A handy guide to retirement savings

The amount you can save into a pension basically depends on what you can afford – but the longer you leave it in the bigger you’re pension pot.

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.

How much do I need to save in my pension pot

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.

 

5 simple and cheap tricks that help sell your property

A recent survey has identified 5 simple tricks that you can use to restyle and add a bit of pizzazz to your faded property, that can help entice a buyer. 

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. 

Top tips to sell you're home
Inexpensive ways you can help prepare your home for sale

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.

The benefits of Tracker Funds

Known as passive funds, trackers aim to replicate the performance of a specific index, such as the FTSE All-Share Index.

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.

Check out the benefits of Tracker Funds

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. 

Buying a home instead of renting is saves you loads of money £££ $$$$

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.

You save money buying your home

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.

Clearing Up Credit Score Confusion

Your Credit Score is a 3-digit number that describes how likely you are to be accepted for credit from Banks or other finance companies.  Each individuals Credit Score is based on their unique credit report, which is a record of how they have managed credit in the past.  If you are looking to borrow money then you need to be aware of your score so you can get the best interest rate. 

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

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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.

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  • 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.