It can be very tempting to delay discussions about pensions – especially if you’ve got many years left before you can even think about giving up work. But that could be a costly mistake. Failing to save enough during your working life can result in a financial struggle in your later years. That’s the inspiration behind Pension Awareness Week, which runs from 15-19 September and encourages people to focus on longer-term planning. This annual event, which has been held since 2014, aims to highlight the importance of saving for later life and provide guidance on achieving financial security.
Here we explore how to safeguard your future and highlight investment funds that can help in reaching your goals.
Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.
The retirement gap
More than 40% of people – equivalent of 14.6 million – aren’t saving enough for their retirement, according to the Government’s Analysis of Future Pension Incomes 2025 report*. The study compared savings with their total replacement rates. This is the percentage of pre-retirement earnings they’d need for an adequate future income.
Higher earners are more likely to be saving less. In fact, 13% of those with pre-retirement earnings of less than £15,900 were under-saving, compared with 48% of those earning more than £67,000. It also found that total pension incomes for future retirees are projected to decline over the next 20 years compared with previous retirees*.
How much will you need?
It all depends on the lifestyle you crave. For example, a minimum standard would cover the basic needs and leave a bit extra for a self-catering holiday and eating out once a month. A moderate standard, meanwhile, would offer more financial security, as well as an annual overseas holiday, while a comfortable living includes day trips and more social activities.
So, what is the reality?
A one-person household would need at least £13,400 per year for a minimum standard, £31,700 for a moderate living, and £43,900 to be comfortable. Couples, meanwhile, are likely to need a minimum of £21,600 per year, £43,900 for a moderate lifestyle, and an annual income of £60,600 to be comfortable.
A pension fund of between £300,000 and £460,000 would be required for a comfortable living for two people, and between £165,000 and £250,000 for a moderate standard of living*.
Building a portfolio
The good news is that there are plenty of investment funds that can help you build the ideal pension pot to meet your retirement needs. In fact, the issue is choosing which option is most suitable, and this will depend on a combination of your existing savings, the length of time until retirement, and your attitude to risk. If you have decades to go – or need a higher return to make up for lost time – then you may want to consider more growth-focused equity funds. This may include global funds, as well as those covering the US, UK and emerging markets. However, those wanting income or stability may opt for less risky bond funds.
AXA Framlington American Growth is a prime example. This portfolio focuses on innovative US companies with unique brands and intellectual property that continue to expand their horizons. Then there’s BlackRock Global Unconstrained Equity, which has a similar approach but can look across the globe for exciting opportunities.
For the more risk-averse or with less time before retirement – and, therefore, more focused on capital preservation – there is Artemis Corporate Bond. While this primarily focuses on investment-grade corporate bonds, it can allocate across the broader fixed-income market. It takes a longer-term view but can also embrace short-term opportunities.
Then there are various multi-asset approaches. One possibility is to examine Chelsea’s popular managed fund range, which offers a variety of options. These carefully crafted, multi-asset portfolios offer investors broad exposure, tailored to their specific objectives. These portfolios are designed to provide one-stop-shop solutions for a wide variety of investors. There are four funds in the range: VT Chelsea Managed Monthly Income, VT Chelsea Managed Cautious Growth, VT Chelsea Managed Balanced Growth, and VT Chelsea Managed Aggressive Growth.
The new Chelsea Pension
Whether you are the start of your retirement saving journey, growing your retirement pot, or looking to take drawdown, Chelsea is here to help. Please contact our team on 020 7384 7300 or email us at info@chelseafs.co.uk. Learn more here.
