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Research regularly shows that we put ambitious targets on our desired or retirement income and then underestimate how much cash we will need to set aside in order to achieve the desired pension targets.

First… a quick guide to pensions 

There are two main types of pension schemes, defined contribution and defined benefit which can sometimes be known as a final salary scheme.

With a defined benefit or final salary scheme, your employer promises to give you a defined income in retirement and is responsible for doing so. 

You will most likely have to contribute each month too, putting in the required amount that your employer specifies.

With a defined contribution scheme you as an employee will need to contribute a specified amount each month.

With a defined contribution scheme, you save into this and get contributions from your employer too. The money is invested to build up a pot, which will then fund your retirement. 

With a defined contribution scheme the answer is more complicated because the focus is on you to deliver the money you need in retirement – so the more you save the pension you will get. 

When you reach retirement you can keep your pension invested and draw money as income, or buy a regular income until you die in the form of a financial product called an annuity.

If you save into a personal pension this will be a defined contribution type plan. You pay money in, invest it and build up a pot. 

How much money do you need in retirement?

You need to consider a number of different essential factors when you consider how much you would need in retirement.

The first is that your outgoings are likely to be lower. One general rule used in the financial industry is that someone aged 40 would need about 50 per cent of their current income to have the same standard of living in retirement.

This rule works on the basis that by the time they retire they will be mortgage-free, not supporting children and no longer spending as much on things such as commuting and other costs involved in going to work each day.

The second major factor to consider is the state pension. Under the new flat-rate state pension scheme this is £155.65 per week, which is £8,094 per year.

Allowing for a full state pension, someone targeting retirement income of £23,000 would need other pension income of about £16,000. You would need a pension pot of £400,0000 taking a 4% income per annum.

How much do you need to save

You receive income tax relief on your contributions to your pension scheme, meaning that you effectively save out of untaxed income. 

There are some general rules for working out what percentage of your salary needs to be going into a pension, in terms of your and your employer’s contributions.

The most common is half your age from when you started saving from – so if you start at age 30 it could be 15 per cent, whereas if you start at 40 it is 20 per cent.

The reality is that when you start saving for retirement you may not be able to pay in as much as you would like. It’s important to remember that payments can be upped at any time and the early you start the better chance you have of building a bigger pension pot.

The post A handy guide to retirement savings appeared first on Savings Advice.

These include making sure the property is presented in the best way possible and any outstanding jobs are completed.

1. New kitchen cupboard doors and lighting

While a well-designed kitchen can go a long way to improving the value of your home and making it more attractive to buyers, you don’t need to go for a major refurbishment.

Instead, you can replace tired or damaged cupboard doors and install new lighting that can give a give a kitchen a new lease of life at the fraction of the cost of a complete refit. 

2. New showerheads and bathroom taps

Instead of completing a full refurbishment of your bathroom a cheaper option will be to freshen up any grimy tiles or mould-stained grouting, replace showerheads and bathroom taps. You could also replace tired shower curtains and toilet seats.

Another simple tip is to box up any toiletries littered around the bathroom as it indicates a lack of storage and may put buyers off. 

3.Style up the garden

A landscaped garden with decking and a stylish shed also help to enhance the value of your home. 

A well-maintained garden can create a lasting impression on a buyer, offering an appealing space to relax, unwind and entertain guests. 

If you do have decking, consider giving it a lick of paint and if you have paving give it a jet wash. 

 4. Remove walls that are unnecessary

Attempt to make more space in your home by knocking down unnecessary walls and opening up space. 

For example, you may be able to remove the wall between your living room and kitchen to create an open plan living and dining space.  

Removing a partition wall can be relatively simple, but if the wall is load-bearing you will need structural reinforcements such as rolled steel joists put in place. Make sure you comply with building regulations.

This is the biggest and most expensive job out of the five mentioned and will require an expert to come in and assess if you can remove the wall or if it is a load-bearing wall.

5. Improve energy efficiency

You can also potentially receive a Government grant to do certain energy efficiency changes in the home. This includes upgrading insulation, replacing old inefficient boilers or installing double or triple glazed windows.

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Tracker funds attract new investors because they grow modest but stable returns over the long term, without you needing any investment knowledge. They also tend to have lower fees as they do not require an active Fund Manager.

According to the Investment Association; trackers share of the investment market has risen by 13% between 2018 – 2019.

By comparison, active funds try to outperform the market and are run by Fund Managers — who buy and sell stocks based on their own research. 

According to research, only 39% of active funds have beaten the market over the past five years.

Analysts insist there is still space for skilled fund managers who act with conviction. However, investors have started to question whether the extra fees that Fund Managers charge value for money. 

The post The benefits of Tracker Funds appeared first on Savings Advice.

New research claims that the average property owner could save £325,000 over a 30 year period when compared to renting. This figure does not even take into consideration any possible house price increases.

