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The Independent
2 days ago
- Business
- The Independent
How much risk is too much risk when it comes to your money?
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. In investing, the general rule is that the more risk you take, the greater the potential rewards. But the stock market can go down as well as up, and the idea of losing money is never pleasant. That's why so many Brits put their money into cash savings rather than the stock market. According to latest figures from the Office for National Statistics, more than 8 million of the 12.4 million Isas opened in 2022-23 were cash accounts. But to give your money the best chance of growing over the long-term, you'll need to invest it - and that means taking a degree of risk. The question is: how much? You're already taking risk - but the wrong sort It is easy to assume that leaving cash in the bank is completely safe, but this is a fallacy. As inflation pushes up the cost of living, the 'real terms' value of cash - its purchasing power - is eroded away. If inflation is 4 per cent then something that costs £100 today, will cost £104 next year, so your £100 in the bank could no longer afford it. The key is to make sure your money is growing at a faster rate than inflation so your wealth keeps pace with the rising cost of living. Research shows that investing in the stock market is the most reliable way to do this over the long-term. According to the Barclays Equity Gilt Study, which looks at data going back to 1899, investing in equities has delivered annualised returns of 6.8 per cent over the past decade after factoring in inflation, while cash has lost 1 per cent a year. Over 50 years, the stock market has delivered annual returns of 8.1 per cent compared to just 0.6 per cent for cash. Meanwhile, research by IG Group found that someone who had maxed out their Isa allowance every year since 1999 would have £275,659 today in real terms if they had put it in cash - but £410,051 if they had invested it in the FTSE 100. 'If you don't take enough risk for long-term financial goals, such as retirement, you may end up with a much smaller pot,' says Craig Rickman from the wealth manager interactive investor. Fear of losing money is a key reason so many savers are reluctant to invest. But risk is different to 'risky'. Many people associate the idea of 'financial risk' with 'gambling', but this is not necessarily the case. Risky is the chance of losing some or all of your money in the hope of big gains (think: putting it all on red at the casino). Risk, on the other hand, is the potential for ups and downs along the way, known as volatility. This is what we see on the stock market: it tends to rise over the long-term, with short-term dips along the way. As long as you don't need to access your money during a dip, you can ride this out in the hope of greater gains in the future. Younger investors in particular are often told to take more risk because they have more time to wait out those ups and downs. Claire Exley, head of financial advice and guidance at Nutmeg, says: 'What matters really is the value of your investment when you need the money, rather than the movements in value along the way.' Investors need to weigh up how much risk they need to take to generate the returns they hope to achieve, while still being able to sleep at night during those market dips. However, it is also important to pay attention to your gut instincts; some people are naturally more risk averse and won't be comfortable with any volatility, regardless of what the data shows. What to invest in Diversification is key to a smooth investment journey, especially for those just starting out. This means spreading your money across different companies, countries and assets. A broad global tracker fund, which invests in thousands of companies across the globe for a low cost, is a good place to start. To further spread your risk, you can add in different 'asset classes' (types of investment), such as bonds, gold or property. Many investing apps, such as Moneyfarm, Nutmeg, Dodl and Wealthify offer readymade portfolios that create an appropriate mix of investments, which is a good option if you don't feel confident choosing your own. Free risk questionnaires can help you determine your risk tolerance. These ask questions such as how long you plan to invest, whether you would describe yourself as a cautious person, and how you would feel about short-term fluctuations. Nutmeg, an investing app, said the average risk level for investors aged 18 to 29 is seven out of 10. This portfolio has 71 per cent in equities, 26 per cent in bonds and 3 per cent in cash - it has returned 71 per cent over the past 10 years. That compares to 22.2 per cent for Nutmeg's Level 3 portfolio and 120 per cent for Level 10. Before you start investing, experts typically advise having three to six months' of outgoings in an easy-access account in case of an emergency. Investing should be for a minimum of three to five years, so don't invest money you might need to access. Rickman says: 'Ultimately, risk appetite is a personal thing. Some people are happy to stomach heavy falls in value for the potential to make more money, and others are more cautious, favouring security and certainty over big potential returns.'
