would go up to pounds 171 and pounds 123 respectively. And if you don't start putting money away until you are 45, then you will need to save pounds 377 or pounds 246 a month. These figures assume a conservative growth rate of 6 per cent a year from the underlying investments and a 1 per cent reduction in yield from charges made by the provider, much lower than the cost of most conventional pension plans. These figures make frightening reading. If interest rates remain low for many years and the current system of swapping a pension fund for a contract to provide an income is not changed, then many people will find that they will need much more than pounds 100,000 when they eventually retire. Unless you are in a final-salary pension scheme and are likely to stay with the same employer until retirement, then you should start to gear up …
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Publication information: Article title: INCOME VERSUS GROWTH: Don't Put Your Nest Eggs in One Basket There's More to Retirement Planning Than a Pension, Writes Tony Lyons. Contributors: Lyons, Tony - Author. Newspaper title: The Independent (London, England). Publication date: March 14, 1999. Page number: 10. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
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