Saving for Your Retirement Fund

Saving for Your Retirement Fund

by Rebecca Hall on 15 Feb, 2011

Saving for your retirement fund has never been more important. The ticking timebomb of an ageing population means state pensions are going down, the retirement age is going up, and your private retirement fund needs to last longer.

Medical advances allowing us to live longer than ever are a mixed blessing. The older we get, the more strain we put on the public finances, and the more strain we put on public and private retirement funds. That means that the earlier you start saving, the better. The squeeze on private retirement funds by decreasing the tax relief available as part of the deficit reduction package and the volatility of the markets means that pensions are not necessarily the best way to save for your retirement, or at least not alone.

More and more retirement fund advisers are recommending a mixture of pension and investments to build up a retirement fund, particularly when it comes to ISAs. ISAs allow you to deposit up to £5340 (from April 6th 2011) in cash tax free. You can invest an additional £5340 in a stocks and shares ISA, or plough the entire £10,680 into a stocks and shares ISA. Whichever way you go, ISAs will give one of the best returns on your money if you can afford to lock it away for a year or more.

Combining a pension with ISAs is one of the chief methods retirement fund advisers are currently recommending, offering a spread of investments and, particularly for wealthier clients, an extra avenue for tax efficiency.

The government has recently announced it plans to introduce a flat rate state pension of £140 a week, which is unlikely to cover many people beyond the most basic living costs (if that), and the recent dramas in the financial markets have woken many people up to the fragility at the heart of the system (particularly in light of the collapse of Standard Life a few years ago). These points combined highlight the need for saving for your retirement fund early, and smartly – not putting all your eggs in one basket and staying aware of the tax benefits associated with it.

About the Author

Rebecca Hall

Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.