Shirley Ballas: Hello, I'm Shirley Ballas and welcome to Rewirement, the retirement
Shirley Ballas: podcast from Legal & General. I'm on a mission to help you
Shirley Ballas: reset, reinvent, rewire for the retirement you want. Every fortnight
Shirley Ballas: I'm joined by fabulous retirees and would- be retirees, with
Shirley Ballas: their own unique take on retirement.
Tracy: Now that I'm entering my 50s, maybe it's a rite
Tracy: of passage and I need to start talking about these
Tracy: things with my friends.
Shirley Ballas: Plus my brilliant panel of experts will be diving in
Shirley Ballas: to tackle the big questions. They'll share their suggestions to
Shirley Ballas: help make your post- work years the most exciting of
Shirley Ballas: all. There's a reason this program's called Rewirement. For many
Shirley Ballas: people, retirement involves a change of pace, a different outlook
Shirley Ballas: and a different day- to- day. But before you get
Shirley Ballas: there, it's important to put yourself in the best position
Shirley Ballas: possible, both financially and in your attitude to money. Fortunately,
Shirley Ballas: the experts are here to tell you what you can do
Shirley Ballas: at any age to get yourself ready and steady before
Shirley Ballas: retirement day comes. Emma Byron and Holly Mackay will be
Shirley Ballas: with me in the studio later, but first let's catch
Shirley Ballas: up on our retirement planning friends. I'm chatting to Debbie today.
Debbie: My name's Debbie. I'm 50- years- old and I am
Debbie: still working. I think this time of life is particularly
Debbie: exciting because I feel financially more comfortable than I have
Debbie: done in the past. The children are less reliant on
Debbie: me, on us, should I say? And we're now looking
Debbie: forward to retiring sooner rather than later, and hopefully enjoying
Debbie: it while we still have the physical capacity to do so.
Shirley Ballas: She's only just beginning her journey to working out her
Shirley Ballas: retirement finances. And I wanted to know what sort of
Shirley Ballas: questions are in her head. Debbie, what else do you
Shirley Ballas: think needs to be done to help you get to
Shirley Ballas: a place where you're really comfortable with your retirement plan?
Debbie: I think, first of all, I need to work out
Debbie: exactly how much I currently have. So, find all my
Debbie: pension pots, actually get answers about what the yield is
Debbie: going to be when I do retire and plan that
Debbie: way. Maybe it's time at the moment while we're relatively
Debbie: secure, touch every piece of wood I can find, to
Debbie: put more aside, maybe that's the answer, maybe I'll have
Debbie: to do that. I think if everything went tomorrow and
Debbie: we had to retire, we would downsize and we'd be
Debbie: okay, because again, it's down to house property value, isn't
Debbie: it? So, our house, if we sold it now, we
Debbie: could get something in the West Country, much smaller for
Debbie: a lot less money and be mortgage free. So, there's
Debbie: always that kind of safety net, if you like, but
Debbie: yes, maybe we should be putting more away. But the
Debbie: other thing is that the retirement age, I mean, when
Debbie: will that be? When realistically, can you look to retire?
Debbie: It's so different now to how it used to be.
Debbie: I mean, my husband's a police officer, but he hasn't
Debbie: been in the force since he left school. So, the
Debbie: usual rule is 30 years and that's it, you retire,
Debbie: but he hasn't got that because he started so late.
Debbie: So, he's going to have to keep going until he's reached
Debbie: a certain amount of pension that he's built up. I
Debbie: don't know how long I'll have to work before I've
Debbie: got a decent amount saved up. It's all very different,
Debbie: very different now.
Shirley Ballas: Today's society is a lot different. Isn't it? Most people
Shirley Ballas: aren't thinking about that and what's going to happen when
Shirley Ballas: they turn 60 or how they're going to manage, well,
Shirley Ballas: not the groups of people I talk to, anyway. Debbie,
Shirley Ballas: when you retire, how much money do you think you're
Shirley Ballas: going to need? Would it be 80% of what you're
Shirley Ballas: earning at the moment, 50% of what you're earning? What
Shirley Ballas: do you think you will need when you retire, to
Shirley Ballas: live on?
Debbie: I honestly don't know, we haven't sat down and done
Debbie: the sums. I think we've always been assuming that because
Debbie: of my husband's final salary pension, we will be able
Debbie: to pay off the mortgage. So, in my head, whatever
Debbie: we've got from pension income from that point will have
Debbie: to do, and that's kind of where I'm at and
Debbie: that's probably not the best way to look at it.
