Retire rich

Retirement years free from financial headaches? Easier said than done. Unless you follow a few golden rules…

In your 20s…

Your next holiday, deposit for a flat or buying a car is probably top of your wish list rather than saving for retirement. But the younger you are when you start saving; the less you’ll need to save per month, as you’ve got time on your side.
To work out how much you should save, pensions experts suggest that you halve your age and express this as a percentage of your salary. So if you’re 24, you should be saving 12 per cent of your pay packet. But if you can’t afford this, save what you can; a small amount is still better than nothing.
Before you start saving, get your finances in order by clearing any debts first. That means paying off credit card and student debts. No point feeling smug about paying into your pension pot each month if you’re shelling out more than three times that amount in credit card interest.
Landed your first job and been offered the chance to join a company pension scheme? Join up! Company schemes mean that both you and your boss chip in, so you’ll be getting some free cash. And another bonus with traditional pension schemes is that you’ll get tax relief, too. This means that when you pay in, the tax man stumps up, too. For a basic rate taxpayer earning £37,400 or less, you pay £80 for every £100 saved.

In your 30s…

Buying your first home, starting a family and climbing the career ladder can mean your finances are stretched to breaking point, but try not to forget your pension. If you’re strapped for cash, some pension schemes allow you to take a temporary ‘holiday’ and suspend payments, but restart contributions as soon as you can.
Diversify, don’t stick everything in the same pot. You could consider investing in property to use as a second home or let out to produce a regular rental income. Or you could think about buying shares or investing in gold, which has seen a 140 per cent increase over the last five years. And you don’t have to buy gold bars to make money, you could invest in ‘exchange traded funds’ which follow the gold price. For more information speak to your financial adviser.
Investing in fine wines is another option, with the price of some vintages quadrupling in value over the last 10 years. But unlike other forms of financial investment, wine investment is an unregulated industry. On the plus side, profits are exempt from Capital Gains Tax but you’re looking at a minimum investment of around £5,000 for a wine investment fund. Check out the liv-ex.com index which tracks the value of the top one hundred most sought-after wines.
With shares, you can invest in just one company, or you can look at stock market tracker funds that follow the FTSE 100 share index. For share-based investment, always seek specialist financial advice.
Women face tougher saving choices during their 30s, particularly after having children, as the number saving for retirement falls by 50 per cent. If you’re freelance, consider a stakeholder pension where you’ll still get tax relief on contributions. And even if you’re not earning your partner can pay in up to £2,880 a year, which with tax relief effectively becomes £3,600.

In your 40s…

Time to check the value of your pension pot. First up, find out how much state pension you’re set to get by getting an online state pension forecast at direct.gov.uk or download and fill in a BR19 form. And find out the value of any company or personal pensions you’ve paid into over the years using the Pension Tracing Service. Call them on 0845 600 2537 or contact them via the website above.
Pay off your mortgage early to give you more disposable cash in later life. If you have a tracker mortgage, the chances are you’ve seen your monthly payments tumble. Don’t waste that extra cash; use any monthly savings to ‘overpay’ on your mortgage. But check mortgage terms first in case there’s a limit to the amount you can overpay.
Make the most of your ISA allowance. This is worth £10,200 every tax year and you can have up to £5,100 in cash savings. Any interest is tax-efficient so whether you’ve got shares or cash savings use this ‘tax-efficient wrapper’ to help boost your savings. And if you’re saving with a partner get them to make the most of their ISA allowance, too.
Keep adding to your savings. You’ll reach your highest earning potential in this decade so channel any work bonuses into pension savings or towards clearing your mortgage.

In your 50s…

It’s worth considering reducing the element of ‘risk’ across savings and investments as any potential stock market crashes could greatly reduce your savings, particularly if you’ve got money in shares.
If you’ve had a major life change and have divorced or split with a partner, now is the time to take stock of your pension planning.
Worried about poor savings rates? If your kids have left home why not let out your spare room? The number of live-in landlords aged 55 plus has doubled over the past year and you can boost your income by £4,250 a year, tax free, under the Government’s Rent A Room scheme.
Use the equity in your home. House prices have soared over the last 50 years, so anyone nearing retirement could be sitting on a potential gold mine. While there are equity release schemes available, why not consider downsizing to unlock some extra cash and reduce your monthly bills?

The final value of your pension fund will depend primarily on how much has been paid in and how well the fund’s investments have performed. The value of investments can fall as well as rise, and you may not get back the full amount you invest. NatWest does not supply all the products mentioned in this feature.
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