Latest news with #pension
Daily Mail
12 hours ago
- Business
- Daily Mail
Blow to City as pension provider Scottish Widows prepares to cut its exposure to UK equities
Pension provider Scottish Widows is preparing to cut its exposure to UK equities in a fresh blow to the City. The company, which is owned by Lloyds Banking Group, manages £72billion of workplace pension assets in its default funds. It is reducing the allocation to London-listed shares in its highest-growth portfolio from 12 per cent to 3 per cent, according to a document seen by the Financial Times. The move comes as ministers and City grandees battle to encourage pension schemes to invest more in British assets to reverse an exodus of companies from the London stock market. A major shift in retirement fund portfolios from British stocks is seen as a key factor in holding back valuations of UK-listed companies. Many have left for Wall Street – with fintech firm Wise the most recent example – or are being snapped by bargain-hunting overseas predators, as in the case of Alphawave, which is being acquired by America's Qualcomm. And a dearth of flotations means departing companies are not being replaced. The Government has responded by persuading 17 pension providers to pledge to invest at least 5 per cent of their default funds in UK private market assets. However, Scottish Widows did not, and it has now told clients it would adopt a 'more globally-diversified approach' with the ambition of 'capturing more growth opportunities in high-performing international markets', the FT reported. US markets have delivered much better returns over the past decade than the FTSE 100, making it more attractive to investors on this side of the pond – though, more recently, the uncertainty created by Donald Trump's erratic policy-making has sowed doubts. Sources close to Scottish Widows, which has total assets under administration of £230billion, say it is already heavily weighted to the UK. Of the £165billion in 'discretionary' funds run for clients, more than a fifth is invested in the UK. And out of £72billion default pension investments, £5.5billion is in London-listed equities. The switch from UK equities relates to a sub-fund that it is being moved to a 'baseline' allocation to global equities already widely used by other providers. It is expected to be completed by December or January. Scottish Widows said it would review the allocations annually and 'where appropriate may include a home bias'.
The Independent
15 hours ago
- Business
- The Independent
How much you should save in your 20s for a ‘comfortable' retirement
Research indicates that individuals in their 20s need to save nearly £500 monthly to achieve a comfortable retirement, with this amount increasing significantly with age. A comfortable retirement is defined by the Pensions and Lifetime Savings Association (PLSA) as an annual income of £43,900 for a single person, allowing for financial freedom and luxuries. To reach this comfortable retirement by age 65, a target pension pot of £700,000 is considered ideal. Retirement income can be managed through annuities, which provide a lifelong income, or drawdown options, where the pot remains invested with income drawn from it. Experts recommend saving multiples of one's salary at different life stages, aiming for one times salary by age 30 and six times by age 60, though many currently fall short of these targets.
Times
16 hours ago
- Business
- Times
We have £800k in pensions. Can we afford to stop saving?
Q. If a couple in their early sixties have a reasonably sized combined pension pot, say £800,000, but struggle to meet weekly expenses, does it make sense to stop contributing nearly £500 a month to their pensions? Paul, Croydon Will Stevens replies For many savers it can seem like a daunting task to balance saving for the future while also living in (and enjoying) the now. In simple terms there are three things to bear in mind: budgeting for more immediate necessities, your future long-term needs (for example holidays, renovations or care) and any other considerations, such as tax. To properly understand how much you are spending each month — and perhaps why you are struggling to meet these expenses — it is worth spending time on a budgeting exercise. This includes taking a good look at what you are spending and where there is any scope to reduce your outgoings, including any direct debits you no longer need or have forgotten about. While this may seem unexciting, it is time well spent, and there are lots of great tools on the internet to help with this step. Next, make sure that your income can meet your expenditure on a regular, ongoing basis. If not you will need to look at options such as reducing your pension contributions, to avoid being forced to rely on your savings. When it comes to savings, make sure that you have enough cash set aside to meet emergencies. These rainy-day savings should cover three to six months' expenditure and should be held as cash in an instant access account. If you know that you will need money for other events in the next three years, it's worth holding this as cash too. If you find yourself regularly drawing down on these cash supplies, say weekly or monthly, you will want to top them up from other sources. With a combined pension pot of £800,000 you're in a strong position. But it's essential to do the sums on what income this could realistically generate in retirement to ensure that it meets your projected living costs. These costs will obviously be unique to you and there is no one-size-fits-all approach, but as a good guide, the Pensions and Lifetime Savings Association (PLSA) recently published its latest figures on the income it calculates is needed in retirement to achieve certain standards of living. • How to stop the taxman taking a big slice of your pension The PLSA says that an annual post-tax income of £43,900 is needed for a couple to enjoy a 'moderate' standard of living while a post-tax income of £60,600 is what you need for a 'comfortable' retirement. It is important to note that these figures do not budget for any housing costs. If you both qualify for the full state pension, it will be a big help. Look at the total value of your pensions, how they are invested and the potential income you could draw from them in retirement. This will help to determine if contributions are still essential or if your pot is already enough to secure your desired lifestyle. It can be a good idea to consolidate pensions in one place, but check that you're not giving up any benefits to each scheme when transferring pots. While reducing pension contributions might provide immediate relief, it's vital to consider the significant benefits you could be giving up. Tax relief on pension contributions means that your savings are boosted by a government top-up. This means that every 80p contributed by a basic-rate taxpayer is topped up to £1 while higher or additional-rate taxpayers can reclaim even more. If you were contemplating stopping contributions to a workplace pension, the benefit you would lose could be even greater. If your employer matched your contributions, that 40p from you would become £1 once your employer's contribution and tax relief was added. The actual 'saving' from stopping contributions might be less than you think, because you would be forfeiting these substantial perks. • Before deciding whether to stop paying into your pension, explore other ways to ease immediate financial strain. Looking at other expenses and identify a plan to reduce your outgoings. If you have a mortgage, it's worth assessing how and when you intend to pay it off. Many savers do this with the 25 per cent tax-free cash that they can take from their pensions but this could lead to not having enough pension to live off in later life. A financial adviser can help you to build a comprehensive financial model tailored to your unique circumstances.
