How much do I need to retire?

There are many varying factors that make up every individual’s answer to this question. Sadly, there is no “one-size fits all” answer, and seeking financial advice might be a good idea if you’re unsure.

You will need to consider what you can afford to be putting into your pension. You should evaluate your day to day living expenses and liabilities (mortgage, loans, etc.) these could all affect your ability to increase your regular contributions. If you can’t afford to make higher contributions now it isn’t the end of the world, it might just result in having to make higher contributions when you are more financially stable. You are currently unable to draw money from your pension until the age of 55, so you will need to ensure that any money invested is not integral.

Here are a few questions you should be asking yourself when trying to manage your retirement savings:

What do you already have in your pension?

Looking at what you already have in your pension is the best place to start. Doing so will allow you to see how quickly you are currently building your pension and how it might look in the future, from there you can start to make informed decisions and realistic expectations.

What kind of lifestyle are you looking to have during your retirement?

Your desired lifestyle will increase or decrease the amount of money you should have saved in your pension. If you are looking to spend £30,000 a year, you need to ensure you can afford to.

When are you looking to retire?

If you are considering taking early retirement then you will need more money in your pension to ensure you don’t outlive your funds.

With your state pension, there are benefits to retiring after your state retirement age. Choosing to defer retirement results in your income being increased.

What is your attitude to risk?

We all know the saying “high risk, high reward” but you need to consider what would you do if you lost all your pension savings? Could you afford to live? If the answer is no, then you should re-consider the amount of risk your taking with regards to your money.

Equally, more ambitious retirement plans may require more risk to be achievable.

If after crunching the numbers your goals seem unobtainable it might be worth considering managing your expectations and if all of this still seems confusing it might be worth seeking financial advice.

If you would like to talk to someone about your pension or receiving more information on how we could help you with your pension, please contact Sound Financial Management via telephone (01752 207070) or via email (info@sound-financial.co.uk).

The Main Changes This Tax Year 2018-19


The new tax year began on Friday with a bigger than usual set of changes to income taxes, personal allowances, pensions, buy-to-let taxation and dividend taxation. Here’s what to expect.

Personal allowance
The amount you can earn without paying income tax rises from £11,500 to £11,850, which works out as a tax cut of £70 for most people.
Income tax
The starting point for paying 20% basic rate tax will be £11,850, while 40% tax will start on earnings above £46,350 (up from £45,000).
Scotland
It’s different in Scotland. The £11,850 personal allowance is the same, but the first £2,000 of earnings after that are taxed at 19% rather than 20%. After that, it’s 20% tax until your earnings hit £24,000, when it rises to 21%. Then above £43,430 the rate is 41%. Both have an upper rate above £150,000; in England it’s 45%, in Scotland 46%.
National insurance
Will be charged at 12% of income on earnings above £8,424, up from £8,164 until you are earning more than £46,350, after which the rate drops to 2%. It’s the same in Scotland.
Auto-enrolment
Auto-enrolment Pension contributions start racking up from this week. From Friday workers must pay a minimum of 3% of salary into a pension (up from 1%), while the employer contribution rises from 1% to 2%.
Buy-to-let landlords
Will only be able to offset 50% of their mortgage interest when calculating their tax bill, compared with 75% before.
Dividends
Until now you could earn £5,000 in dividends tax-free. This drops to £2,000 for 2018-19.

Source: https://www.theguardian.com/money/2018/apr/06/welcome-to-the-new-tax-year-heres-the-main-changes

Why Is Life Insurance So Important In Your 20s?

In our 20s the last thing anyone wants to think about is getting ill or, god forbid, worse. Although we still feel like we live care-free lives and have no responsibilities, the reality is that we are now financially independent and this comes with certain responsibility not only to ourselves but to others. If you have any loans, a house, significant other or children, you should be looking at life insurance.

Today, we prioritize our technology and our pets, taking out policies to cover loss and damage to our phone and ensuring vets bills are covered for our furry friends. These are generally the first considerations when thinking about insurance, but why are we not considering ourselves? The main reason is that we don’t get educated to the importance of personal insurance, if you get ill and can’t work, you will most likely seek additional help from your parents or a home care service, which could be costly. Having insurance will absorb some of this financial burden and avoid eating into savings. The mind-set in the UK is also hindered by the NHS, because we have our healthcare provided the financial implications of becoming ill aren’t something we would consider an issue, our initial care is covered and we tend not to think about the ripple effect that could be caused due to illness. Potentially having to pay out of a new phone or an operation for man’s best friend is worrying and costly, thus insurance is an instant thought.

Continue reading “Why Is Life Insurance So Important In Your 20s?”

What You Need To Know About Workplace Pensions

Like many young people the thought of retirement is a far off dream for me, so when talking about workplace pension I tend to half-heartedly listen. The truth of the matter is that we should start putting money aside for later life as soon as possible, and the work place pension scheme set up by the government is the easiest way for you to start doing this. Starting a pension pot now will ensure you see as much growth as possible from your invested money, with the aim of ensuring you are financially stable in your retirement.

So what is a workplace pension?

A workplace pension is a pension scheme set up by your employer; a percentage of your pay will be deducted every payday and placed into the chosen scheme. In most cases your employer will also contribute into the scheme for you.

Employers are legally obligated to provide a workplace pension scheme for their employees; this is called ‘automatic enrolment’. If you meet the following requirements, your employer must enrol you and make contributions to your pension:

• You’re classed as a ‘worker’ – you have a contract or other arrangement and receive payment for the services you provide (this does not include limited company arrangements)
• You’re aged between 22 and your state pension age (visit Gov.UK to find out what your state pension age is)
• You earn at least £10,000 a year
• You usually work in the UK
However, there are exceptions to your employer automatically enrolling you, if you don’t meet the previous criteria or any of the following, but this does not mean you aren’t eligible to opt-into the scheme:
• If you’ve given or been given notice to end your employment
• You already have a pension arrangement with your employer
• You’re a director without an employment contract and employ at least one other person
• You’re a limited liability partnership
• You’re from another EU country and are in a EU cross-border pension scheme
• If more than 12 months before your enrolment date, you decided to leave a pension previously arranged by your employer
• You have evidence of your lifetime allowance protection
• You receive a one-off payment from a workplace pension scheme

If your income is low (below £490 per month/ £113 per week) your employer isn’t required to contribute.

When you are automatically enrolled your employer will need to notify you in writing. This letter should include information regarding your joining date, the type of scheme and which company runs it, how much is being contributed, how you can opt-out and how tax relief may apply to you.

Your employer cannot dismiss or discriminate against you for being in a workplace pension scheme, they are also not able to encourage or force you to opt out.

If you decide to change jobs your pension still belongs to you. Regardless of If carry on paying into the scheme or not, the money will remain invested and you’ll receive the pension when you reach the scheme’s pension age. Your pension will not automatically be paid into the same scheme, so ensure you keep all you pension details and either combine your schemes or keep a record of them. You will be able to join a new scheme with your new employer and can continue to contribute to your old scheme if you wish.

Want more information? Check out our website www.sound-financial.co.uk or give us a call on 01752 207070

DISCLAIMER: Seeking professional and personalized advice is always recommended. Your financial needs and circumstances are completely individual to you and you should treat them as such by seeking advice from an investment professional. Independent financial advisers have the ability to recommend products from all areas of the financial market and will provide you with a clear guide to establishing everything you need to make a smart investment that suits you.