Scottish Sun
11-07-2025
- Business
- Scottish Sun
Why Labour's economy plan means you'll need even MORE to retire
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) PENSIONERS will need to spend £15,000 a year more to have a comfortable retirement if Labour extends its stealth tax raid, analysis shows. Income tax thresholds were frozen until 2028 by the Conservative government. Sign up for Scottish Sun newsletter Sign up 2 Pensioners will need £15,000 more a year to afford a comfortable retirement Credit: Alamy 2 Source: Pensions UK But the prime minister has not yet ruled out extending the thresholds beyond this date as he attempts to fill a £22billion black hole in the public finances. A single pensioner currently needs a disposable income of £43,900 a year to have a comfortable retirement, according to industry trade body Pensions UK. But if the tax thresholds were frozen for two more years and higher living costs continue to rise then it would mean this figure would rise to £58,860 by 2030. As a result, pensioners would need £14,960 more a year than they do now. A comfortable retirement would allow you to spend £75 a week on food and £21 a week on takeaways, assuming that you own your own home and are mortgage free. In comparison, in 2020-21 you needed just £32,800 for a comfortable retirement. But the soaring cost of living has pushed up the amount you need each year to £43,900. As the cost of energy, food, driving and holidays have risen, pensioners currently need a higher income each year to make ends meet. If the amount of disposable income pensioners need continues to rise by the annual average of 6% each year and the income tax thresholds remain frozen then a pensioner would need £58,860 to live comfortably. Frozen tax thresholds have dragged millions of people into higher tax bands through a concept known as 'fiscal drag'. How to track down lost pensions worth £1,000s Craig Rickman, personal finance expert at Interactive Investor, says: 'Fiscal drag is a sneaky tactic of raising the tax burden over time, as it freezes tax thresholds so that people pay more of their income as wages rise with inflation. 'While it's not as obvious as raising tax rates directly, it could have a bigger impact over long periods – particularly when you see the length of time that some of these rates have been frozen.' He added that as tax thresholds are frozen for so long even lower earners will gradually pay tax on their income. Meanwhile, u-turns over the winter fuel payment for pensioners and plans to cut disability benefits have left pensioners feeling uncertain about their finances. How to save for retirement Anyone planning their retirement needs to do some careful calculations about how much they will need to afford the lifestyle they want. A good starting point is the government's state pension age calculator, which will tell you when you will receive your state pension. Visit to find out more. Pension calculators can also help you determine how much money you need to save to have the pension pot you want at retirement. The earlier you start saving, the easier it is as your money grows longer. And you're not on your own when saving for retirement. Your workplace will almost certainly contribute some money to your pension pot, too, and you get tax relief from the government, which reduces the amount you have to pay yourself. If you are struggling to make ends meet then don't worry, we have revealed how to legally pay less tax on your income. Plus our guide explains how to give yourself a secret pay rise and get up to £240,000 extra in retirement. Or if you are a grandparent then you could get a £6,600 boost for looking after children during the summer holidays. When can I retire? IF you're wondering when you can retire, it's best to speak to your pension providers. Firstly, use the government's tool to check your state pension age. Next check retirement ages on workplace pension schemes - this can massively impact your windfall once you enter your golden years. For advice, you can contact The Pensions Advisory Service for free online or on 0800 011 3797. Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
The Sun
10-06-2025
- Business
- The Sun
The best jobs that allow you to retire early and how you could boost your pension pot to £345k
EVERYONE dreams of escaping the daily grind early and retiring - but what jobs will help you do that as quickly as possible? Here, we reveal the top roles to get the best paid pension and the employers offering more to make you richer in retirement. It might be tempting to choose a job based on salary alone, but it's important not to overlook how it will affect you when you retire. While private sector jobs tend to offer more flexibility and a higher salary, public sector jobs typically offer more generous "defined benefit" or "final salary" pension schemes. These schemes guarantee an income that rises with inflation, making them a "gold-plated" option rarely found in the private sector. In the private sector, you'll likely have a "defined contribution" scheme, where your retirement income depends on contributions and investment performance. Auto-enrolment requires at least 8% of your salary (5% from you, 3% from your employer) to go into a pension fund, and the government adds to this through tax relief. For basic-rate taxpayers, every £80 contributed becomes £100. Although defined contribution schemes may seem less appealing, starting early and maximising contributions