Retirement Investment Strategies
At Clifton Nash, we do things in the opposite way to many financial planners. Rather than start with what our industry calls “the product” e.g. an ISA, pension, property, bond, trust, annuity – we start with you.
We want to know about you, your plans and your goals for the future. Only when we truly understand you can we begin to tailor make a plan for you. Your plan will probably involve a combination of different investment vehicles, but the timed and phased structure of them depends on your plans, age and attitude to risk.
If you’re new to this area, here is a brief glossary of some of the terms that we use. Don’t worry about trying to interpret them, we will explain everything to you.
Pensions are the traditional way of saving for retirement. Over the years pensions have seen many changes, particularly in 2014 when pension rules were partially relaxed by the government.
Pensions have the advantage of the government giving you tax relief on contributions, effectively meaning that a £1 contribution to a pension will cost a basic rate tax payer 80p. Growth on the pension fund investment is free of Capital Gains Tax and you have the option to take 25% of the value of your pension fund as a tax free lump sum. However any income which you draw from the pension will be subject to income tax.
ISAs have been seen in a better light recently as another string to the retirement planning bow. With ISAs there is no tax relief on contributions (like pensions) but all earnings (from investments, interest etc) from an ISA are tax-free. And, unlike pensions, there are no restrictions on what you can do with the money. Furthermore, any income drawn from an ISA is not subject to income tax.
Stocks, shares and equities are all essentially the same thing.
A share buys you part-ownership in a company. You invest your money in that company by buying an equity stake. The value of your share can alter and as an investor, your objective is to sell your share for a higher price than you paid for it. Shares in companies are usually bought and sold on a financial market, such as a stock exchange.
Shares are often part of other investments – like pensions. Typically Fund Managers will buy and sell shares to increase the value of your investment. By understanding your attitude to risk, we are able to tailor the sorts of investment that would be suitable in terms of risk versus return.
Clifton Nash are not authorised to conduct share dealing on behalf of clients
A bond is a debt that governments and larger companies sell to raise money for projects or growth. Bonds typically offer the buyer a fixed return for their investment over a given period – usually 5 to 10 years.
Government Bonds are often considered lower risks and have a more predictable return than shares. Corporate Bonds can be higher risk as Companies have less financial strength than Governments.
An annuity is a contractual financial product sold by financial institutions, like insurance companies. Traditionally individuals approaching retirement age have bought and annuity with their pension pot. In exchange for their money, the provider guarantees them a defined income until death.
More recently many other options have become available, both in terms of different types of annuities and also retirement options that do not involve annuities at a later stage or not at all.
Protection and Insurance
Protecting your assets is always a discussion we have as part of your plan. There are many different ways you may want t protect yourself, including critical illness insurance, life insurance, key-man insurance and others. Here are few questions we ask clients to think about:
What benefits are provided by your employer in the event you are unable to work through illness or accident?
How will you provide for your children if you are diagnosed with a critical illness, or even worse?
How would your household manage if you were made redundant?
How long do you want the cover to last? For a specific number of years or for the whole of your life?
How would you like the benefit to be paid? As a lump sum or a monthly income?