The changing demands on pensions

In the good old days, we saved for 40 years of our life, to fund the last 15 years. Then we met our maker. 

Everyone knew where they stood. Today it’s different. We are now funding for 40 years knowing that this pot of money may have to last another 25 to 40 years.

The mathematicians have calculated over the longer period, that you would have to pay in more than your entire salary, for 40 years, to be sure you have everything financially covered till death. Unless you were lucky of course and died early!

Why bother at all? I hear you question. Well, there’s more to this.

Many are not now retiring at 60-65 years of age. We know that we feel good at 60. We wind down a bit, maybe work part-time. We become industry consultants, sharing our wealth of knowledge. We volunteer, we even start new businesses.

The reality is that we need access to some of our pension pot, but not all. The ability to drawdown money, on the drip, is very helpful. The remainder can then stay invested for longer. The maths of leaving money to grow for 50 years to fund 15 to 30 years is much more attractive.

We want to avoid all those firms that pollute and damage the planet.

So what about our properties? If you have been in your house for 25 years or more, it’s value will have more than doubled. If you have some part of your mortgage still to repay, do you repay it? Whilst interest rates are so low, is it better to take some of your pension pot to clear it, or just keep paying the interest?

Many in retirement are enhancing their lifestyles by drawing down income or capital from their accrued equity. If you have no dependents or plans for this money, this is a no brainer. If you have, then it is a more nuanced decision. 

Why starve yourself so that your kids can live it up? Equally, we don’t want our kids to financially suffer later in their lives. Either way, Equity Release should be a consideration in most people’s retirement planning.

The rise of the impact pension

Now let’s talk coronavirus. Sorry, but it has just changed the retirement planning world.

A steady culture shift has suddenly become a stampede! The odds are that before coronavirus you never bothered to check the ethics and integrity of your pension funds. Now after coronavirus, we care. We care more than we have ever cared before.

We want our pensions in sustainable investments and impact funds. We want our money to do good, and avoid all those firms that pollute and damage the planet. I can tell you, if you feel this way, you are not alone.

So you thought retirement planning was boring? It has never been more exciting!

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