Dependable Dads can be the meat in the financial sandwich. The kids are getting older. And more expensive. And your parents are looking just a little bit more creaky. How can you keep it all going and try to fix your pension too?
Stocks and Shares ISAs
Stocks and Shares ISAs are a very good way to think about saving for stuff over the mid-term. If you would like to start to squirrel away some money to help your kids down the track, to save for retirement or maybe to help Mum then it’s worth thinking about these savings accounts. Largely tax free, they make a lot of sense, and we’ve done the legwork for you, suggesting a few good ones in our Best Buys. For shorter term emergencies, the predictability of cash makes it the sensible approach although interest rates are dire so make sure you shop around.
Although your kids are no longer babies, it’s never too late to start a Junior ISA (JISA) if you haven’t already. You can open up a JISA online in less than half an hour – and then you, friends or a nice grandparent can pay into this.
All children resident in the UK are eligible for a JISA. You can pay in a maximum of £9,000 a year for each child. This JISA then automatically converts to an adult ISA when they are 18.
This of course means that the children get access to the money when they're 18. Worried they'll spend it all on motorbikes and full moon parties? Biggest provider Hargreaves Lansdown tells us that over 95% just transfer to adult ISAs and the kids keep saving.
Now for the really boring but really important bit – private pensions. Try and stash something away into a private pension if you can. It’s the best way to turbo charge your savings. Don’t be an Eeyore and assume it’s too late – something’s better than nothing.
Get a State Pension forecast – it’s quick and easy to do and gives you the starting point for working out how much you’ll have in retirement. By law your employer needs to offer you a pension at work. You’ll see 5% of your salary siphoned into this – you can opt-out but it’s usually bad ideas as you’ll forfeit contributions the Government and your boss have to make as well (3%). Finally try and trace all your old pensions from work – it can be painful but contact your old employers and consider rolling it all into one place.
Just be careful about doing this without financial advice – especially if it’s a final salary scheme or a ‘deferred benefit’ scheme – these can have good guarantees which you won’t get matched anywhere else today.
Ready to look at some providers? At the end of the learning path, we’ll suggest some links, products and guides.
Hiding behind the jargon, these are just investment accounts which are protected from tax.
Lots of readers are wrestling with whether they leave their money floundering about uselessly in some low-rate cash account OR try and put it to work in the stock market. Yes, this involves risk and yes, might lose some money.
But here's a fact. Since the stock market began, we have been 90% more likely to do better in shares than cash over any 10 year period. And 99% more likely over an 18 year period.
Hhhmm. So how much is at stake? The worst year in recent history was the 2008 crash when the main UK stock market fell by about 30%. Turning your £100 into £70. But if you'd stuck the course, you would have been back up to £100 just over five years later.
You can hedge your bets here too. You can have a cash ISA and a stocks & shares ISA as well – this is not an either/or decision. You can put a very hesitant toe into the world of shares and not dive in with a huge splash.
If you’re saving with at least a 5 year timeline, then having something in the stock market needs to be considered. Especially when interest rates are so dire.
Bamboozled by choice? We’ll tell you which providers we like and why, and show you how other investors rate them too. Have a look at our Best Buys. (https://www.boringmoney.co.uk/best-buys/all-providers/)
Fees are steep and don't rely on State help. In England and Northern Ireland, if you (or your parents) have more than £23,250 of assets, then don't expect the State to pay for care home fees. You'll need to have a plan to fund these yourself.
According to research from Partnership, 32% of people say they will live with their kids - but just 4% have had this conversation. Oops.
The average annual cost of residential care is just over £30k, although 40% of us believe living in a care home costs less than £25k a year. Nursing care is more expensive with the average costing almost £40k a year, and rising all the time.
A typical pensioner's income is £16,848.
What Are My Options?
Use the home. If an elderly relative needs to go into care, their home could be sold and the proceeds used to meet the costs. However, this may not be possible if they have a partner. An equity release mortage could be taken out to provide cash without having to sell the house. Interest payments on this kind of mortage are usually rolled up until the house is sold, but be careful. The loan can increase substantially, possibly requiring all the remaining equity to pay it off.
Use savings. Savings, investments and pension funds are another option, if they're available. The main advantage is that you only pay for what you need, when you need it. As long as the money doesn't run out.
Use insurance. Care home annuities are basically long term care fees plans. They're effectively an insurance policy - you pay a large amount of money up front and then the insurance company guarantees to pay the fees for however long they're needed.
Stripping away all niceties, these plans are a bet with the insurance company about how long you're going to live.
1. Stocks and Shares ISA
With interest rates at historic lows, sitting in cash for years on end is not the smartest thing to do as a default position. You can set up a Stocks & Shares ISA online, from £25 a month and if you need to access it, this money is not locked away either.
Have a look at our Best Buys table to compare the different providers, along with user reviews and ratings.
2. Private Pension - Get Your Head Around This
Pensions aren’t exactly feel-good territory. But the Government does a pretty limp job of selling the main benefits of saving for this. You get £20 for free for every £80 you put into a pension. More if you’re a higher rate taxpayer. That’s the “Why bother” bit. Free money!
We can help you get a clearer picture of what you have today. And what a sensible goal might be.
3. Robo Advisers - One For The Kids?
If your kids are now more into Magners than Mickey Mouse, you might be wondering how to help them start earlier than you did on the savings ladder. Robo advisers are the new way to save for the iPhone generation. With starting amounts from just £1, offering easy questionnaires, ready-made portfolios and mobile access, you might just find this is something which suits you too!