Older pensions could be delivering poor value for money

Older pensions could be delivering poor value for money:

In February, Research conducted by the Institute for Fiscal Studies funded by the Economic and Social Research Council, was published.

The new research found that:

• Many deferred pensions held by a sample of those in their 50s are in schemes with charges that are high relative to current market standards.
• Deferred pensions started longer ago typically have higher fees than pensions started more recently, and these differences do not look justified by better performance. Charges have fallen over time and deferred pensions often do not reflect these changing market conditions.
• Among people in their 50s contacting Profile Pensions, the average annual fee for deferred pensions taken out in the 1990s is above 1.1% of fund value, compared with around 0.9% for pensions taken out in the 2000s and 0.8% for pensions taken out in the 2010s. Very few pensions taken out a long time ago have low charges: four-fifths of the pensions started in 2013 have a charge of 0.75% or less, compared with just one-in-four of the pensions started in 2003 and one-in-nine of the pensions started in 1993.
• While the difference between 1.1% and 0.8% sounds small, it can make an important difference to retirement resources when cumulated over many years. For example, for a 50-year-old with a pot of £21,000, it would amount to a difference of around £2,400 at age 67 in today’s prices if annual investment returns going forwards are the same as the average over the past five years.
• Older deferred pensions may also not be invested in the way that people now want. Unlike with pensions taken out more recently, the equity allocation of pensions started longer ago is less likely to line up with a current assessment of people’s willingness to take on risk.
• This may be a particular issue for people approaching retirement, among whom the proportion of their pension funds invested in equities varies according to when their pension was started. Specifically, among pensions taken out more recently, there is a decline in the share invested in equities at older worker ages; no such decline is seen among pensions taken out longer ago.

Stratagem Financial Planning have explained this further in their blog post.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Please note, whilst we as Chartered Accountants offer a wide range of services which are unique to your business, we are not financial advisors. We work with the award winning team of financial advisors at Stratagem Financial Planning. We urge you to contact them for further guidance on this article.

Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

How can entrepreneurs improve their financial resilience?

More people than ever before are working for themselves and setting up businesses. It can be incredibly rewarding, but you also need to consider how it’ll affect your financial resilience. The UK has a great spirit of entrepreneurship. According to the Office for National Statistics, around 4.8 million people (more than 15% of the labour force) is self-employed, and it’s something younger generations are continuing.

Stratagem Financial Planning have provided 8 things entrepreneurs can do to improve their financial resilience.

1. Make the most of tax allowances

Managing your tax bill can help your money go further. As an entrepreneur, there may be additional tax allowances you can make use of now or in the future.

2. Set up a pension and make regular contributions

Opening a pension and making regular contributions is a great first step to building long-term financial resilience. As well as your own contributions, your pension can also benefit from tax relief and will be invested to hopefully deliver growth over the long term.

Stratagem Financial Planning can help you create a retirement plan that suits your goals, and balances your spending now with the future.

3. Consider income protection

While on the subject of managing your income, how would you cope financially if you became too ill to work? While no one wants to think about being involved in an accident or having a long-term illness, it does happen.

Income protection policies can provide a regular income if you’re not able to work. You will need to pay regular premiums, but it means you can focus on recovering should something happen to you.

4. Review whether critical illness cover is right for you

As well as income protection, you may also want to consider critical illness cover.

5. Set personal goals

When you’re building up connections or starting a business, it can be easy for that to become your sole focus. However, personal goals are just as important and can help you live a more fulfilling life.

Personal finance goals, like being able to pay off your mortgage or retire early, can provide motivation and ensure you have a clear direction for life outside of work.

6. Review your budget

As you’ll be responsible for your income, understanding your budget is crucial. The questions below can help you track your cash flow and make informed decisions about your spending:

• How much are you making?
• Does your income vary?
• What are your essential expenses?
• How much are you saving regularly?

7. Don’t neglect your emergency fund

How much you should hold in an emergency fund will depend on your commitments and other assets. A rule of thumb is to have three to six months of expenses in a readily accessible account.

8. Set up regular financial reviews

Finally, over time your goals and financial circumstances will change. Regular financial reviews can help ensure the steps you’re taking are still appropriate and support your wider goals.

