One day, your sales career will come to an end. Will you be sorted for the future?
With pensions becoming ever more unreliable and the housing market in a state of flux, you need to understand how will you provide for your retirement.
Here are five alternatives to the basic pension.
1. Property
Think of your mortgage repayments as a personal pension plan. Pay off your mortgage before you retire.
If you have a large family home you could then sell and move to a smaller property, using the difference as your income.
2. Individual savings account (ISA)
ISAs are flexible tax-free schemes that don’t lock your savings away. You can withdraw your money in one or a number of lump sums. And you don’t pay income or capital gains tax on your interest.
You can take out a cash ISA with your bank or building society, or create an investment account to be invested in stocks and shares.
You can choose from mini and maxi ISAs, i.e. split your money between providers or have the maximum permitted amount with one.
3. Stocks and shares
Again, recent upheavals have made us more wary of the stock market – which could be a good thing! But if you’ve already got some form of pension and still have some disposable cash, low-risk investments are still a good way to top up your retirement income over the long term.
If you can’t afford to lose any of your money, don’t invest it. When you buy shares you’re buying a part of a company, so your profits will only grow if their business does. Dividends are usually paid out twice a year by larger companies but there are no guarantees.
To make any investment worthwhile you’ll need £1,000 or more, but a good stockbroker can mean a good return on your money.
4. Renting or letting
Alternatively you could move to a smaller house or flat when you retire, and rent out your own place for a monthly income. Or you could buy another property at any time purely to let – if you’re sure the rent you’ll collect will cover the new mortgage.
If you live in a university town you should be able to rely on the student market – just don’t invest in fancy furniture!
In your calculations you should include your responsibility for all repairs and maintenance, as well as finding tenants and collecting their rent, unless you pay a management company to take care of it.
5. Other alternatives
If you’re the type of person who loves antiques or art you could consider these additional investments. However, it’s a much more risky option – markets can be fickle and there’s no guarantee you’ll even make back your money down the line. But if you know you’ll get enjoyment from your collection today, it doesn’t hurt to keep an eye on its market value over time.
Useful links: Directgov on pensions