Debbie: I should be thinking ahead more. But I think once
Debbie: the house is paid off, everything else you can make
Debbie: do with. I'm in a situation where, because I've worked
Debbie: in so many different places, I've got lots of little
Debbie: bits of pension and savings and stuff all over the
Debbie: place. And quite recently, actually, I tried to get it
Debbie: all in one place and I'm still doing that, and
Debbie: I absolutely hear you. It is so important for everyone
Debbie: to know where everything is, because if I can't keep
Debbie: track of it, no one's got a hope when I go.
Shirley Ballas: That's exactly what I'm going to do as well. Debbie,
Shirley Ballas: is it good to talk about money? Are you comfortable talking
Shirley Ballas: about money with your husband and your children?
Debbie: Yes. Very comfortable talking to my husband about it. That's
Debbie: absolutely no problem at all. I think, as a society,
Debbie: we don't really talk about money, especially retirement and the
Debbie: savings and insurance and things like that. As you said,
Debbie: it goes back to death, doesn't it? People don't want
Debbie: to talk about that kind of thing, but I think
Debbie: that people should talk about it. I actually had a
Debbie: financial advisor in my very first job, so I was
Debbie: 21, and he came in and he talked to me
Debbie: very, very rationally about what I ought to be doing
Debbie: at that stage, and of course, I didn't, but I
Debbie: did make a start. And I think the more people
Debbie: that know about that early on and actually take it
Debbie: on board and listen and do something about it, they'll
Debbie: be a much better position when they get to retirement.
Shirley Ballas: Is there anything you would change moving forward?
Debbie: Yes. I think I'm probably going to consider my kids
Debbie: more. It is a completely different state of play now
Debbie: with the kids growing up and getting onto the property ladder.
Shirley Ballas: So, Debbie, what the most pressing questions you have around
Shirley Ballas: financial planning for retirement and what questions do you think
Shirley Ballas: others will also be confused over?
Debbie: I'm not a hundred percent clear exactly, at the moment,
Debbie: what I will end up getting when I do retire.
Debbie: And I'm aware that things change as life goes on,
Debbie: and rates change and go up and down, and investments
Debbie: change. Bearing in mind, I have quite a few different
Debbie: pots of money in different places, it's not a hundred
Debbie: percent clear what I'm looking at. I'd like a little bit more
Debbie: education, really, and to understand more what each of these
Debbie: pots of money does, how it performs and what the
Debbie: effects of different things in the economy is going to
Debbie: have on it.
Shirley Ballas: Colin and Tracy are still working, but have a few
Shirley Ballas: options on their plate. I asked them to compare notes
Shirley Ballas: on where they seek advice.
Tracy: In the past, I have spoken to an independent consultant,
Tracy: many years ago, actually. And I think that was recommended through
Tracy: a friend. But I think my current context, at the
Tracy: moment, I haven't really sought advice in terms of where
Tracy: I'm sitting now, because it was a few years ago.
Tracy: I probably could go online and get some advice via
Tracy: the teacher's pensions, government pension, and maybe get in touch
Tracy: with people there to find out a bit more about what
Tracy: it's going to look like and what my options would
Tracy: be. I prefer face- to- face, though, and talking with
Tracy: somebody. So, I feel as though, perhaps, I haven't sought
Tracy: as much advice as I should have done because I
Tracy: don't know at the moment what my options are. I
Tracy: would probably go back to teacher's pension and maybe try
Tracy: and get another independent financial advisor, perhaps, to talk about
Tracy: ways forward and what it will look like in the
Tracy: future. And surely, there must be some sort of badge
Tracy: of ... That they would be accredited to or signed up
Tracy: to, to know that they are a good financial advisor,
Tracy: providing robust advice and legal advice to you. Now, I
Tracy: don't usually talk about such matters with my friends, but
Tracy: perhaps we should, now that I'm entering my 50s, maybe
Tracy: it's a rite of passage and I need to start
Tracy: talking about these things with my friends.
Shirley Ballas: I mean, you don't have to tell them what you're
Shirley Ballas: worth. You don't need to say how much money you've
Shirley Ballas: got or what you're thinking about investing. You can just
Shirley Ballas: have a conversation about investment, about pension policies, about the
Shirley Ballas: future. What did they do for their children? What are
Shirley Ballas: they thinking about doing for their children? What are they leaving?
Shirley Ballas: Or talk about the mortgage, is it paid off? Isn't
Shirley Ballas: it paid off? I think the more that you can
Shirley Ballas: communicate, the easier these decisions are to make.
Tracy: Talking about it is only going to help. Isn't it?
Shirley Ballas: Colin, where do you seek your advice when it comes
Shirley Ballas: to your pension plans? Do you have anybody special, anybody in mind?
Colin: I did have, when I first set up the schemes,
Colin: when I first started my unlimited company, there was a
Colin: financial advisor, who'd been recommended to me by a friend
Colin: who was just round the corner from where I worked.
