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How much should I be saving towards my pension?

Archive for February, 2021

How much should I be saving towards my pension?

Wednesday, February 10th, 2021

Research shows that we put ambitious targets on our retirement income and then underestimate how much we need to save to get there.

Before we delve into how much you should be saving, here’s a quick overview of the two main types of pension schemes:

In a defined benefit scheme your employer promises to deliver you an income in retirement. You’ll most likely have to contribute each month too, putting in a required amount.

These ‘gold-plated’ schemes are increasingly rare.

The other type of scheme is a defined contribution scheme. If you have this type of scheme, you will save into this and get contributions from your employer too. The money is invested to build a pot which will then fund your retirement.

If you have a defined benefit scheme, you just need to save as much as your employer says. But with a defined contribution scheme things are a little more complicated… The onus is on you to deliver the money you need in retirement – the more you save, the more you get.


How much will I need in retirement?

In retirement, your outgoings are likely to be lower. For instance, most people will be mortgage free and not supporting children. In the finance industry, there’s a vague rule that some currently aged 40 would need around 50% of their current income to have the same standard of life in retirement.

You should also factor in the state pension. Under the new flat-rate scheme this is worth £155.65 per week (£8,094 per year). So, someone targeting a retirement income of £23,000 would need to contribute £16,000 from their own pensions.


How much should I be saving?

Naturally, the amount you need to save depends on the size of the pension you want. However, it also depends on your age.

For instance, putting 12% of your salary towards your pension might be enough if you start in your 20s, but if you leave it until you’re 40, you might need to pay in closer to 20% to get the same level of income.

It’s sometimes said that the rule for working out what percentage of your salary needs to be going into a pension is half the age from when you started saving. So, if you started at age 30 it would be 15%.

This said, given the variation in salaries and personal circumstances, it can be a good idea to get a slightly more profound insight into your finances. 

You could use some sort of pension calculator. There are plenty of different calculators online that let you play around with the numbers. A quick search on Google will reveal plenty. 

All things considered, this can’t give you quite as clear a view on your financial retirement scenario as speaking to an independent financial adviser. They should have the knowledge and experience to help you get both a clear view of your current situation and the changes you could make so that your money works harder towards your goals.

Minimum age for pensions freedoms rises to 57

Wednesday, February 10th, 2021

The government has confirmed that the minimum age for drawing a personal pension is to rise to 57 in 2028.

Savers who pay into a personal pension either directly or through their workplace can currently access their money at 55. However, the government plans to raise the age as a result of increased life expectancy.

The change hasn’t yet been brought into law, but Treasury Minister John Glen has confirmed there are plans for legislation. 

In parliament, he said: “In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.”

The change will affect workers currently aged 47 and under, and was first announced by then chancellor George Osborne.

As chancellor, George Osborne significantly changed the way we can access our pensions.

He brought in rules that allowed retirees more access to their personal pensions, removing both the limit on cash withdrawals and the requirement to buy an annuity to ensure a secure retirement income.

Opponents to the rise in pensions age claim that the changes restrict workers’ freedom to retire. The changes will make it more difficult for some to retire sooner.

One investment analyst has described the change as a “kick in the teeth at a time when many people are reassessing their work/life balance after a terrible year socially, emotionally and economically.”

However, others believe that the changes are a positive step because they give people two years more to pay into their pension funds. They argue that this will increase the chances that retirees will have enough saved in their pension pots to provide an adequate level of income for the remainder of their lives.

Those who were planning to access their pensions at 55 but can no longer do so could look at other options. These could include saving into an Isa to fund the two year period before turning 57. 

Most savers will agree that the government is right to give so much advance warning, unlike with the increase in state pension age for women from 60 to 65, which caused some animosity. These changes do not affect when you can claim your state pension.

If you have any further questions around your pension pots, please get in touch.

Can Investing in one Company make you a Millionaire?

Wednesday, February 3rd, 2021

We all know that investments can rise and fall in value. That a prudent investor spreads their risk across different sectors and across different markets. And we all remember our very first financial adviser, our Grandma, who told us not to put all our eggs in one basket. 

But between Christmas and New Year there was a story on the BBC about the soaring share price of electric car maker Tesla which has created what it described as an ‘army of millionaires’ – the so-called ‘Teslanaires.’ 

Shares in Elon Musk’s company soared more than 700% in 2020, making Tesla the world’s most valuable car company, Elon Musk the world’s richest man (overtaking Jeff Bezos of Amazon) and making many investors in the company millionaires. 

