Accounts & Bookkeeping

Personal Pensions; Don’t Panic!!

It’s surprising how one little word can throw many people into paroxysm’s of wailing and gnashing of teeth, but more people worry about their pensions that almost anything else.  Libor-rigging scandals?  Really?  UK Government borrowing increasing? P’ah! Your football team being kicked out of the cup? C’est la vie!  Pension pots?  Aggghhhhh!  Most people have at least some concerns that they will not have enough saved for when they finally retire, and imagine their standard of life dropping.  But don’t start reaching for the smelling salts just yet; things are not as dire as you may have imagined and you probably don’t have a future of eating endless brown rice and water.
Much of the hype surrounding UK pension pots is actually whipped up by the pensions industry themselves, spun on the basis that if you can generate enough interest and uncertainty in a market then the general public does the expected and panics.  And if you can instill enough uncertainty, then it will focus people minds and they will redouble their efforts to reach perceived targets.  And that’s how it works with pensions; tell people that they won’t have enough, and they will try to save more, and all that really does in the short term is to put more funds at the immediate disposal of Pension Fund Managers!
There has been much discussion about pension pots and many scare stories regarding shortfalls in ready cash when you most need it, but there is growing concern that this aspect is being a little overplayed by the pensions industry.  Suffice to say, bar the independently wealthy, everyone needs to plan and save for retirement, but with wise investment you will probably find that you can put away enough now to leave you not only comfortable in retirement, but hopefully give you sufficient to allow a good standard of living.
Many industry experts are saying that younger savers should be aiming for a yearly pension of around two thirds their final earnings, which currently equates to around £35,000 per year for a couple earning an average wage each.  But that will require an investment total of anywhere between £300,000 and £600,000!  However, consider if that is a true picture.  You would hope to own your home by then, and not have the worry of a mortgage, so £35,000 is actually a considerable amount of money for a retired couple to spend, and with a state pension adding another £7,500 that can become a lavish lifestyle, rather than simply comfortable.
Of course, the golden rule with pensions is to start as early as you can and build up your investment over many years, but that doesn’t mean that you should spend all of your available money on a pension and have little life now.   Seeking personal advice from an independent financial advisor will give you the opportunity to save for the future, and live well now too, but unless you have no pension at all, you shouldn’t be panicked by the industry.

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