When we think about financial security it’s surprising how many of us take little or no definite action, hoping things will somehow take care of themselves. If that sounds harsh, consider these findings from a survey by AXA Life about that most important element of financial security and wellbeing – our pension.
▪ 75% of us have no idea how our pension pot is performing and have no idea what our pension fund is investing in.
▪ 20% of us have already been or will be caught out by lower than expected annuity rates, resulting in reduced retirement incomes and standards of living.
▪ Some 30% of people who are retired already report that they do not have enough money to do the things they enjoy.
▪ 10% found their retirement income was significantly less than they expected.
▪ 25% have had to cut back on essentials such as food and heating.
All this against a background of constantly increasing life expectancies – a man of 60 living in Western Europe has a one in five chance of reaching 95. With this in mind, many of us will need to save for a retirement that will last as long, or longer, than the working period that will provide for it. No surprise then that most of us need or will need to supplement our pensions with extra activity.
It’s never too late to take action
Of course, it’s easy to say we could have avoided this situation with some good financial planning and activity; hindsight is a wonderful thing but changes little. The question is: how do we make the most of what we have and secure the lifestyle we want in the future?
The first requirement must be to become totally aware of, and accept, our financial situation! We must have a full and professional financial appraisal carried out so we can understand our exact position and look at the options open to us – knowledge is power and in financial terms this means the power to control our financial situation and make defined plans and take action!
Discovering the options
Most of us will find, surprisingly, many options open to us, which we can define in roughly three broad areas: savings, pension and investment.
A. For those of us still working or creating income we should consider what we can put aside to actively support our pensions when the day arrives. If we have any residual income, it will have little effect on our future if it is allowed to simply gather in a bank – and if we don’t have residual we need to find out how we can create some to use for a regular savings/investments activity. It is surprising how even a modest amount, saved regularly, can impact on our total requirements – especially as most of us can save tax-free and make great advantage of compounding interest.
B. As expats, our occupational pensions can be used in many different ways. A great many us have the power to gain control of the accumulated capital and get many valuable tax advantages and opportunities for greater growth, together with tremendous benefits and protection for our beneficiaries. If we ‘own’ a UK pension we simply must investigate these options.
C. Since the so called crisis of 2007/8 our general appetite for investing has weakened –indeed some of us have stopped altogether, preferring to leave our money in a bank, even when we know the damage it does to growth and opportunity. In reality we have no choice but to get our capital working if we are to have any chance of long-term maintenance of its value. We must have a structured plan, in line with our tolerance to risk, our needs and requirements and the purpose for which the capital needs to be used, that is to say, where does it fit into our overall strategy.
Small amounts can make incredible differences
We therefore have much opportunity to plan our strategy – regardless of the amounts we ‘think’ we have. Saving and investing as little as 400 to 500 Euro per month, re-constructing a pension pot as small as 50,000 GBP or working with capital sums as ‘small’ as 30,000 to 40,000 GBP will have great impact on our future security and that of our nearest and dearest. We owe it to them and ourselves to investigate the possibilities – and take action!
This facility is not suitable for all expatriates, and we recommend that advice is sought before one makes any commitment. As an Independent Financial Adviser, Blacktower seeks to ensure that our clients receive the advice suitable for their specific circumstances. Please contact us for further details 289 355 685
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William Offen is Blacktower Financial Management (International) Country Manager, Portugal