But as the article rightly points out, it has been a bumpy road for Tesla. In May of last year Elon Musk wiped $14bn (£10.2bn) off the company’s value when he carelessly tweeted that, in his opinion, the Tesla share price was too high. 

We all need to remember that for every Tesla there is a Sirius. Sirius Minerals was a mining company, granted the right to mine potash in the North Yorkshire Moors near Whitby. Many local investors, swayed by stories of the potential returns, invested heavily, putting their life savings and pension lump sums into the company. But the shares steadily dropped, the company was eventually taken over with the shares trading at 5.5p and the local investors were left facing heavy losses. 

Yes, shares like Apple, Nike and Starbucks may have produced spectacular returns for investors on their way to becoming household names, but many, many companies have gone in the opposite direction. April 2019 saw Debenhams go into administration and what could have been safer than the British high street? Surely people will always need to shop, they will always need new clothes… But that was before the pandemic when 2020 was the worst year for high street job losses and store closures in 25 years. 

There will always be winners and losers in investing and the good news stories, the ‘Teslanaires,’ will always receive plenty of publicity. After all, ‘Investor takes sensible long term decision with their financial adviser’ is hardly a headline story. 

But for our clients, it is the best course of action and always will be. A carefully constructed portfolio, in line with your financial planning goals and consistently monitored by your financial adviser: it may not make the headlines, but it will certainly let you sleep at night.

Will we ever go back to the office full time?

Wednesday, February 3rd, 2021

For many people, the pattern of working life was well-established. They got up on a Monday morning, ate some breakfast and travelled into work. They exchanged news around the proverbial water-cooler, sat in meetings and came home again in the evening. Rinse and repeat.

Then, on March 23rd last year, the UK went into lockdown. Suddenly, millions were working from home. 

Commentators were quick to proclaim ‘the end of the office.’ Studies quickly emerged showing that people were actually more productive working from home. No-one missed the daily commute and lunch eaten in the garden in April and May was a lot more fun than trekking to the nearest deli.

Even more importantly, Millennials and Generation Z, the demographic cohorts that were making up more and more of the workforce, were getting what they wanted;  flexible working and a much-improved work/life balance. 

Company after company announced that working from home would continue indefinitely. Finance directors looked at income and expenditure statements and wondered if they really needed that expensive building with all the desks and chairs and the giant jar of coffee every fortnight.

We’re now in lockdown 3. For those who have only been part of the workforce for a few years, a significant portion of their working life may have been spent working from home. And yet it does appear that the proclamation ‘the death of the office’ may have been a bit premature. Even introverts are reported to be missing the chat around the water-cooler. 

Many people are finding that they simply cannot work from home effectively in the long-term, as they juggle the competing demands of work, childcare and a relationship. 

There are also increasing worries that working from home is making us less creative.  

Steve Jobs famously said that offices were about creativity and collaboration: that much of Apple’s success came from chance meetings in the office. As many of us have noticed, chance meetings do not happen on Zoom. 

So as the vaccine is rolled-out, many people are missing the office, but don’t bet against its disappearance just yet…

February Market Commentary

Wednesday, February 3rd, 2021


It might be appropriate to start January 2021 by looking back at last year. At the start of January 2020, we were fairly sure what we would be writing about, which included the run-up to Brexit on the 31st and a gradual thawing of US/China relations with a long-awaited trade deal due to be signed. 

China certainly grabbed the headlines but not for reasons of trade. By the end of January 2020 countries around the world were experiencing the initial impact of coronavirus, and the impact on world stock markets was starting to be felt. 

Ultimately 2020 was a year like no other but, as we reported last month, the majority of stock markets actually made gains in the year. 

So what did January 2021 bring us? The roll-out of more vaccines finally gave hope of an end to the pandemic but there was also some bad news, especially on the UK high street and in the US jobs market. January wasn’t a great month for world stock markets but, as last year very clearly showed, it is only one month. 

As always, let’s look at all the details…


January ended with reportedly around 600,000 people being vaccinated in one day and the month began with business leaders calling for help as the country went into its third lockdown, which now looks set to continue into March. 

By that time Chancellor Rishi Sunak will have presented his Budget. It is rumoured that the furlough scheme will be extended, but will there be more help for business in the Budget? Or will the Chancellor stick to his earlier mantra that he cannot save ‘every business and every job?’

The second part of that statement is becoming all too apparent. As we write (on the morning of February 1st) there is confirmation that Asos are buying the Topshop and Miss Selfridge brands. They are buying the brands and the customer base but they want nothing to do with the shops. Last week Boohoo bought Debenhams on exactly the same basis. 

