WHAT OTHER OPTIONS ARE THERE APART FROM TRADITIONAL PENSION SAVINGS?
WHILE pensions tend to be a central part of people’s retirement plans, there are other ways to save or release cash. Moneyfacts.co.uk has looked at what else is out there, which may help savers diversify their retirement savings in the years to come.
Some options may have pitfalls though, so it’s important to take time and seek financial advice to decide what’s right for you.
Rachel Springall, a finance expert at Moneyfacts.co.uk, says that, to supplement their pension savings, some people may open a savings account. “However, for a home owner who is soon to retire and facing a retirement shortfall, equity release may be worth careful consideration,” she adds.
Here Rachel outlines some potential options...
LIFETIME ISAS (LISAS)
LIFETIME Isas help savers build a nest egg for their first home or retirement. Savers can put in £4,000 each year until they turn 50 and the Government adds a 25% bonus. A Lisa can be opened by savers aged between 18 and 39. There is usually a penalty to access funds other than for buying a first home or retirement.
This has been temporarily lowered due to the coronavirus pandemic, so savers should generally get back all the money they put in, subject to any investment losses incurred if the Lifetime Isa is invested in stocks and shares. The withdrawal charge will return to normal levels in from April 6 2021.
EASY ACCESS ACCOUNTS
PAYING in a bit in each month can help boost a retirement fund. Saving just £100 a month for the next 25 years could build a pot of £30,000, excluding interest.
NOTICE ACCOUNTS
CHOOSE a notice account for a higher return than on an easy access account. So long as savers give the required notice period, they can access their cash without penalty. Challenger banks (smaller, newer banks) tend to reign supreme in the top rate tables in this sector.
FIXED RATE BONDS
UNLIKE easy access and notice accounts that allow savers to put in regular sums and gain access to funds in the short-term, fixed rate bonds tend to be more restrictive. But savers often achieve a higher rate of interest.
CASH ISAS
CASH Isas come in many forms, including easy access Isas, notice Isas and fixed Isas.
EQUITY RELEASE
THOSE about to retire who face a pension shortfall may consider a lifetime mortgage to release equity from their home.
These should be investigated carefully as there will be consequences for inheritance planning. Seeking independent financial advice will help you decide if this is right for you.