Jan & Ian, 57 & 63
One half of this fun-loving couple has already reached retirement and is drawing on a pension. The other half, still working and loving it, is keen to keep saving as long as she can. After all, The bigger the pension pot, the longer the list of holiday hotspots!
Confidence level: 2 out of 10
"I've got to be honest - we're pretty nervous about fiddling with our savings. Neither of us have ever been all that maths smart. I like art and Ian's into writing, so numbers are neither of our strong suit! But it's no excuse is it. This is our livelihood, so we do know we need to take it seriously.
"I think it would really help to have a bit of a point in the right direction. We want to move about 10% of our cash pension into some investments and Ian's been looking at different companies to invest in, but what's the difference between them really? And with everything up in the air since the Brexit and Covid-19, what effect does that have? It's hard to know. I just don't want to have to worry."
My pension planning question...
"We're thinking of self-investing 10% of our cash pension pot. If you were in our shoes - semi-retired and nervous novice investors looking to grow our pension pot - what advice would you give in these unprecedented times?"
Have one final salary pension paying out already
Confident they'll have enough for a 'comfortable' income if they get a handle on their savings now
Answer by Laith Khalaf, AJ Bell Youinvest
Financial Analyst - Meet the experts
Firstly whilst I can’t give you 'advice' I can provide some information to get you started on your research.
It’s great that you’ve got a final salary pension set up and can look forward to a comfortable retirement without worrying too much. That’s a solid base for your retirement income and should give you a bit more freedom with the rest of your pension savings. The difficulty is, as you point out we’re in unprecedented times and markets are jittery. But at the same time, cash (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/cash/) is yielding next to nothing and will likely leave you hard pressed to beat inflation.
When willing to invest cash for ten years or more, some market exposure is sensible. Because you’re nervous you should research what investments are right for you, which could include what is known as a ‘multi-asset’ or ‘mixed asset’ fund (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/funds/) in industry jargon. Basically this is a just a fund which invests in a range of shares, bonds, cash and sometimes gold. The idea is that by holding a mix of different assets which perform well at different times, you get a smoother ride.
One other trick to consider is rather than putting all the money you want to invest in one go, spread your investments out. If you invested in twelve monthly instalments over the course of a year, you basically average out the price you pay for the shares you are buying. That way you mitigate the risk of putting all your money into the markets on day one, and on day two seeing them fall 5%, for example.
At some point in the future you might think about switching your money into income producing funds (https://www.boringmoney.co.uk/learn/articles/what-is-an-equity-income-fund/) to support full retirement, for example a ‘mixed asset’ approach. Unlike a final salary scheme, the income will be variable, and will fall in some years, rise in others. If that was your only income it could be a concern, but seeing as it will be a top up to a final salary scheme you may be better placed to handle a bit of variation. And you can always think about putting a bit away in the good years to use in the bad.
The information in this article is for information purposes only and is not a personal recommendation or advice. Remember that the value of investments can change, and you could lose money as well as make it. Tax treatment depends on your individual circumstances and rules may change.
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