At the end of the 30-year period, buying would also give the homeowner £218,800 in equity from paying off their initial 95% loan-to-value mortgage of that amount.

But the claimed savings depend on interest rates on home loans remaining at the historically low-levels that they are at now.

It should be noted that the research, factored in rent starting at the current national average of £11,292 a year and rising by an annual 2% .

The research also included the costs of buying a home such as purchase costs, maintenance and buildings insurance and works on the basis that the buyer starts with a 5 per cent deposit mortgage.

The research claimed that home loan interest rates would have to be in excess of 11.5% throughout the life of a loan before owning and renting produced equal expected financial returns.

The post Buying a home instead of renting is saves you loads of money £££ $$$$ appeared first on Savings Advice.

In the UK, there is no standard Credit Score.  Each of the 3 credit reference agencies, Experian, Equifax and Callcredit – all use different ways to calculate credit scores.   Experian is the largest credit reference agency. It’s commonly used by lenders, so it’s likely to be very comprehensive.  You can sign up for free to check your scores with each agency to ensure the details they hold on you are correct.  

What should I check on my credit score

1. Check addresses on old accounts.

2. Fight unfair defaults on your file.

3. If you no longer have joint accounts with someone, ensure you financially de-link (ie, separate).

4. Always check your credit reports after rejection. Read why here.

5. Cancel unused credit and store cards. Find out why unused cards can count against you

The importance of a good credit score

There are several reasons to have a good credit score.  For example, if you hope to take out a mortgage or take a bank loan in order to finance home improvements or the holiday of a lifetime.

Your Credit Score will need to be in good shape in order to get the best interest rates from your finance provider.  The higher your credit score the better.  A high score means that you are more likely to be given credit and achieve better deals when borrowing money or taking out a mortgage.

Ways to achieve a good Credit Score

• Don’t apply for credit too often

  If you apply for an excessive number of credit products regularly, it is likely to have a detrimental effect on your credit score.  So be sensible, decide which product you want before you apply to lots of different companies. Sometimes it could be beneficial to use a loan matching service.  These services help match or connect you with ne or more lenders.  One such company is iloans.  They are regulated by the FCA and never charge the lender a fee.

  

• Be stable

Finance companies don’t like borrowers who are not stable.  They like lenders who have lived at the same address for a while so bear this in mind if you are thinking of moving on a regular basis. 

• Don’t pay your lender late

If it’s your credit card repayments, your phone bill or your mortgage, it isn’t good to pay your lender late. Make sure you pay on time, why not set up a direct debit so your payment always gets there on time?

• Build trust with lenders

Your relationship with lenders isn’t different from other relationships, you need to build up trust.  You can do this by consistently paying your bills on time.  

The post Clearing Up Credit Score Confusion appeared first on Savings Advice.

These costs are made up of adding together the cost of purchasing cars, having the car repaired, filling it with fuel and making sure that it is legal to drive by paying tax and insurance.

It must also be remembered that the vehicle purchase costs above, don’t factor in the costs that are recouped from reselling vehicles.

The largest costs are fuel!  It’s estimated that the cost of fuel over the lifetime being just over £54,300.  It must be noted that this figure is open to variable fuel prices which can fluctuate in line with oil costs.

The cost of buying a car is the second highest financial cost.  With the purchase costs of being calculated at just under £42,000; with survey participants paying on average just under £8,400 on each vehicle; with it being calculated that each car is owned for five years.

The next highest costs are vehicle repairs which are estimated at just under £42,000.  Insurance costs are also a significant cost at just under £28,000.

These estimates are based on the survey respondents passing their test at 17, driving their vehicle for 63 years and giving up their license at 80 years of age.

The post Your car costs over £200k to run in your lifetime appeared first on Savings Advice.

Pension Credit is an income-related benefit made up of 2 parts – Guarantee Credit and Savings Credit.

Guarantee Credit tops up your weekly income if it’s below £163 (for single people) or £248.80 (for couples).

Savings Credit is an extra payment for people who saved some money towards their retirement, for example a pension.

Pension credit is an income-related benefit. It’s an extra payment that guarantees most people over 62 a minimum income, yet many don’t realise they’re entitled to it.

Pension Credit is an income-related benefit made up of 2 parts – Guarantee Credit and Savings Credit.

Guarantee Credit tops up your weekly income if it’s below £163 (for single people) or £248.80 (for couples).

Savings Credit is an extra payment for people who saved some money towards their retirement, for example a pension.

Savings Credit is an extra payment for people who saved some money towards their retirement, for example a pension.

The post Many pensioners don’t claim all their pension benefits! appeared first on Savings Advice.

For one person, it could mean cutting out their morning coffee. For another, it could mean cancelling all their unnecessary subscriptions or not buying an outfit for every new occasion.

Whatever you choose, it’s important to stay true to yourself and get what you want from it.

