Maggie wouldn’t call herself a wild person, but she doesn’t mind taking a risk with investing. In fact, since being widowed it’s become a key part of her future-facing money plan.
"I have some disposable income which maybe some other people don’t have, so that enables me to go on holiday and help my children out. I save about £200 a month, sometimes more, and if the kids have something coming up like a baby or an eye test I’ll pay for that."
"When my husband and I were together, we had our money all in one really. Put all our wages together and sorted household bills and that. Saved for our marriage, saved for our children. But when I was on my own I was responsible for everything – going from two incomes to one. It was a bit of a shock.
"I’ve been alone for so long now I would always keep my own savings, but we didn’t back then. And I got left with debts too that weren’t mine. It definitely made me stronger, and more financially savvy."
"I’ve got a company pension I’m happy with. They just changed it but I know a limited amount about that. I think it’s not going to be as good as the previous one but it’s okay for now. I am trying to find out more and find the information but it’s a whole minefield really isn’t it. But I do like the websites that explain all the pensions and give you the bare bones of it.
"Just seems pensions aren’t as good any more, are they. My friend was hit by a pension collapse. Company went bust. I think really you need to have your own money. Your own pot. I still put money into a pension, but I think you need something else as well as that."
"I invest in shares through work so I put money into shares every month – taken straight out of my salary, separate to my pension.
"With my shares I invest in companies and it goes up and down but I feel safe. I mean I’m not a wild person. I’m not a prude but I’m not wild. I just go for big companies and just put away small amounts. I’d like to think it’s something sensible that’s been around for a while, but nothing’s guaranteed these days is it.
"I wouldn’t invest in guns or tobacco though or anything like that. No way. And my dad was looking at bitcoin and I was like “get out of that!”. Seems like he’s been taken for a ride – he always does this."
"I’m paying in the minimum to my pension at work and I’m considering upping it, but I don’t really have confidence in it. How can I tell if it’s solid? How do I know the pension will still be there when I come to retire?"
Answer by Helena Wardle, Sterling and Law
Answer by Helena Wardle, Sterling and Law
I completely understand why there is a lack of faith in pensions, the main concerns I have come across are “what happens if the pension provider goes bust” and “what if the rules change again!”
Pensions benefit from consumer protections and the type of protection you have depends on the type of pension you have. If you have a final salary pension, your pension would normally be shown as a level of income that you have built up. If the company goes bust, you would be protected by the “Pension Protection Fund” which would protect 90% of your promised income up to a cap* (*£36,019 this tax year) and most final salary pension scheme members would be below this cap.
For pensions that have a fund value you are normally protected under the Financial Service Compensation scheme. The cover depends on the pension contract you have but you can contact your pension provider and ask them to confirm this to you. Typically it’s one of two, you are either covered 100% if your pension is through an insured contract typically offered by an insurance company or £50,000 per fund for other contracts such as Self invested personal pensions( SIPPS).
Pension legislation has changed a lot, some of the biggest changes have happened in the last few years but I think these have been mostly positive, putting savers more in control of their money. I have noticed a lack of understanding of death benefits and tax reliefs. I often see clients who are higher rate taxpayers paying into personal pensions or some workplace pensions who are able to claim back additional tax from their pension contributions but don’t because they didn’t know. It is also a common misconception that pensions die with you but for personal pensions or money purchase pensions the full pension pot will pass as a legacy on to your loved ones if you died. It’s difficult to reassure you of future changes as it is very likely that pension legislation will continue to change long term but most changes has taken into account the impact on savers who have already built up pension savings. The reality is that the later you leave it, the more difficult it is to build up what you need to have a comfortable retirement.
Depressingly, state pension age will start rising from 2028 by 1 year for every 10 years. This means that the normal state pension age will slowly creep up from the already later age of age 68. State pension in itself is not enough for most people to cope with as its only £168 per week at the moment. This means for retirement to be comfortable and enjoyable you have to save from a younger age to give yourself security and choice. It also gives the government incentive to encourage people to save for their later life!
Pensions are a great savings vehicle due to the tax relief on it, this means that for every pound that you invest, £1.25 goes into your investment earning you a return long term! The compounding effect of this means that your savings will build up quicker in a pension plan than it would in most other savings like an traditional ISA. Add to that most savers who are employed would benefit from employer pension contributions and that higher rate tax payers can reclaim further tax, pensions are good investments to use to build up for you future. It’s important to note that you can’t access the money until you are of pensionable age (55 rising to age 57 in 2028) but there are very few things in life that gives you money for nothing and in my view pensions are it.
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