Investment For Pension

PENSION FUND

If you wanted an average salary post retirement of £27,000/year for 20 years after retirement, you would have to have accumulated £540,000 in your retirement fund at retirement (& for £50,000/year you would have to have £1,000,000)


At an annual net interest rate of 5% and annual inflation at 2.5%, you would need to save £725/month for 30 years to get to £540,000 i.e. if earning the median UK income and relying solely on your pension for retirement, you need to be saving 30% of your gross income for 30 years to be able to maintain your current income after retirement.


The UK median disposable household income for the Financial Year ending 2017 was £27,300.


Defined Benefit vs Defined Contribution pension schemes:

MANY PROFIT WITH PENSION

1.Defined Benefit Pensions: They pay out a secure income for life. Your employer contributes to the scheme and is responsible for ensuring there’s enough money at the time you retire to pay your pension income. The amount you’re paid is based on how many years you’ve worked for your employer and the salary you’ve earned.


2.Defined Contribution Pensions: Requires that you build up a pot of money that you can then use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement. If you’re a member of the scheme through your workplace, then your employer usually deducts your contributions from your salary before it is taxed.


 For most people working today, Defined Benefit Pension Schemes are NOT an option:

1.They are rarely issued today by employers.Most work place pensions Schemes today are Defined Contribution schemes.

PENNY FOR PENSION

2. A significant percentage of existing Defined Benefit schemes are ‘underwater’-presenting huge liabilities to employers.

According to PWC, the funding DEFICIT for the UK’s 5,800 corporate defined benefit pension funds was £200 Bn i.e. Total Assets of £1,560 Bn was significantly below the £1,760 Bn needed to pay out existing & former workers at the end of April 2018.
PROSAIC

What are the SOLUTIONS to avoiding this pension time bomb?

PENSION BOMB

1.SAVE REGULARLY: UK personal savings rate has averaged 8.50% from 1955 to date –with rates dropping below 5% since January 2017.

2.INVEST INTELLIGENTLY: Take responsibility in learning to invest in a diversified long-term and largely self-determined portfolio.


So main question arises where to invest, so you can learn all of that from my Blog and If you want to know which Stock I hold, just contact me on financefarmer1@gmail.com

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