Yahoo
18 hours ago
- Business
- Yahoo
I'm 51, earn $129K and have $165K in my 401(k). Can I afford to retire when my husband, 59, draws Social Security at 62?
I really appreciate your column and the advice you provide. I have been considering 'retiring' early to have more time with my husband during our younger years. We were both married for more than 20 years each. We met when I was 46 and he was 54. Our divorces did cause us quite a bit of financial loss, and we have $105,000 in combined debt, not including our house payment, which is $2,200. I'm currently 51 years old, and my husband is 59. He is retired from a state job and receives a pension that nets around $3,600 per month, as well as lifelong health insurance for both of us. Once he reaches 62, we estimate his Social Security will provide approximately $1,800 net per month. In four months, he can cash out a Roth IRA, which would pay off our outstanding debt, minus our house. 'I'm at my wit's end': My niece paid off her husband's credit card, but fell behind on her taxes. How can I help her? 'I prepaid our mom's rent for a year': My sister is a millionaire and never helps our mother. How do I cut her out of her will? Israel-Iran clash delivers a fresh shock to investors. History suggests this is the move to make. 20 companies in the S&P 500 whose investors have gained the greatest rewards from stock buybacks I'm 75 and have a reverse mortgage. Should I pay it off with my $200K savings — and live off Social Security instead? I earn $129,000 per year. I contribute 15% to my 401(k), which is currently valued at $165,000. I also rolled over an old 401(k) with $125,000 to be managed by a financial adviser. Can I quit working in three years — when my husband begins collecting Social Security? I plan to stop contributing to my 401(k) at that point. How much do you anticipate my account would be worth when I reach 59 1/2? The money my financial adviser manages has been earning approximately 9% per year, and my employer matches 6% of my compensation. We would be downsizing our house and likely moving to a state with lower property taxes (we currently live in Texas). What do you think I should do? Should I retire early and join my husband on this new adventure? Thank you in advance for your advice. The Wife Related: 'This flies in the face of my morals and ethics': My father cut my sisters out of his six-figure estate. Should I push back? Think twice before you retire early. Your husband will have to pay 40% of his combined pension and Social Security on your house payment, and that's after he uses his Roth IRA to pay off your combined debt. Even if your $165,000 401(k) were worth $195,000 after three years — assuming a relatively conservative 6% growth — you would still need that money to last you for another 30 years. It's simply not enough, even with your husband's state pension. You won't be able to make withdrawals from your 401(k) for another eight years and you too may be forced to take your Social Security benefits before your full retirement age. By claiming his Social Security at 62, he is also settling for significantly less than his full amount if he waited. You have a long wait until you qualify for Social Security, and your slightly throwaway comment that your husband will cash out his Roth IRA to pay your debts also gives me pause. You have a relatively secure six-figure income and your employer is contributing a 6% match, so why throw that away now just because your husband is ready to retire? Unless you absolutely hate your job and feel like it's making you sick, there's a lot to be said for these peak earning years and the meaning, social contact and structure that work brings you. You might miss it when it's gone and, even if you're glad to see the back of it, you will certainly miss the financial independence and security of knowing that you are building a nest egg for retirement. Do you really want to be that dependent on your husband? Let's say, for the sake of argument, that you had $400,000 collectively in both 401(k)s in three years. Using the 4% rule — withdrawing 4% of your nest annually over a 30-year period — you would take out $16,000 a year. U.S. adults, on average, say they'll need $1.46 million to retire comfortably, up 15% over the $1.27 million reported last year, according to a recent study by Northwestern Mutual. That doesn't put you in the crosshairs for an easy retirement. You're doing OK. Keep at it. Some 75% of non-retired adults had at least some retirement savings, but 25% had no retirement savings, according to one report by the Federal Reserve. Oftentimes, the clue is in the question. If you are that worried about your ability to retire, keep working and accumulating savings. You want more leisure time with your husband, but will you also have more security and more peace of mind? The Social Security Administration and AARP provide retirement calculators that help determine whether you have enough money to retire. (As for your other point, Hawaii has the lowest property taxes, per this guide from SmartAsset. But that doesn't necessarily mean a lower cost of living.) You can input your assets, projected retirement spending, life-expectancy assumptions and tax estimates. Longevity is a big unknown. The average U.S. female who reaches 65 can expect to live to around 86.7, according to the SSA. If you retire at 54, could you hold off on claiming Social