When the Chancellor stands up on March 3rd he will need to give far more than a reduction in rates, or an online sales tax, if he is to breathe new life into our high streets. 

Perhaps the only consolation for the high street is that it is not the UK car industry. 2020 saw new car registrations down to a 30 year low, with Mike Hawes of the Society of Motor Manufacturers and Traders describing it as “the worst in a generation.” 

On the other side of the coin, Nissan reaffirmed its commitment to car production in Sunderland, with COO Ashwani Gupta describing Brexit as a positive for the industry, saying it would allow Nissan to ‘improve its competitiveness.’ 

In the wider economy, UK GDP was down by 2.6% in November, thanks to another period of lockdown. Inflation doubled in December to 0.6% due to a rise in transport costs and, to no-one’s surprise, Government borrowing in December set a new record. At £34.1bn borrowing in the month was the highest December figure on record, and the third-highest for any month since records began in 1993. 

Fortunately there was some light amid the gloom. Bank of England boss; Andrew Bailey; told City AM that he expected a ‘pronounced recovery’ as the vaccination roll-out continued. 

Perhaps even more encouraging is that the entrepreneurial spirit was alive and well. More than 29,000 new companies were registered in the UK in September, the highest number since October 2007 and the third-highest monthly figure since records began in the late 1980s. Confidence among more established businesses appears to be returning not just in the UK but around the world. City AM reported that companies raised $400bn (£292bn) in the first three weeks of the year as central governments continued to stimulate their economies. 

What about the FTSE-100 index of leading shares in January? Sadly it fell back 1% in the month to close at 6,407. The pound was unchanged against the dollar in percentage terms, ending the month at $1.3700. 


The month in Europe began with shareholders approving the merger between Fiat Chrysler and France’s PSA group, which will create the world’s fourth biggest carmaker. 

It was also a successful start to 2021 for Europe’s police forces, as an international operation led by Europol took down what it claimed was the world’s largest illegal platform on the ‘dark web.’ Dark Market had more than 2,400 people selling drugs, counterfeit money and anonymous sim cards; in total worth more than €140m (£124m). German authorities arrested an Australian citizen near the German-Danish border. 

At one point in the month it looked as though Germany might close its borders over worries about possible Covid-19 mutations. There are certainly plenty of worried faces in the country, with Reuters reporting that German business morale had ‘slumped.’ 

There are also concerns about who will replace Angela Merkel. Germany is due to elect a new Chancellor in eight months’ time and as yet the ruling CDU party has failed to come up with a viable successor to Merkel. 

One European leader who wasn’t waiting eight months was Italian Prime Minister Giuseppe Conte, who resigned over criticism of his handling of the pandemic. Reportedly almost half of Italian voters want Conte to remain as PM, but with the political parties divided over spending as a way out of the consequent economic downturn; it is not clear if he will be able to form a new coalition government. 

Like most of the major Western stock markets; the German and French indices both drifted downwards in January. Germany’s DAX index was down 2% at 13,433 while the French stock market fell 3% to 5,399. 


January was, of course, the month when ‘45’ gave way to ’46.’ Joe Biden was sworn in as the 46th President of the United States. 

Biden immediately signed a swathe of executive orders. The US will rejoin the Paris Climate Accord and 11m illegal immigrants were granted an amnesty. Other measures followed as he started to unpick Trump’s legislation. 

Will we see a more conciliatory attitude to China from the new administration? The US/China tensions continued right up to Trump’s last days in office as he banned eight Chinese apps including popular payment platforms Alipay, QQ Wallet and WeChat Pay. 

As we all now know, the pandemic has been good for billionaires. January saw a change at the top of the leaderboard, with the soaring share price of Tesla allowing Elon Musk to overtake Amazon’s Jeff Bezos and claim the ‘world’s richest man’ title. 

January was a month which underlined, if it needed underlining, the pace of change in the American economy. Tesla is now the world’s most valuable car company and set a record for delivery of new vehicles. It also moved closer to launching in India and recorded its first quarter of $10bn (£7.3bn) in sales. 

Apple duly reported sales of $111bn (£81bn) for the fourth quarter, which was up 21% on the previous year. Facebook revenue was up to $28bn (£20.4bn) in the fourth quarter (up 25% on last year) and Netflix went past 200m subscribers. 

…But there was bad news for the wider US economy which lost 140,000 jobs in December, the first fall since April, as rising Covid-19 cases and the cold weather took their toll, especially on restaurants and bars. 

