Pension Planning
“I’m too young to think about retiring”
For many people, the decision to save for a pension is the most important investment decision they will ever make. Retirement may currently seem remote to you and other day-to-day financial demands may seem more pressing. Yet, undertaking a simple and flexible retirement programme, whatever your present age or future plans, is a wise and rewarding decision.
“Or am I?”
Increased longevity, earlier retirement and higher expectations in retirement are all compounding to heighten the need to plan more effectively the financing of those “golden years”. Imagine for a moment how you would feel if, after a lifetime of work, you had insufficient funds to enjoy your hard-earned retirement.
For example, although there is a basic State Pension in many countries, most residents would have a wholly inadequate pension if they were to rely only on this source of income at retirement. One of the UK’s leading providers of retirement plans, estimates that an individual with a salary of BPS 35,000 (approx. US$44,000) a year, with full State Pension entitlement would receive a pension of 23% of pre-retirement income: a 77% fall in income.
A report published by the Office of Fair Trading in 1998 in the UK stated that in order to receive a pension targeted at two-thirds of final salary at age 65, individuals would need to save a high proportion of their income each year until retirement. The amount required depends on whether or not they already had savings.
The percentage of earnings that needed to be saved at different ‘start-ages’ to receive this two-thirds of final salary at retirement worked out as follows: starting at age 25 required 10% of salary; at 30 it was 13%; at 40 it was 23%; at 50 was 46%; at 55 it was 74%.
The sources of pensions to meet higher expectations are becoming less and less certain. State schemes, where they exist, are unlikely to provide more than basic pension levels, even in the most generous of territories. Additionally, many existing company schemes penalize employees, at least in respect of the employers’ contributions, if they leave with only a few years of service.
For those working internationally, or uncertain about their future plans, specific extra provisions may well be advisable. A personal pension fund is, therefore, essential to provide the capital and income necessary for the fulfilment of your retirement expectations.
Today, international pension plans exist that not only match the standards of domestic schemes, but actually exceed them. It is necessary to understand the key issues that must be addressed and take advice and counselling on a range of products and services that will help you maintain your standard of living in retirement.
Highly experienced brokers are vital to ensure you get best advice. Like your solicitor, your accountant or your doctor, your broker must be a professional and a specialist whose opinions, as well as expert know-how, will give you the opportunity to make informed decisions based on sound advice. Make sure you get a personal consultation for an individual plan that suits your own unique circumstances, and maximises your available financial resources. All good advice should be confidential, free and without obligation.