can build a substantial retirement fund. According to the Pensions and Lifetime Savings Association, a single person needs £13,400 per year for a basic retirement, while a couple requires £21,600. Craig Rickman, pensions expert at interactive investor (ii), said: "Don't overlook pensions when job hunting. "Even though it might not seem like extra cash in your pocket right now, an attractive workplace pension means you don't have to save as much personally every month to retire comfortably. "That's why it's vital to engage with your workplace pension at the earliest opportunity." Kings Speech 2024 reveals huge pensions shake-up that could add over £11,000 to retirement pots Below we reveal the best jobs in the public and private sector to help you build your pension pot and boost your chances of retiring early. Top jobs for solid pension pots Town planners have some of the most generous pension pots. For example, someone earning £30,000 a year from the age of 30 could retire with an annual pension of £41,400 through the Local Government Pension Scheme (LGPS), according to ii. The LGPS works by adding a small portion of your salary - 1/49th - into your pension pot each year. This amount grows over time in line with inflation, helping it keep its value. Boost your pot by £354,000 RETIREMENT expert Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, shares how to maximise your pension savings. She said: "Small changes can make big differences to your pension." "And increasing your contributions beyond auto-enrolment minimums can make a huge impact over time. "The amount you contribute now will directly impact how much money you have when you decide to retire, typically around age 68. "For example, if someone starts saving at age 21 and continues until age 68, with a starting salary of £25,000 per year and an investment growth of 5% per year after fees, they could save around £236,000 by retirement. "This assumes they contribute 5% of their salary, and their employer adds an additional 3%." "If you increase your contribution to 10%, with your boss still adding 3%, you could boost your savings to roughly £384,000. "But what if your boss is feeling generous? "A more substantial contribution from your employer can significantly boost your retirement savings. "For example, If you save 5% of your salary and your boss matches that with another 5%, your pension could reach approximately £295,000 by the time you retire. "Even better, if both you and your boss contribute a hefty 10% of your salary each, you could be looking at a substantial pension pot of around £590,000. "It really pays to find out what your employer's policy is on pension contributions – it could make a massive difference to your future." Meanwhile, armed forces personnel don't have to pay into their pensions at all, as the Ministry of Defence contributes on their behalf, adding 1/47th of their salary each year and adjusting it for inflation. The standard pension age is 60, but those who serve for at least 20 years and leave after age 40 can benefit from the Early Departure Payment (EDP) scheme, which provides a tax-free lump sum and monthly income. For example, a sergeant retiring as a major could receive a pension of around £32,000 a year. Plus, teachers can build a pension of roughly £25,700 a year after 40 years of service on a £60,000 salary, plus a £170,000 if they tax a one-off tax-free lump sum, according to ii. Tax inspectors in the Civil Service Alpha scheme could receive £23,600 a year on a £36,100 salary. The Civil Service Alpha pension scheme is a 'career average' defined benefit scheme where you build up an annual pension based on 2.32% of your pensionable earnings each year, adjusted for inflation Police officers can retire after 30 years with about £22,000 annually. Firefighters retiring at 60 might get £20,000 to £29,000 a year, depending on service length. NHS workers build pensions based on 1/54th of their salary each year, offering strong retirement income. Museum curators in public roles could get £15,000 a year after 30 years, earning £30,000 annually. I tracked down lost pension and boosted my pot by £5,000 KATHERINE Brant was one of millions who lost track of an old pension pot – a common problem in the UK, where 4.8 million pots are "missing, Each time you start a new job you start a new pension, which can leave you with several pots of cash that are easily forgotten about. On average, employees lose sight of pots worth £10,000. As an assistant manager at a charity shop in Lincoln, Katherine, 32, realised she had no idea where her old pensions were, fearing that the savings from her previous jobs might be lost forever. Determined to take action, she decided to get on top of her pension planning during the pandemic. "I only had a very basic understanding of how pensions worked, but I knew I must have old pots knocking around somewhere that I'd completely lost," she said. Her search led her to Moneybox, an app designed to help people locate and consolidate their pension pots. Unsure of what to expect, Katherine signed up and provided her details. What followed was life-changing. The app helped her uncover a forgotten £2,000 pension pot, which has since grown to £5,000, significantly boosting her retirement savings. With decades left before retirement, Katherine now has plenty of time to grow her savings even further. "Finding this extra money feels life-changing—I had no idea it was even there," she said. If you're