If you're over 50, or about to get there, your finances are set to go through some big changes.
Statistics issued by Prudential reveal that a staggering four out of ten workers have now entirely given up the dream of retiring in their 60s.
In light of falling annuity rates, it might be the case that people with individual pension plans will have to rethink their retirement age.
However, there are alternative strategies available to income-seekers in their 50s and beyond.
Equities (stocks and shares) are a portion of ownership in a company, which entitles the holder to a relative claim on the business’ assets and profits.
They’re perhaps the most well known of investment vehicles but are often dismissed by people who remember the stock market crash of 1987, or by anyone who doesn’t have an appetite for risk.
As a whole, equities are certainly amongst the most volatile of asset classes.
However, they also have the potential to provide the best returns – the key is sensible stock selection.
The best option for those looking to spread the risk is arguably to invest in an ‘equity income fund.’ Under these schemes, monies are distributed amongst typically 50 to 100 reliable blue-chip firms, in sectors such as telecoms, oil, pharmaceuticals and utilities.
They’re a good option for more medium-risk investors seeking to receive good rates of dividend return (often four to five per cent, although yields vary and are not guaranteed), without the level of volatility in share prices that might otherwise be expected for smaller stocks.
Corporate Bonds and Gilts are a form of debt issued by companies (corporate bonds) and governments (gilts) to raise money.
In buying one, you lend the issuer money – which they then promise to pay back, with interest, at a set date in the future.
Gilts are historically fairly stable investments, because there is an expectation that the state will always be able to satisfy any debtors.
In contrast, corporate bonds are considered slightly riskier investment, because they are issued by companies (which are more likely than the state to default).
Because gilts yields are currently so low, investors are increasingly turning to bonds to make up the shortfall.
As with equities, corporate bonds can be invested via funds to spread the risk, or via what is termed an ‘ISA wrapper’. Returns are often in the region of four to five per cent, but again this is not guaranteed.
Although traditionally viewed as a fairly cautious investment, there is concern in the financial markets that corporate bonds may be over-priced at present, so think carefully about the balance of your investment portfolio and be realistic about the level of returns you expect to achieve.
Insurance Company Investment Bonds are typically invested in managed funds or unit trusts. They have the advantage of offering investors an annual income allowance of five per cent of the capital, for up to 20 years, with no tax liabilities occurring until the bond is encashed.
Even then, basic rate taxpayers are unlikely to face any tax when they cash the bonds in, unless gains on the investment are significant. This is because the five per cent withdrawal is treated as a return of capital, rather than income, for tax purposes.
The drawbacks of investment bonds are that they usually carry surrender penalties within the first five years, while the capital value may fall, particularly if the investment return does not match the level of income withdrawn.
The good news is that there are a wide range of investment funds available, which may be mixed and switched, in accordance with the investor’s risk profile.
Just make sure you’re fully aware of the clauses and surrender policies associated with your chosen fund and make sure that it is the most tax-efficient scheme for you.
Permanent Interest Bearing Shares (PIBS) are shares issued by building societies. They pay a fixed rate of interest so, although they are technically shares, their characteristics are more akin to corporate bonds.
At the moment, because financial institutions are looking to re-capitalise, returns on PIBS are extremely attractive – in the region of ten per cent.
While PIBS are generally considered a fairly safe investment, building societies are not invulnerable to becoming insolvent – as demonstrated by the recent banking collapse. Investors therefore need to be confident of the institution’s financial strength.
The other risk is that PIBS usually have no redemption date, and so selling them may not always be straightforward.
As always, seeking independent financial advice is likely to be worthwhile if you’re assessing your investment options. Achieving the best annuity rate available means you have to shop around.
This is particularly true if you are a smoker or have medical conditions that could leave you with a shorter than average life expectancy.
With the correctly structured portfolio and a suitable selection of funds and products, older savers can significantly enhance their income – whatever their age!
by Graham Tracey
Chartered financial planner at IFA, Carpenter Rees
Financial planning for all eventualities - 30 July 2012
41% of over 45s would use property to fund care - 04 May 2012
Rising retirement age and longer life expectancy looms - 18 April 2012
More than one third of over 55's have yet to plan their retirement - 12 December 2011
Campaigns & Issues
Woodland Court staff face secure future thanks to Brunelcare
Residents and staff at a retirement village in Downend have finally reached the end of two years of uncertainty, following the acquisition of Woodland Court by Brunelcare.
