Monthly Archives: June 2015

Lifestyle Funds That Put Your Lifestyle At Risk

People with their pension savings invested in lifestyle funds have suffered losses of 9% since February, says the Telegraph.
It criticises the insurance companies running these funds for not changing their methods since the pension reforms were introduced in April. The losses have occurred because the lifestyle funds progressively switch money from shares to fixed interest as you near retirement age and in recent months bond prices have dropped sharply. Experts say these lifestyle funds were designed for people intending to buy annuities at retirement, but many people will now use the pension reforms to keep their fund invested and make regular or occasional withdrawals, so a lifestyle approach will not be appropriate.

As you approach retirement, it is essential to review the investments within your pension fund and make sure they match the way you plan to use your fund in later years.

If you would like a professional view on your retirement investments, please contact us for a no-obligation Discovery Meeting, provided at our expense.

To Buy (To Let) Or Not To Buy (To Let)

With the announcement of the new pensions freedoms, many people have considered the option of taking money out of their pension funds with a view to investing in a buy to let property. I have written a previous article about this here, however Prudential have now created a far more detailed case study on this very topic.

Buy to let property can be a fantastic source of income and capital gains, and can certainly form a part of any well diversified investment portfolio, however the tax consequences may mean that it is less attractive than it seems to use pension funds for this purpose.

The conclusion of this case study is that a very attractive yield of 6% on a buy to let property, could be effectively reduced to as little as 2.7% if the property if funded from a large pension withdrawal.

 

Beware Of Temptation

A majority of pensioners who were asked if they would sell their annuity Рa reform the government is currently consulting on Рsaid they would not sell, reported the Financial Times. Almost half said they thought they would get a poor deal. But almost one in five said they would sell either to pass on an inheritance or to fund healthcare costs in old age.

The sale of existing annuities is likely to be tricky and even if the government does go ahead with its proposals, many annuitants can only expect to get back a much smaller sum than they paid originally.

What needs to be remembered here, is that it is likely to be the same insurance companies who offer the annuities that will be offering to buy them back, and the cynic inside me says that they will want to take some profit along the way.

Pushing Through The ‘Comfort Zone’

For some time now I have been a keen runner, typically covering 5-6 miles at a time, 3-4 times a week. Hardly marathon distances, but enough to pose a challenge to those like me who enjoy moderate fitness. Around 18 months ago when we moved home, I had to find a new running route, which was quite enjoyable given the surroundings of the Suffolk countryside. I settled on my route and continued to increase my distance along said route sightly each day until I came to a t-junction.

Now this T-junction seemed like a sensible place to stop and turn around whenI first reached it, so that is exactly what I did. I then proceeded to run this same route (and stop at the same t-junction) for the next 12 months. While I always set out with good intentions to go further, by the time I reached the t-junction, my mind would say “right, we have made it, time to go home”.

You see the human brain is designed to find solutions to problems. When it finds a solution to a problem, it remembers this solution and this information can be re-called whenever the same problem is encountered. Before too long, this solution has become a habit. It is this same function that makes it very difficult to push past our ‘comfort zone’, whether in business, sport or life. The problem is that while the solution you came up with before might have solved the problem, it may not have done so in the best or most efficient way. For this reason it is important to push past these mental barriers and carry on.

I did just that this morning. After weeks of trying, I finally turned right at the t-junction, and carried on my run for another 1/2 mile. It turns out, it wasn’t so bad after all!