Is Yours Big Enough?

Date Published:19/03/2008

Recently, Sir Fred Goodwin the former Chief Executive of RBS and his pension have filled many column inches in the press.

I don’t propose to repeat the many comments that have been made previously and of which everyone must be aware.

However, the fact that Sir Fred is in possession of a pension fund with a value of around £16,000,000 and that this fund is paying this 50 year old an annual pension of something in the region of £703,000, is quite notable.

Whilst most people cannot expect to have such an income from their pension, perhaps now is the time to consider how much income you will need in the future from your pensions and investments.

Investors, with the help of their Certified Financial Planner, should calculate how much income they will need in the future and then consider all existing investments and pensions, establishing if these will be sufficient to meet the income requirements.

Everyone will have differing personal circumstances, which means that there will never be a ‘one answer fits all’ solution. Bespoke solutions will always be required.

In spite of the current economic turmoil and particularly volatile investment markets now may be a really good time to seek advice and do something to improve your own personal position.

Investors really should be taking advantage of the current markets. All need not necessarily be doom and gloom. Surprising as it may seem, but some investors are still making money.

There are many occasions where, with a few small amendments to current arrangements, significant improvements could be made to investment returns or income and capital.

The key is knowing exactly what you will need and what you already have. It’s then down to your financial planner to ensure that you take the best possible advantage of whatever is available in the investment marketplace, whilst ensuring that you take advantage of all favourable legislation and that you also take action to meet your objectives.

It’s a bit like a jigsaw puzzle. If even one small piece of the puzzle is missing, the picture will never be complete, or look as good as it should.

It may come as a surprise to many who intend to rely on their pension fund to generate their future income that in the UK, the average size of a pension fund, as reported by The Pension Policy Institute, is only £25,000. The level of annual income that this could generate would be in the region of £1,500.

Could you live on this level of income in addition to the annual basic state pension of £4,716.40?

Less than 50% of the UK population will be in receipt of a pension other than the basic state pension.

Perhaps the current state of the finances of UK PLC leaves those individuals with no additional pension provision somewhat vulnerable.

Individuals needing an annual income of £30,000 from their pension fund will need to have a fund of around £500,000 at retirement. This level of fund value is not going to appear overnight, unless you are very lucky indeed!

With the low level of stockmarkets and current tax advantages available, perhaps now is the time to take action.

Who knows if stockmarkets will go lower, or if the tax advantages will remain in the future.

balanced stones