Previous owners of the 57 apartment village, Care Village Group, went into administration in June 2011, leaving the residents and staff with an uncertain future.
The top priority for the Bristol based charity has been to retain all 27 members of staff to ensure that the support services are maintained, whilst minimising any disruption to the residents.
WRVS becomes Royal Voluntary Service as it marks 75 years
1.3 million over 75s will need support in future to stay independent
Today, 75 years on from its founding as the Women’s Voluntary Services, WRVS is dropping the W from its name and relaunching as the Royal Voluntary Service with a pledge to help two million older people over the next 10 years.
The decision to change its name comes as the charity recognises the need to meet the demands of an ageing population and to be more visible to men as well as women. And fresh research reveals the scale of this need – 26 per cent of over 75 year olds say that they think they will need support in future in order to stay living independently in their own homes, with almost a third of men (29 per cent) stating that is the case.
Competitions & Fun
Win a Doro PhoneEasy 515 handset!
We’ve teamed up with Doro to give four very lucky Mature Times readers the chance to win a Doro PhoneEasy 515 mobile phone.
The Doro PhoneEasy 515 has been designed to provide an easy-to-use mobile for people who might find mainstream handsets difficult or confusing to use. This beautifully stylish candybar phone features an easy-to-use camera enabling you to capture those spontaneous photos quickly and easily before sharing them with others.
The Doro PhoneEasy 515 has several user-friendly functions including a direct SMS key and a charging cradle to make charging hassle free. It also has a large keypad, enlarged text for easy dialing and messaging and a loud, clear sound.
Win a prize at home or away in this month's prize draw with Silver Travel Advisor!
Enter now and you could win a prize at home or away! How about a 7 night break for 2, with flights included, in beautiful Slovenia? Or a trip to London’s glitzy theatreland, staying in a 4* hotel? Both fabulous treats which must be won!
Silver Travel Advisor is a friendly website packed with advice, tips, information and honest reviews written by and for silver travellers (aged over 50). A team of advisors are on hand to answer queries (for free), and you can share your own experiences too.
Health & Wellbeing
Loneliness is a ‘ticking time bomb’
One in three people over the age of 50 struggles with loneliness – fuelled partly by a rise in later life divorces, according to an official study. Figures show almost seven million members of the baby-boomer generation and above admit to feeling lonely.
Research published as part of David Cameron’s plan to measure the nation’s ‘happiness’ said almost half of people over 80 feel lonely - many “much of the time”.
Campaigns groups say the study, by the Office for National Statistics, suggests the generation approaching retirement will be a “loneliness time bomb”.
Property & Finance
15 per cent of population claim financial worries are affecting their health
aspect of their lives
Leisure and Lifestyle
Singing you heart out
Music sensation Billy Ocean takes time out talk to Laura Heads about the release of his latest album and how making music has changed dramatically during his 40 year career.
The star has sold over 30 million records in his lifetime and has collected a pile of Gold and Platinum awards across the world. Billy’s unique reggae infused voice and musical style, representing his Trinidadian roots, are recognisable anywhere and it is that which has earned him his well-deserved number ones.
And the well-loved singer-song writer said that the way music is made has changed a lot since he first began in the 1970s. He said: “Music is now controlled by technology. New artists allow technology to control what they are doing.
New guide to travel insurance launched
THIS IS A handy to use and easy to read guide packed with tips aimed at helping older travellers when considering the purchase of travel insurance.
The guide came about as a result of the numerous enquiries we received here at the Mature Times’ offices regarding travel insurance for older people. MT Editor Andrew Young says ‘We receive many, many e-mails, letters and telephone calls from our readers regarding this subject. We know that as you get older travel insurance becomes more expensive, but there are ways that you can try to help offset some of these increases – and this guide can help you do that.’
I have received a copy of you paper from our Community Centre for the last two years and really look foreword to reading it. Thank you!