Start saving when you’re young and save sensibly
Build a regular savings habit at an early age. 75% of respondents to the NatWest Aspiration Index began saving regularly by the time they turned 30. The power of compounding returns is immense for longer investments. To get you into the habit, set up a Direct Debit on pay day and if you get a pay rise, increase your regular savings – you’re unlikely to miss the cash.
Know when to take risks
The further away you are from retiring, be prepared to take more risk with your investments. Take less risks the closer you get to retiring.
Sign up for workplace pension schemes and regularly review contributions
Automatic enrolment means that joining a workplace pension scheme becomes much easier rather than having to take steps to join. Under automatic enrolment most workers are signed up, making saving into pensions more attractive by making it compulsory for employers to pay into eligible workers’ pensions schemes and there is added tax advantages of doing so.
Make the most of the annual contribution allowance
It is important to regularly review your finances and make sure you are getting the most from your money. With the new pension freedoms and tax relief on your contributions, there has never been a better time to reassess your financial fitness around retirement planning. Pension rules and jargon can be bewildering, even for those who are financially sophisticated, so you should be regularly reassessing your priorities. By speaking to your banking relationship manager you can review your current strategy and how best to utilise your allowances. It is best to take action immediately, no matter your age, to make sure you are on track for the retirement lifestyle that suits you best.
Use an ISA allowance to top up contributions
Another simple way of investing to help achieve your retirement lifestyle aspirations is by utilising your annual ISA allowance, thus growing your investment without incurring a tax bill. The interest you earn or any growth you make on an investment ISA isn’t liable for capital gains tax and any dividends paid on investments are also tax free.*
*It’s important to remember that the value of investments can go down as well as up, so you could get back less than you invest.
Understand the value of your assets
You should understand your assets and have a plan to liquidate them. A significant portion of the UK population is sitting on huge amounts of housing equity. For some people, downsizing is an option while for others equity release schemes will work better. This may also help mitigate inheritance tax obligations for your beneficiaries.