Lifestyle

The majority of Brits feel stressed about planning their retirement, a survey from Aviva finds. While later-life planning can seem complex, taking control of your goals and pension during your working life can mean you feel more confident.

The survey found that 61% of Brits feel stressed when they think about retirement planning. Unsurprisingly, given the current economic uncertainty, money is a big concern. The research found:

• 71% of people worry about whether they have enough money set aside for retirement to do all the things they want to do.
• 65% are concerned about how long their pension will last.
• 59% are unsure if they are paying enough into a pension.

If you’re worried about your retirement, here are five steps you can take.

1. Understand how your pension will grow during your working life

The research found that younger generations are the most concerned about retirement.

While many tax allowances haven’t fallen, they haven’t increased in line with inflation either. In real terms, that means they’re less valuable than they once were. It could affect your income, long-term wealth, and what you leave behind for loved ones.

As the cost of living and the value of some assets rises, the tax breaks you use may not be stretching as far. It means your tax liability may have increased or that you need to review your financial plan.

As potential Inheritance Tax (IHT) bills consider the total value of your estate, the associated allowances can really highlight the effect of inflation.

The nil-rate band would have increased by more than £135,000 if it matched inflation

The nil-rate band is the threshold for paying IHT. If the total value of your estate is below this, no IHT will be due.

Scammers are taking advantage of financial worries as the cost of living rises. It’s more important than ever that you remain alert to potential fraud.

According to Citizens Advice, scammers have targeted more than three-quarters of adults this year – a 14% increase when compared to this time last year.

The Financial Conduct Authority (FCA) also warned that financial crime is to become “even more prolific” due to rising costs, MoneyAge reports.

Fraudsters are adept at using circumstances to make you more likely to overlook red flags.

From offering “guaranteed high-return investments” when investors are worried about getting the most out of their money, to taking advantage of Covid concerns to charge for fake tests during the pandemic, scams evolve to prey on vulnerabilities.

Now, some criminals are using cost of living concerns to scam more people.

British politics over the last few months has certainly been turbulent. In the last four months, there have been three prime ministers, four chancellors, and countless U-turns. So, it’s not surprising that households have been struggling to keep up with what’s happening and what it means for their finances.

Less than three years after a landslide victory, former prime minister Boris Johnson resigned after a mass resignation of ministers in his government. The contest for Conservative leadership saw Liz Truss named prime minister, but her tenure lasted less than two months – making her the shortest-serving prime minister in 300 years of British history.

While short, Truss’s tenure was eventful, including presiding over a national mourning period for Queen Elizabeth II. Announcing she wanted to “hit the ground running”, Truss and former chancellor Kwasi Kwarteng announced a mini-Budget, but the effects were anything but mini.

The controversial and aggressive tax cuts they announced led to market volatility.

As the cost of living rises, you may be considering increasing how much you withdraw from your pension. While it could solve short-term challenges, it’s important that you think about how it could affect your future too.

Several factors, including the war in Ukraine and the long-term effects of the pandemic, mean that inflation is much higher than it has been in recent decades. In the 12 months to August 2022, the rate of inflation was 9.9%.

Your regular outgoings are likely to have increased, as well as the cost of discretionary spending, like holidays or days out. As a result, the budget you set out when you initially retired may not be adequate now.

If you’re struggling financially or are having to make lifestyle compromises, increasing your pension income may seem like a simple solution.

Data published in FTAdviser suggests that pension savers would need an extra £90,000 to maintain their standard of living because of rising costs.

It can be easier than you think to lose your retirement savings. In fact, estimates suggest thousands of savers have forgotten about pensions that could support their retirement goals.

31 October marks National Pension Tracing Day, so it’s the perfect time to review your savings and see if you could reclaim lost money.

As you could be paying into a pension for decades before you can access it, it’s easy to lose touch with some of your savings. Perhaps you’ve changed your job or moved home and didn’t update your details.

Even small sums in a pension can support your retirement goals, so it’s worth spending some time tracking down lost savings.

1 in 3 savers worry that they’ve “lost” a pension

It’s becoming more common to switch jobs frequently during your working life. As a result, many employees will build up multiple pensions during their careers, and it is hard to keep track of the different pots.

As a self-employed worker, it can be more difficult to manage your finances. Your income may vary or not be as reliable as those who are employed.

According to a study from Scottish Widows, almost half of self-employed workers said their income fluctuates.

The research suggests that self-employed people could be more susceptible to income shocks, such as an unexpected bill or the need to take time off work due to illness.

That doesn’t mean you should change your work, but taking extra steps to create financial security could be beneficial. This is particularly true in the current economic climate.

In the 12 months to June 2022, inflation was 9.4%. As the cost of living rises, your outgoings may have increased, which could affect both your personal and work expenses.

Uncertainty means that consumers and businesses are more likely to reduce their spending.

Young workers calculating how much they need to save for retirement can feel like they face an impossible challenge. Yet, research suggests that a significant proportion could be on track to exceed the Lifetime Allowance (LTA).

The findings highlight how valuable saving early and the compounding effect of investments are.

The LTA is the total amount you can tax-efficiently save into pensions during your lifetime. If you exceed this threshold, additional charges could apply when you start to make withdrawals.

For the 2022/23 tax year, the Lifetime Allowance is £1,073,100. It will be frozen at this level until April 2026.

For someone just entering the workforce and earning a relatively low wage, the chance of exceeding that threshold can seem far-fetched.

The top 10% of earners aged 18–21 could exceed the Lifetime Allowance by 58

According to research from PensionBee, the top 10% of earners aged between 18 and 21 could exceed the current LTA by the time they reach 58 – around seven years before the typical retirement age.

Rising inflation and concerns about recession risks continue to place pressure on households and affect economies around the world.

The World Bank has slashed its 2022 global growth forecasts from 4.1% to 2.9%. The organisation also warned the global economy is at risk of experiencing stagflation, where economic growth is stagnant, but inflation is high.

As an investor, you may be worried about the effect the current situation could have on your portfolio and long-term plans. Remember, short-term volatility is part of investing, and you should focus on investment performance over years rather than months.

If you have any questions, please contact us.

UK

Once again, inflation reached another 40-year high in the 12 months to June. The rate of 9.4% is slightly higher than the 9.1% recorded the previous month.

The conflict in Ukraine is significantly affecting both energy and food prices, which is likely to place pressure on household budgets.

The cost of living is rising quicker than has been normal in the last few decades. Indeed, the last time inflation was this high was in the 1980s. So, what happened then compared to now?

According to the Office for National Statistics (ONS), inflation in the 12 months to June 2022 was 9.4%. As a result, the cost of living is creeping up, from your household bills to days out. The Bank of England (BoE) expects inflation to reach 11% this year before it begins to fall.

There are several key reasons why inflation is higher now. The effects of the pandemic and related lockdowns have caused the price of some items and raw materials to rise. The war in Ukraine has exacerbated this, most notably increasing energy and food prices.

While ONS data shows that average wages are rising, they haven’t kept pace with inflation.