Security until you can maximize your benefits at 70? Many people — 28.4% of men and 26.5% of women — take Social Security when they reach full retirement age, which is between 65 and 67, depending on the year a person was born. Meanwhile, 8.4% of men and 9.3% of women wait until at least 70 to take their benefits, according to the SSA. I wonder how much early retirement, as exciting as the prospect might be, is your idea and how much is pressure from your husband, who is understandably eager to embark on his new post-work life. Planning can be fun too. What kind of retirement would you like after you downsize and move to a new state? It's great that you are in a happy marriage; that will help you in your retirement years, but will your income match your retirement goals? Longevity and lifestyle requires a healthy investment income. Related: 'My wife and I are very grateful': Our son wants to pay off our mortgage before we retire. Will this backfire? Previous columns by Quentin Fottrell: My husband will inherit $180K. I think we should invest the money. He wants to pay off his $168K mortgage. Who's right? 'I'm at a loss': My boyfriend of nearly 10 years is naming his elderly parents as beneficiaries and giving them power of attorney. Am I right to be upset? 'We have no prenuptial agreement': Will my wife be able to take my money if I transfer it to my retirement account? Israel-Iran conflict poses three challenges for stocks that could slam market by up to 20%, warns RBC These defense stocks offer the best growth prospects, as the Israel-Iran conflict fuels new interest in the sector 'I'm 68 and my 401(k) has dwindled to $82,000': My husband committed financial infidelity and has $50,000 in credit-card debt. What now? My husband is in hospice care. Friends say his children are lining up for his money. What can I do? My friend, 83, wants to add me to his bank account to pay his bills. What could go wrong?
The Independent
21 hours ago
- Business
- The Independent
Revealed: The exact amount every generation needs to save for a comfortable retirement
The surprising amount a person needs to save in each decade of their life for a ' comfortable retirement ' has been revealed. Someone aged in their 20stoday needs to start saving nearly £500 a month, research from investment management company Fidelity shows, with this figure rising significantly every ten years. Assuming a starting point of no savings, a 35-year old should start putting away £841 a month, the research shows. This rises to £1,703 at 45 and £4,508 at 55. These are the amounts that would be needed to hit a 'comfortable' retirement salary which the Pensions and Lifetime Savings Association (PLSA) puts at £43,900 a year for a single person. This rises to £60,600 for a couple (meaning £30,300 each). It's important to note that the PLSA's comfortable category is defined as giving a pensioner 'financial freedom and some luxuries.' In this bracket, a pensioner is able to go on a few holidays a year, eat out regularly, and keep money aside for household maintenance. The next bracket down from this is 'moderate', where a pensioner has 'financial security and flexibility,' followed by the bracket where at least all the basic needs are covered and some may be left over for leisure. Assuming a retirement age of 65 – which will continue to rise – this means a pension pot target of £700,000 is ideal to fall into the comfortable retirement category. This depends on a variety of factors however, especially if the pension saver goes down the annuity route. An annuity is a financial product that provides a lifelong, regular income in exchange for a down payment of savings. For a one person, the PLSA says a fund of around £540,000 to £800,000 is ideal to return a comfortable annual payment. From age 55 (rising to 57 in 2028), savers can still take 25 per cent of their pension as a tax-free lump sum. This can be done before purchasing an annuity, meaning it can be drawn from that alongside those payments to make up and annual income. The other most popular pension route is the drawdown option. This involves keeping some or all of the pension pot invested while taking a regular income from it. However, the longevity of this pension pot will depend on its investment performance. A poor investment performance could see £700,000 run out by age 83 when also taking an income of around £40,000. However, an average performance could make it last until age 90, while a good performance could carry the funds far past 100. Further research from Fidelity also shines a light on how much a person should look to have saved at each point in life to achieve a decent retirement income. By 30, experts recommend an amount in savings worth one times your salary. So for someone earning £30,000, this would mean at least £30,000 in savings – both inside and outside of pensions. However, the average person is currently just falling short of this target. Latest figures show that in the 25-34 age bracket, an average £28,277 is held in savings – with around £9,500 in ISAs and £18,800 in pensions. By 40, the guidance rises to twice your salary at that age, and by 50 it's three times as much. This rises to six times your salary at 60 – a target that many will struggle to reach. Government figures show that in the 55-64 age bracket, an average of £178,745 is held in savings. This comprises around £41,000 in ISAs and £137,800 in pensions.