To create a financial plan that will include frequent reviews to make sure you remain on track, please contact Stratagem Financial Planning.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning

Please note, whilst we as Chartered Accountants offer a wide range of services which are unique to your business, we are not financial advisors. We work with the award winning team of financial advisors at Stratagem Financial Planning. We urge you to contact them for further guidance on this article.

Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

If you’re nearing retirement, you may be starting to think about planning the next stage of your life, so, what should retirement planning include?

Stratagem Financial Planning have laid out five questions that you should think about as you approach retirement. They can also help you get the most out of the financial planning process by ensuring your aspirations are at the heart of any decisions you make.

1. What are you looking forward to in retirement?

If you’re nearing retirement, you may be excited about the next stage of your life. Setting out what it is you’re looking forward to can help you make decisions that are right for you.

According to the Great British Retirement Survey from interactive investor, 49% of people that haven’t yet retired are looking forward to greater freedom and 42% see retirement as an opportunity for a new business or hobbies.

3 in 10 people still working think their life will improve when they retire. Pinpointing what it is that will make retirement an exciting milestone for you is crucial.

2. How will you fill your days when you retire?

While you may have big plans for your retirement, it can be easy to overlook the day-to-day when you set out your lifestyle.

3. How will you maintain social connections in retirement?

Work can play a pivotal role in your social life. So, when you retire, it can leave a gap.

4. What will give you purpose in retirement?

Much like filling your days, retiring can pose a challenge for some retirees if they feel like they’ve lost their purpose and drive when giving up work.

According to an Aegon report, just 4 in 10 people think about what gives their life joy and purpose.

Considering your driving force is a useful exercise at any point in your life and reviewing this as you retire is an important task.

5. Do you have any concerns about retirement?

While you may be looking forward to retirement, it’s natural to have some concerns too.

From worries about your finances to being anxious about the lifestyle change, thinking about your concerns is as important as setting out what you’re looking forward to.

It means you can address any worries that you have and put a plan in place to deal with them. By being proactive, you can really focus on enjoying your retirement to the fullest.

Using your lifestyle goals to shape your financial decisions.

By combining lifestyle and finances when you’re retirement planning, you can have confidence in the decisions you make. Please contact Stratagem Financial Planning to discuss your retirement and the lifestyle you’re looking forward to.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please note, whilst we as Chartered Accountants offer a wide range of services which are unique to your business, we are not financial advisors. We work with the award winning team of financial advisors at Stratagem Financial Planning. We urge you to contact them for further guidance on this article.

Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

Why you shouldn’t panic during market volatility:

Over the last two years, investors have experienced a lot of volatility. If you’ve been tempted to change long-term plans, data can highlight why you shouldn’t panic.

At the start of the Covid-19 pandemic, markets fell sharply, and investors continued to experience volatility as the situation and restrictions changed. Just as things were slowly getting back to “normal”, tensions with Russia began to rise and stock markets reacted strongly when Russia invaded Ukraine in February.

Stratagem Financial Planning have provided three interesting pieces of data why you shouldn’t panic during market volatility.

1. Stock market risk falls the longer you invest

All investments carry some level of risk, and the value of your investments can fall.

However, over the long term, the ups and downs of investment markets can smooth out. This means that the longer you invest, the less risk there is that you will lose money when you look at the long-term outcomes. This is why you should invest for a minimum of five years.

2. Markets have historically bounced back

When you’re experiencing volatility, it can seem like a one-off event. Yet, if you look back over the years, you’ll see there are often events that can seem like reasons not to invest or to change your investment strategy.

Data from Schroders shows that stock market corrections, where there is a 10% drop, are not as rare as you might think either. The US market has fallen by at least 10% in 28 of the last 50 calendar years. Yet even with these dips, the market has returned 11% a year over the last 50 years on average.

3. Trying to time the market could cost you money

As stocks rise and fall, it can be tempting to try and time the market.

Everyone wants to buy stocks at a low price and sell them when the value is high. But it’s incredibly difficult to consistently predict how the markets will change.

Building an investment portfolio that reflects your goals and takes an appropriate amount of risk is crucial. If you’d like to talk about investing, whether you have concerns about market volatility or want to start a portfolio, please contact Stratagem Financial Planning.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Please note, whilst we as Chartered Accountants offer a wide range of services which are unique to your business, we are not financial advisors. We work with the award winning team of financial advisors at Stratagem Financial Planning. We urge you to contact them for further guidance on this article.

Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.