You know when you’ve been tangoed

I read a recent report which, to be blunt, left me a little speechless (an achievement in itself). To my mind it merely confirms the need for detailed planning rather than a back of the envelope guesstimate. I will concede that anything to do with the future is a bit of a guess, but an educated one, based on relevant data is somewhat more reliable.

Does my Boredom Look Big in this?

I am on fairly safe ground if I suggest that most tedious aspect of working with me is gathering and providing details about your spending. For this we have the Spending Plan (I’ve included the link for you here) but it also needs updating. This is a total pain, but until most of us have confidence that banks will accurately share your data with us via technology (probably no time soon for most of you) then it’s a hard graft.

Anyway, the purpose of it is foundational to any financial plan. If we don’t have a good idea about what income you have and how you spend, then frankly we have as much chance of being vaguely right as any other economic forecast (not very).

Imagine my surprise on learning that the Pensions and Lifetime Savings Association (PLSA) increased the amount of the income they expect to provide a single person with a ‘moderate’ standard of living in retirement from £23,300 in 2022/23 to £31,300 this year, an increase of 34%. For context, according to the ONS, the average salary in the UK at April 2023 was £35,464.  You can find the RLS here. Yikes! That’s some increase, substantially above the rate of inflation. That’s an orange fella’s slap round the cheeks wake up call if ever there was.

To give you some context a full State Pension (35 qualifying years of National Insurance payments) is about £11,502 in 2024/25 meaning that even by their error prone forecast most single people will need about another £19,798pa from other sources (in todays money). As we have set the bar as guesstimates, that’s a pension and/or ISA/investment fund of about £494,950 to provide £19,798pa. (Please assume all the warnings about assumptions and investments blah blah blah..). In my guesstimate, I’ve used the 4% rule, which is contentious, but a better guide than most. Let’s just call it £500,000.

Little wonder then that one in seven retired people are currently having to return to some form of work to top up their income to make ends meet. This is having to, not choosing to.

Financial Adviser Truth… 

As difficult as it may be for pundits, compliance officers and regulators to accept, most people need a fairly aggressive investment strategy to stand much of a chance of getting the target income they actually want. That means a high allocation to shares (or equities – same thing). Holding fixed interest securities because you don’t like seeing your statement valuation reduce is not going to get you where you need to go, at least its unlikely, but I can only really tell you if you engage us to do a proper plan for you.

If you are a client already, this is why we request that you check our reports for you and you provide details of your income (before tax) from all sources along with your spending details – ideally rounded up and inflated by you for good measure.

Of course, if you want to return to work that’s an entirely different matter, but good financial planning is about enabling you to maintain your standard of living, your lifestyle, for the remainder of your life.

If you have no idea what I mean about being tangoed, here is the advert from many years ago, I’m presuming that the drink is largely available at all beverage retailers. (No I am not about to paint myself orange to make the point).

• Benefit and pension rates 2024 to 2025
• ONS data