Don’t play re­tire­ment roulette

Daily Express - - YOUR MONEY - By Har­vey Jones

RE­TIRE­MENT is in­creas­ingly a lot­tery with mil­lions of older work­ers pin­ning their hopes on down­siz­ing, an in­her­i­tance or hit­ting a prize jack­pot to fund their fi­nal years.

Everybody dreams of win­ning a mil­lion or two but this is no way to plan for a se­cure fi­nan­cial fu­ture.

The only re­li­able method is to pay reg­u­lar sums into a com­pany or work­place pen­sion, as well as other tax-ef­fi­cient sav­ings ve­hi­cles such as Isas.


The over-50s of­ten strug­gle to save enough for re­tire­ment be­cause of the ris­ing cost of liv­ing, with in­fla­tion stand­ing at 3 per cent, while wages stag­nate. Many also have fi­nan­cial re­spon­si­bil­i­ties, de­pen­dents to fund and have to pri­ori­tise pay­ing off debts such as a mort­gage.

The re­sult is that more than two mil­lion over-50s work­ers say they are yet to take pen­sion sav­ing se­ri­ously, ac­cord­ing to Aviva’s Real Re­tire­ment Re­port, which leaves them play­ing “re­tire­ment roulette”.

Work­ers ex­pect their earn­ings to peak at age 51 and stay there for five-and-a-half years, mak­ing this a vi­tal win­dow of op­por­tu­nity to boost pen­sion sav­ings.

Some­one who puts away an ex­tra £100 per month dur­ing that peak earn­ing pe­riod could boost their pen­sion pot at re­tire­ment by £25,000.

Lind­sey Rix, man­ag­ing di­rec­tor, sav­ings and re­tire­ment at Aviva, says fi­nan­cial pres­sures are forc­ing many to post­pone re­tire­ment planning and put their faith in fac­tors be­yond their con­trol, such as down­siz­ing: “Even op­tions that might seem guar­an­teed, such as mak­ing a profit from sell­ing your home and mov­ing some­where smaller, could pose a chal­lenge should eco­nomic or mar­ket con­di­tions change.”

Some­body sell­ing a de­tached house worth £310,000 and down­siz­ing to a semi cost­ing £197,000 would re­lease a lit­tle more than £100,000 af­ter stamp duty and re­moval costs, ac­cord­ing to fig­ures from Royal London, and a house price crash could quickly shrink that. In­cred­i­bly, one in 10 says that they are re­ly­ing on hit­ting the jack­pot to fund a com­fort­able re­tire­ment, Aviva says, de­spite the odds of win­ning big on the Na­tional Lot­tery be­ing just one in 45 mil­lion.


Win­ning the lot­tery is the ul­ti­mate act of faith, but even then there is no guar­an­tee of a se­cure fu­ture as too many mis­han­dle the money.

Plain English Fi­nance founder Andrew Craig says: “Very few peo­ple know how to take ad­van­tage of such a large wind­fall, with lot­tery win­ners be­ing par­tic­u­larly vul­ner­a­ble.” An in­cred­i­ble 70 per cent end up go­ing bank­rupt within seven years in the US, ac­cord­ing to the Na­tional En­dow­ment for Fi­nan­cial Ed­u­ca­tion.

Sim­i­larly, while Pre­mier League foot­ballers earn more than £30,000 a week on av­er­age, three out of five de­clare them­selves bank­rupt within five years of re­tire­ment.


More than 20mil­lion Bri­tons hold Premium Bonds, which cre­ates two new mil­lion­aires ev­ery month. This is a life-chang­ing amount of money, but if you re­sist the temp­ta­tion to splash the cash, could you af­ford to give up work? Sarah Coles, per­sonal fi­nance an­a­lyst at Har­g­reaves Lans­down, says if you put the money in cash with a long-term re­turn of 2.54 per cent a year and drew the av­er­age an­nual UK in­come of £27,200, the money would last 30 years. “If you in­vested in bonds yield­ing 5.16 per cent it could last 47 years,” she adds. Coles says if you in­vested in the stock mar­ket, which his­tory sug­gests of­fers a long-term re­turn of 6.08 per cent a year, you could have more cash than you orig­i­nally in­vested af­ter 60 years: “This is the best op­tion and would give you plenty to pass on to your fam­ily.” For most peo­ple, set­ting aside a lit­tle ev­ery month is the surer path to a com­fort­able re­tire­ment.

DREAM TICKET: You can’t rely on the luck of the draw

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