It doesn’t always mean cancelling all your bills or cutting yourself off from the rest of the world!

Prepare

Before you start your personal no-spend challenge, make a list of everything that you already have in the fridge/freezer so you can plan meals using these, make sure your car has petrol and automate all of your bills in advance.

Detail how long it will last!

The length of your personal no-spend challenge is completely up to you. 

Are you going to go for a few days? A week or even a full month!

Remember ….You’ll likely find it easier to complete a no spend challenge during the week, with it being easier to plan lunches and stick to a budget when you’re in work and bound by a schedule.

The choice is yours!

Have a goal in mind!

Are you …Saving up for a deposit on your first home? Are you saving up for the holiday of a lifetime? Or are you looking to complete work on your home?

If you have something to work towards it is a great motivator for your personal no-spend challenges. If the urge to spend gets too much, think about how good it’ll be once you reach your goal.

Don’t make excuses…Start today.

There is never a good time to start saving money but today is the day.

If you’re having a hard time telling yourself no, then leave home with only enough money for your daily necessities; such as travel. Leave your cash and debit card at home. That way, you physically can’t spend! …but remember to make sure you have enough money for travel.

Over time, you’ll be able to tell yourself:

‘I have no money to buy this, so I must not need it.’

You’ll learn how to prioritise your spending and be truly happy with the items that you do buy.

Challenge yourself each time you go to spend

For the times that you do need to buy things, it’s really important to challenge yourself each time each time you want to spend.

Are you buying different types of milk in your weekly shop? Do you regularly watch all of the channels on your TV subscription? Do you own a pair of shoes similar?

Are you buying the biscuits because they are brand? When you can buy the own brand biscuits cheaper!  Remember that small purchases add up, especially on your food bill.

Do you really need all of those television channels?  Cut out those unnecessary subscriptions today!

Use up what you have

Do you not know what to make for dinner, but your freezer is full of food?

A lot of us fall into this trap and we end up spending unnecessary money on food.  Stop making last minute trips to the shop and buying expensive takeaways by using up all the bits in your freezer!

You can entertain yourself for free

Have you watched all the terrestrial television shows that you wanted during the week? If not watch them on catch-up free! (Obviously this is after you’ve paid your licence:)

When was the last time that you went to your local library or museum?

You can also take your children on outdoor activities such as having an homemade picnic in the park. So, days out don’t need to cost a penny.

Don’t be too hard on yourself

It’s on if you have the occasional trip up and buy a coffee or bar of chocolate.  The important thing to remember is that it’s a small trip on your no spend journey. It you haven’t failed, just don’t give up.

Remember your no spend journey isn’t forever

Focus on why you’re on the no spend journey and remind yourself of your goals.  The holiday; the home refurbishment, or to build up savings remind yourself of your goals!

The post Develop your own no spend challenge appeared first on Savings Advice.

1. Get the taxman off your back

Nearly seven out of 10 Britons do nothing at all to reduce the amount of tax they pay and as a result they pay £4.6 billion in tax unnecessarily. There are plenty of things that you can do, such as making full use of your family’s tax-free ISA allowances, and seeking capital gains tax and inheritance tax advice, that will leave you more of your money to spend on the things you enjoy.

2. Work out what you need to retire in comfort

Just because you’ve got a good income now, doesn’t mean you will be well off in retirement.  A single man with a £100,000 pension pot would be able to buy an annual income of just £5,500 a year. That’s not a lot of luxury.  If he had £200,000, he would generate income twice that amount, or £11,000 a year. To get the equivalent of the national average salary in retirement, which is currently £26,500, you would need a pension pot of around £500,000.

3. Claim pension tax relief

Pension tax relief is hugely valuable, especially for higher earners. They can get tax relief of up to 45 per cent on their pension contributions, but there is no guarantee this will continue. There is a growing political campaign to cut pensions tax relief for higher earners. Your contributions are subject to an annual allowance of £50,000, falling to £40,000 in 2014/15. Use it if you can. You may also be able to carry forward any unused allowance from the past three years.

4. Review your risk profile

Look at where your money is invested. Does it match your risk profile as you get closer to retirement? The closer you get to retirement, the fewer chances you should take with your money. You might want to reduce your exposure to, say, high-risk emerging markets, and shares and switch your gains into cash or bonds.  Consider taking specialist financial advice.

5. Review your mortgage

The average mortgage rate recently hit an all-time low of 3.47 per cent (January 2019) . If you’ve got equity in your property, you can find deals for as little as 2 per cent or 3 per cent. If you’re paying more than that, it’s time to shop around for a better deal.

6. Think of your kids

If you invested just £84 a month for 18 years, you could build a lump sum of £25,000 for your children’s future. Even £50 a month over the same period could build a fund worth nearly £15,000, which would make a decent contribution to a house deposit. And you can invest a lot more than that, without having to pay tax on the growth or income.

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