Get an extra scoop of ice cream in terms of tax relief...
HOW do you teach your children about tax? Eat 40 per cent of their ice cream.
Of course, we'd never do that. But isn’t it a pity it doesn’t work the other way around - to also teach them about tax relief?
We could show them how they’ll get an extra ball of ice cream, some day, as tax relief when they save into a pension. (I like mint choc chip, personally).
It has all come home again this week, with a new survey on how we are planning for our retirement.
Unfortunately, it’s not a pleasant read for pension advisers – we see the same thing, year in, year out.
Our biggest challenge is to get people to pay attention to the future. Of course we have enough to do in the here and now, between bringing up the kids and all the challenges that earning a living brings. Our ‘golden years’ may seem so far away. But will we be ready, or are we banking on a late lotto win to give us security, when we retire?
This month, Aviva are telling us about the financial situation of middle aged, non-retired people. What’s that? You’re not middle aged? Try this: multiply your age by two. Now. Are you certain you’re going to get there?
For us mere mortals (aged 45-60), over half (58 per cent) are worrying about not having enough money for a comfortable retirement.
What are we doing about it? Exactly what you’d expect, which is: ‘not much’. Over a fifth (21 per cent) of us worried souls are doing sweet nothing to save more for retirement.
Okay, it’s hard to see the horizon, when we’re still in the trees. So it’s no surprise that young workers are worst at realising that, one day, they will want to retire.
In the 18-24 age group, just 14 per cent do something about saving more than the legal minimum; the 35-44s aren’t much better, at 25 per cent. You’d think with young families they’d have more sense, but as I say, in the younger years, we’re more concerned with not stepping in the puddles, than looking down the road.
Now here’s the remarkable part: it’s the people in mid-life, aged 35-44, those who still have plenty of time to improve their retirement planning, who are most concerned about their retirement. Same story for those in front of them in the queue, in the 45-54 age group, where well over half (59 per cent) are worried too.
The wise ones read the papers, not least this esteemed column. They know that the state pension system is in danger of falling to bits, yet they’re still not saving enough to make themselves financially independent.
So what happens next? Well, most of us seem to be bringing on the ostrich philosophy. Bury our heads in the sand, and perhaps the problem will go away.
It won’t. Lockdown hasn’t been easy on our finances, but who’d have thought it has also softened our brains?
Only one in ten of 45-60 year olds are planning to save more in future, but at the same time one in six (17 per cent) say they don’t feel they could confidently set a retirement date. They believe they’ll probably have to work at least six months longer than they’d like. They feel they have no control – and retirement planning is all about keeping control.
Now we get to one particular, special group, the self-employed. If you are self-employed, you are most likely to be behind on planning for your retirement. This may be totally understandable. Your elders aren’t standing with you around the company coffee machine, chatting about pensions.
For you, the company coffee machine is the Barista Bar at your local supermarket. And don’t expect to hear it from the apprentice - sure he can hardly wire a plug. But at least he’s open to learn.
The research shows a quarter (23 per cent) of self-employed people are taking no steps to sort out later life.
The irony is that if you are self-employed, your work is most likely to have been hit hard by the Coronavirus pandemic.
Bottom line this week? Get thinking. Get advice on your pension. Get that extra scoop of ice cream, in terms of tax relief. (And try the mint choc chip. Seriously.)
Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at www.mkennedyfinancial.com