‘I want a bit of added luxury in retirement’
A former detective constable hopes to make the most of her police pension and savings. Harry Brennan reports
Earlier this month the state pension age for women was brought into line with that of men at 65. The equalised state pension age will now rise to 66 by 2020, meaning some women will have to wait years longer than planned before they can start to draw their state retirement income.
Many have been caught out by the change and, as women tend to live longer than men, will have to do everything they can to make their money go further.
Amanda Neimer, 62, is approaching state pension age and wants to invest her spare cash to provide comfort in her later years.
Now living in Petham in Kent and working for the local council, Ms Neimer previously worked for Kent Police as a detective constable.
During her police career she worked in child protection, the Criminal Investigation Department and in immigration and customs with Special Branch on the French side of the Channel Tunnel.
She has just sold her house and is happy to remain renting for around five years until she turns 67, when she will consider buying a smaller property and may stop working.
After selling her home in order to move closer to family, she had £132,000 in spare cash. She put £50,000 in National Savings & Investments Premium Bonds, with an effective interest rate of 1.4pc, and has another £20,000 in easyaccess cash accounts.
Ms Neimer has a remaining £40,000 that she “doesn’t know what to do with” and is considering investing in the stock market through funds. She said she had a medium-to-low risk appetite and little investment knowledge.
She takes home around £1,400 in pay, plus income from a police pension that pays around £830 a month. Her rent is £875 a month.
“I have been working all my life and in my later years I want to have a bit of money to provide for some luxury,” she said. “I want to be able to enjoy my retirement and be comfortable. I’ll be travelling to Australia to visit friends and have had enough of flying economy class.
“Some of my friends have suggested investing in gold, others in high-risk investments. The returns promised seem attractive but, for me, to lose any money would be catastrophic.”
Hayley North of Rose & North, a financial planning firm, said:
The key for Ms Neimer is securing a new home and reducing her expenses, making sure she has cash available when she needs it and making the most of the extra income while she has the energy and enthusiasm to travel.
Given her cautious approach and fear of high-risk investments, she needs a guaranteed income in retirement to ensure she does not need to invest in the stock market.
She is in a fortunate position with her police pension. This is a final salary pension and the value of the income it pays should increase with inflation – currently 2.4pc – each year. As Ms Neimer is expecting a full state pension, currently £730.60 a month, her gross income will be at least £1,561 a month. This means that when she stops working she will have enough retirement income to cover her costs, assuming she uses her savings to buy a new flat as planned.
Based on where she lives now, she should be able to buy a one-bedroom flat for around £100,000, leaving her with some cash for emergencies and longer-term savings.
Although holding Premium Bonds will yield little in terms of return, the money is fully protected thanks to government guarantees on NS&I accounts. The cash savings she holds are fully protected up to £85,000 by the Financial Services Compensation Scheme (FSCS).
I recommend that she save the £40,000 in cash. This will ensure that her funds are readily available for the purchase of the new property when the time comes.
She should be careful not to lock too much of her cash away in longerterm fixed-interest accounts as she Would you like a Money Makeover? If you’d like to as possible be considered, please), details email [email protected] of any debts telegraph.co.uk (including with the subject mortgages) line “Give and how me a Money you would Makeover”. describe your Please provide attitude the following to investment information: risk;
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Once she has started to draw her state pension she will have surplus income of at least £730 a month, which she can use to save further or put towards a business- class flight to Australia. These typically cost anything from £3,000 for a round trip and prices vary depending on when you travel.
She should be able to afford this once she has allowed for the purchase of a new home.
Nick Bamford of Informed Choice, the financial planning firm, said:
Ms Neimer’s attitude to investment risk is medium-to-low. This concerns me because even a medium-risk portfolio can go through a significant fall in value.
Based on her attitude to investment risk, I would recommend that she does not buy stock market investments, as such investments can go up and down in value and she needs her savings to remain stable over time.
For her, it is probably worth accepting the modest growth she can achieve by keeping cash in an interest- earning account in return for avoiding the disappointment of investing money and seeing it fall significantly in value, which could leave her unable to buy the property she wants.
Ms Neimer should be able to rely on both her police and state pensions, along with what she earns now, to provide for a secure retirement, and can fall back on her cash reserves in emergencies. With this in mind I don’t see a pressing need for her to expose herself to the markets and take on investment risk. If she intends to buy a small flat at some point in the future, perhaps in around five years when she starts to receive her state pension, I would again question the need to invest at all.
Gold is a popular investment, especially during the periods of uncertainty and volatility such as those we are going through now. But remember, as with any type of investment, the price of gold can fall as well as rise and you may not get back what you put in.
I wouldn’t pay too much attention to your friends’ recommendations.
‘My friends have told me to buy risky assets and gold, but I don’t want to lose money’