WE ALL understand that saving for retirement is inevitable, but are there more financial options available that the state pension or private pensions?
Whilst pensions have large tax benefits many are seeking additional solutions to ensure they are financially comfortable once they give up work. Fortunately, there are now a variety of alternative solutions available for retirement.
Stocks and shares ISA
If you want your money to work hard for you, investing in a stocks and shares ISA could be an option. A stocks and shares ISA is designed to help individual savers invest their money in the likes of shares, property, or bonds. Like traditional pensions, ISAs allow you to save tax free for a longer period of time. For the 2018/19 tax year, investors could place up to £20,000 into a one or more ISA accounts.
Wellesley’s ISA-eligible Property Bond is an investment opportunity for those interested in residential property. Money invested into our Property Bond is used to acquire loans which are secured against new homes in the UK. Being ISA eligible, means investors could hold their Property Bond within an ISA, allowing them to earn tax efficient fixed returns of 5.5 per cent per annum.
Some key features of our Property Bond include:
- Invest in loans secured against property.
- Only lend to experienced creditworthy, carefully selected commercial borrowers.
- Three-year bond
- Interest paid monthly.
- Listed on the Irish Stock Exchange (this means you have the opportunity to list your bond should you require access to your funds)
- Administration and custody services provided by The Share Centre.
Company SAYE schemes
Those who work for large companies may find their employer offers a ‘Sharesave’ or Save as You Earn (SAYE) scheme. This allows employees to buy shares in the company they work for at a fixed price after a period of saving. Most SAYE schemes are for three or five-year stints and allow monthly savings of as little as £5 to £2,500. Employees who complete the length of the savings plan receive a tax-free bonus on top which varies depending on the scheme you are part of.
The People’s Pension
Regardless of how big or small a company is, it is law that they enrol all employees in The People’s Pension. Although everyone has the option to opt out, having a number of pension sources for the future can be a good strategy.
Each time an employee receives their monthly salary, a small amount of it will be syphoned into the People’s Pension account, along with a contribution from the company. For the 2018/19 tax year the minimum contribution is five per cent from the employee with at least two per cent from the employer. Sometimes, people find that the return on their savings with The People’s Pension is better than any savings account they hold with a bank, with the average interest rate being one per cent.
Investing in property
Many households naturally move into larger and more expensive properties over time as the family grows and jobs evolve. Whether a premediated process or not, downsizing on retirement leaves many with a substantial lump sum to live off, particularly if the mortgage has been previously paid off.
Alternatively, another avenue some are harnessing in their 40s and 50s is creating a portfolio of buy-to-let properties. Letting out homes and becoming a landlord is a way of generating income during retirement. Many estate agents will manage rental properties for landlords for a fee which means there is scope for retirees to be as hands on or off as they please.
The current state pension age in the UK is 65 for men and 63 for women. However, it is not mandatory to retire when you reach this age. Many people choose to continue working, whether this is in their current role or taking a part-time job to supplement their state pension.
What is the best pension for me?
Everyone will receive a state pension when they reach the qualifying age. However, with this amounting to £164.35 per week, many are investing their money in a variety of ways to ensure their retirement is financially comfortable.
Whilst there is a greater emphasis on contributing to a pension from an early age to build your pot overtime to give you a better income, it is never too late to start saving for the future. If you begin contributing to your pension in later life, you can still add the equivalent of your annual salary in to your pension fund tax free each year.