looking to track down a lost pension pot, you can also use the government's Pension Tracing Service by visiting Top jobs in the private sector Some private sector companies offer generous contribution rates to employees. The financial services industry tends to be a good place to start, with average employer contributions around 9.5%. For example, Unilever provides a benefits package equal to 25% of your salary. If you earn £40,000, this means £10,000. You can decide how to use it - put it all into your pension, take some as extra pay, or split it, such as £8,000 for your pension and £2,000 as cash. Shell follows with a total pension contribution of 20% (5% from employees and 15% from the employer), which can rise to 27.5%. Legal & General combines a basic contribution with a matching scheme, allowing employees to potentially reach a total of 20%. Kingfisher, owner of B&Q and Screwfix, offers a sliding scale where employees contributing 8% or more receive 14% from the employer. Phoenix Group boosts salary sacrifice contributions, enabling employees to receive 14.2% while contributing only 2%. A salary sacrifice scheme is where you agree to reduce your gross salary in exchange for a non-cash benefit, like increased pension contributions. This reduces your taxable income and National Insurance contributions, potentially saving you money while boosting your benefits. Royal Mail contributes 13.3% to its Collective Defined Contribution scheme, with employees adding 6%. Tesco matches pension contributions up to 7.5%. INDUSTRY trade body The Pension and Lifetime Savings Association calculates how much a single person and a couple need to afford different levels of comfort in retirement. They factor in all household bills, groceries, travel and car costs, going away on holiday, clothes, beauty treatments and more, into the amount of money you need per year. There are three lifestyle levels - minimum, moderate and comfortable. Here's how much you need per year to afford them all. Basic retirement: A single person needs £13,400 annually for a basic retirement lifestyle, while a couple needs £21,600. This covers essential needs plus a few extras like a small holiday and monthly cheap meal out. Moderate retirement: A single person needs £31,700, while a couple needs £43,900. This covers one holiday abroad a year, eating out once a week, and budget for two or three weekly activities like going to the cinema or swimming. Comfortable retirement: A single person needs £43,900, while a two-person household needs £60,600. This includes a foreign holiday and several mini breaks a year, as well as beauty treatments and hair appointments every six weeks.
The Independent
21-03-2025
- Business
- The Independent
The smart savings moves to make before the new tax year starts
With the end of the tax year fast approaching on April 5 2025, time is running out for savers and investors to make the most of allowances before they 'reset'. But research indicates that 'investment anxiety' is holding some people back, with seven in 10 (70%) UK adults citing barriers such as a lack of experience or concerns around losing money. Craig Rickman, a personal finance expert at interactive investor (ii), which commissioned the research, suggests firstly, making the most of your Isa allowance. The annual limit for the amount that can be newly saved into Isas is £20,000. Rickman says: 'If you have unused Isa allowance this tax year and plan to add more, make sure you do before the allowance resets.' He also highlights the various different types of Isas to choose from, including Lifetime Isas, Innovative Finance Isas and Junior Isas (for children). Savers may choose to hold their money in cash, stocks and shares, or a combination. Lifetime Isas can be useful to people saving for their first home as they come with a government bonus, but there are terms and conditions to consider, such as potential withdrawal penalties in certain circumstances. Innovative Finance Isas, meanwhile, enable investments to be made with businesses. Rickman says that when choosing an Isa, 'the best one for you will depend on your personal goals and risk appetite'. Putting money into investments, rather than cash savings, does carry the risk of getting back less money than you paid in, although there may be bigger rewards – if it turns out that the investments perform relatively strongly over the longer-term. Rickman says Junior Isas can be a great way to help children navigate the wave of financial challenges of early adulthood. 'While only a parent or guardian can open a Jisa for a child, anyone can contribute once the account is up and running,' he adds. Potential returns and rates of interest will be something savers often weigh up when considering savings accounts, but something else to consider might be whether an account aligns with your values. Roger Hattam, director of retail banking at Triodos Bank UK, says: 'Whether you're saving in a cash Isa, or investing in stocks and shares or innovative finance, your money won't just sit there: it will be actively used by your bank to fund whichever businesses and sectors that bank sees fit. And this is where your choice really matters.' He adds: 'Even a small amount of money can make a huge impact when it's being invested back into transformative projects that deliver measurable positive impact.' Hattam suggests researching ethical campaigns and independent guides to find more sustainable and transparent savings products.