One analyst described the figures as being “so bad, they’re good”, meaning that they would force the incoming Biden administration to introduce stimulus measures. The new President duly unveiled a $1.9tn (£1.4tn) stimulus plan for the economy, including a direct payment of $1,400 (£1,020) to all Americans. The package also included $415bn (£303bn) to fight the virus and $440bn (£321bn) for small businesses. 

The Dow Jones index fell 2% and through the 30,000 barrier to end the month at 29,983. The more broadly-based S&P 500 index was down 1% to 3,714. 

Far East 

Official figures have revealed that the Chinese economy grew by 2.3% in 2020. That may be its slowest rate of growth, but China will be the only major economy to have grown at all last year and growth in the final quarter was an impressive 6.5%. 

January started with more mass arrests of pro-democracy activists in Hong Kong, and it ended on a similarly bellicose note with Beijing warning Taiwan that any attempt to seek independence ‘would mean war.’ 

As the Trump Presidency entered its final days, the spat between China and the US continued. China brought in new laws that will allow courts to punish firms that comply with ‘unjustified’ foreign laws. The US accused China of falling short on its commitment to buy an extra $200bn (£146bn) of US goods in 2020 and 2021. 

Tellingly, figures released by the United Nations showed that China overtook the US as the world’s top destination for foreign investment last year. New investments in the US halved last year, whilst direct investment into China rose by 4%, allowing it to overtake the US. 

The Shanghai Composite index had a quiet month and was up just 10 points, unchanged in percentage terms at 3,483. The Hong Kong market was up 4% to close January at 28,284; while the market in South Korea was also up 4% at 2,976. Japan’s Nikkei Dow index rose a rather more sedate 1% to close at 27,663. 

Emerging Markets 

‘May you live in interesting times, Mr Bond,’ as countless villains have said to the hero. It appears that Vladimir Putin has said much the same to his arch-critic Alexei Navalny who flew back to Russia for the first time after allegedly being poisoned with a military-grade nerve agent. 

Navalny was immediately arrested, as were 1,500 of his supporters who took to the streets in protest. The final Sunday of the month saw more protests, with reports suggesting up to 5,000 people had been detained across the country. 

With rumours circulating of Putin supposedly owning a ‘Black Sea palace’, which Navalny alleges was paid for with ‘the biggest bribe in history’, this may be one of the longer stories of the New Year. 

Rumours also continue to swirl around Vladimir Putin’s health, so Russia could be in for an ‘interesting’ year in 2021. 

The Russian stock market remained stoically unmoved by the unrest and speculation, dropping back just 12 points in the month to end unchanged in percentage terms at 3,277. 

There was bad news in Brazil, with Ford announcing the closure of its last three factories in the country, putting an end to decades of manufacturing in the country, with 5,000 people expected to lose their jobs. 

The company, which is undertaking a global restructuring, blamed ‘significant losses’ in the region. January was a disappointing month for the Brazilian stock market, which fell back 3% to close at 115,068. 

The Indian market was down by a similar amount, ending the month at 46,286. 

And finally 

With millions of children facing the ordeal of Zoom lessons with their teachers and, presumably, tiresome questions, one boy managed to avoid the interrogation. The young whippersnapper changed his name to ‘Reconnecting’. Apparently it took his teacher several weeks to twig that she hadn’t heard from him for a while…

Meanwhile the world’s elite tennis players were flying down under for the Australian Open tennis, only to be quarantined in their hotels for 14 days. Obviously they still needed to practice, so several of the players took to training in their bedrooms. We have all heard noises we’d prefer not to hear from the next bedroom, but perhaps not 400 backhand volleys hitting the wall at three in the morning. A clear case of game, set and mattress…

Finally, some clients may worry that we are living in an increasingly ‘Big Brother,’ tech dominated world, particularly as facial recognition becomes ever more prevalent. 

Sadly, ladies and gentlemen, you may soon have more to worry about than just your face being recognised. One Chinese technology company gave all its staff cushions, supposedly for their wellbeing. The staff were told that the cushions would monitor vital signs such as heart rate and breathing and even pick up on poor posture. 

If only that were true. One employee got an angry message from HR demanding to know why she had not been at her desk between 10.00 and 10.30am, followed by a threat to cut her bonus. 

“I felt like I was being spied on,” said Ms Wang. 

Quite so. And if you’re reading this, Big Brother, some of us in the office are not as young as we once were. If you’re thinking of spying on us, our faces may be a better bet after all…