US stimulus hopes offset poor growth projections
Could a few lifestyle tweaks help realise hopes of ending your work life early? Vicky Shaw seeks some expert tips to boost your pension
THE London markets made gains as positivity surrounding financial stimulus in the US helped the FTSE to shake off gloomy economic forecasts.
Think tank the National Institute of Economic and Social Research (NIESR) slashed its economic growth projections due to the second wave of Covid-19 in the UK.
It warned the economy is set to grow 3.4% in 2021, having previously predicted a 5.9% rebound, although this was not enough to heavily impact London-based stocks.
The FTSE 100 closed 34.2 points, or 0.53%, higher at 6,523.53 at yesterday’s close.
Connor Campbell, financial analyst at Spreadex, said: “A record-breaking start from the Dow Jones juiced up the European indices, despite the rising number of Covid-19 variants around the globe.
“With the Democrats putting in place the framework to go their own way and pass Joe Biden’s 1.9 trillion-dollar American Rescue Plan regardless of whether or not Republicans are on board, the implementation of the stimulus package is getting closer and closer.
“Even the FTSE – which is sitting under the cloud of NIESR’s latest forecasts for the UK economy – got in on the action.”
Elsewhere in Europe, the Dax rose to an all-time high before slightly tempering while France’s biggest index marched to its highest for a month. The German Dax was 0.21% higher and the French Cac moved 0.47% higher.
Meanwhile, sterling was robust against a weaker dollar as US traders focused on equity stocks. The pound increased by 0.17% versus the US dollar to 1.373 and was up 0.09% against the euro at 1.140.
In company news, Boohoo shares dropped after it bought Dorothy Perkins, Wallis and Burton from Arcadia administrators for £25.2 million. The deal is for the inventory, e-commerce and digital assets of the businesses and will save around 260 jobs. However, investors were largely unimpressed, with shares sliding 17.4p to 347.5p.
Elsewhere in retail, Frasers Group nudged lower after Mike Ashley’s retail business confirmed it sold its almost-25% stake in French Connection amid takeover interest for the brand. Frasers closed the session down 9p at 468.6p. Bahamas Petroleum Company shed two-thirds of its value after the AIM-listed company told investors that an oil well off the coast of Bahamas, which it waited a decade to drill, had not found “commercial levels” of oil. It fell 1.39p to 0.67p.
BP was one of the FTSE’s top performers, with shares rising after it secured the rights to build new wind farms in UK waters. Its shares finished the day 9.9p higher at 261.95p.
The price of oil rose past 60 dollars for the first time in a year, as energy traders joined in with the improvement in sentiment. The price of Brent crude oil increased by 1.63% to 60.31 dollars per barrel.
The biggest risers on the FTSE 100 were Evraz, up 20.4p at 523.6p, BP, up 9.9p at 261.95p, Anglo American, up 97p at 2,581p, and Antofagasta, up 50.5p at 1,532p.
The biggest fallers on the FTSE 100 were JD Sports, down 24.4p at 828.4p, Whitbread, down 79p at 3,201p, Ocado, down 62p at 2,746p, and Smurfit Kappa, down 78p at 3,544p.
UNLESS you have a very well-paid job, or are expecting a lottery win, the idea of retiring early may seem like an impossible dream. But by starting early and committing to regular saving, perhaps you can nudge the dream a bit closer to reality.
Some people even go to extreme lengths to try to retire early – which may involve dramatically cutting back their spending while trying to maximise their savings.
However, for many, this may be an unsustainable way to save, but you could still boost your chances of retiring early by making more moderate lifestyle changes.
Here, Laura Laidlaw, head of customer savings at Standard Life, looks at how this can be achieved...
Know what you want
Like anything, it is important to have a goal to work towards. Being realistic with what you want from your retirement, and what this will cost you, will help determine how much you need and how long you need to work for to get it.
Considering how much money you will need to live on will be dependent on a variety of factors, from the kind of lifestyle you want, where you want to live and whether you want to continue some form of work.
Remember that early retirement doesn’t necessarily mean giving up work altogether. Many retirees kick-start part-time careers in something they love, or pursue a hobby or side hustle that could make extra money. Factoring in earnings from this should help your planning too.
Start early and cut back
Once you have a clearer idea of your goals and what you’ll need to fund them, you’ll need to work out how to get there.
If you start early enough, there are many ways to make small changes that will build up to be substantial savings in the long-term.
It’s understandable that extreme budgeting isn’t for everyone, but being stricter about what you spend your money on could help make an earlier retirement a reality.
Simple savings can be made in your everyday spending. You could change where you shop, switch utility providers, use vouchers and cashback websites, swap expenses like shop-bought coffees or maybe cancel monthly subscriptions you don’t use.
Once you have worked out where you can make savings, be savvy with where you put that extra money. For example, you could consider topping up your pension, if you have one. But remember you won’t be able to access pension savings until age 55. Another option for longterm investment, which is more accessible, is a stock and shares Isa.
While investing can carry risks, over the long-term the returns may potentially be greater.
Be smart with the cash you save
You don’t need to be close to retirement to think about saving into a pension. As soon as you enter the world of work, putting savings into a pension is a brilliant way to be tax efficient.
Some employers offer matched monthly contributions to your workplace pension, so if you are lucky enough to be offered this you should take advantage with extra payments to boost your retirement fund.
It’s also worth considering putting any work bonuses in future years into your pension. If your employer gives the option of making a pension contribution using bonus sacrifice, the boost to your pension could be worth much more than if you took the bonus as cash.
‘Side hustles’ can also boost your pension pot
Climbing the career ladder is one way to boost your income – but starting a side line enterprise is another. Look into other options and don’t be put off by ventures that will only add small increments to your monthly income - every little helps across a longer period of time.
Get creative about ways to earn a bit more money. This could be anything from selling things you no longer need on auction websites, or turning a hobby into a small business to work around your main job.
You might even consider renting out a spare room in the future if you have one. Whatever it might be, any additional income could help to get you closer to early retirement.
Seek professional advice
Trying to work out how and when to retire can be difficult, so using a financial adviser could help make early retirement a possibility.
A financial adviser can discuss your plans, including when you can afford to retire, what you can afford to spend each month or year, as well as help you choose the right investment options to get the most out of your money.
Remember that early retirement doesn’t necessarily mean giving up work.
Many retirees kick-start part-time careers in something they love...