Colin: And I worked there for about seven years and it
Colin: probably isn't a coincidence, but when I left that organization and
Colin: went somewhere else, 80 miles away, it was never convenient
Colin: to just pop round and see the guy to talk
Colin: about where we're at, do we need to replan things?
Colin: Do I now need to take out this sort of
Colin: insurance plan? How would my pension go in? Although, he
Colin: was only ever on the end of a phone, this
Colin: was probably still pre- mobile phone days. So, yeah, he
Colin: was good. What actually happened was that, fairly soon after
Colin: I took out some of the schemes, that a lot
Colin: of consolidations and mergers and acquisitions took place. So, it
Colin: seemed like every time your plan settled down, it then
Colin: got acquired by somebody else. And then, two years later,
Colin: somebody else acquired it. And so, it got to the
Colin: stage where you thought, " I now don't know whether that's
Colin: the plan that's suitable for me." So, that's probably about
Colin: the time that I stopped contributing to them, and since
Colin: then, I've generally done all the research myself, a lot
Colin: of homework, very rarely rush into making any decisions of
Colin: that type. My friends and family would tell you I'm a
Colin: bit of a spreadsheet nerd, in that I put all the
Colin: information into spreadsheets, analyze it, and that's how I make
Colin: my decisions.
Shirley Ballas: Remember David and Marcus? Our choir singers. David retired after a
Shirley Ballas: career in finance, but Marcus is still working in his
Shirley Ballas: own business. I asked them if they prefer to educate
Shirley Ballas: themselves or take advice from specialists? David was first to answer.
David: I mean, because I've been involved in finance and I'm
David: interested in it, I was never likely to ignore this
David: field, but when you're busy and you're working all hours in
David: practice, you don't do much more than make cursory checks
David: on statements that come in. And even, when I look back at the
David: information that I've received, when I've left jobs and so
David: on, that there've been quite a lot of errors and inconsistencies
David: in those, which I didn't pick up at the time.
David: So, it is much more recent, I would say, from
David: perhaps my mid- 40s onwards when I started to look
David: in to a little bit more detail, but I'm still
David: learning. My wife is not particularly engaged and she didn't
David: do a frontline role. She was secretarial for the general
David: management. And I think it's fair to say there's more
David: linguistic than numerate in terms of her skill preference. So, I
David: involve her in the decisions or I tell her what
David: I'm planning to do, but she really does leave it
David: to me. She has, I think, after I made one
David: error, I mean, the worst financial decision I probably took
David: was on her final defined benefit pension with the bank
David: that she worked. So, she's never quite forgiven me for
David: that, but hopefully I do get more things right than
David: the wrong in regard to her pension situation.
Marcus: I'd like to be in the room when David's wife
Marcus: hears that he thinks she's more literate than numerate. There
Marcus: are three of us directors in the firm where I
Marcus: work and our financial interests are therefore very much intertwined
Marcus: and that's been fantastic because the three of us have
Marcus: gone through this journey together and have had a lot of
Marcus: chance to talk through and discuss how we wanted to do things. So, I think
Marcus: that's been my main support group and my main way
Marcus: of finding out the options.
Shirley Ballas: It's great to hear how our would- be retirees are
Shirley Ballas: looking ahead and asking the big questions. So, what do
Shirley Ballas: you need to ask yourself to get the basics right
Shirley Ballas: in retirement? And do you need to have it all
Shirley Ballas: worked out before the big day arrives? I'm joined, once
Shirley Ballas: more, by Legal & General's Emma Byron, managing director of retirement
Shirley Ballas: income, as well as Holly Mackay, founder of Boring Money.
Shirley Ballas: What a dream team to give your financial planning a
Shirley Ballas: boost, welcome both. Emma, for some people, their retirement might
Shirley Ballas: be almost as long as their working life. When do
Shirley Ballas: you begin to even work out the numbers for that?
Emma Byron: I think, if you look at it in that way,
Emma Byron: then it feels like a insurmountable task, really, to undertake.
Emma Byron: I don't think any of us start our working life thinking
Emma Byron: about planning for the next 30 years. That's for sure.
Emma Byron: Most of us all work out what we're going to
Emma Byron: be paid, and then what that means we can afford
Emma Byron: in rent or mortgage and how many times a week
Emma Byron: we can go out. So, I think people should try
Emma Byron: not to see it as something completely different to that.
Emma Byron: The first step is really to understand the assets that
Emma Byron: you've got, what retirement income sources you might have. So,
Emma Byron: get your health in order. Think about all of those sources
Emma Byron: of assets, think about maybe consolidating your pension pots, so
Emma Byron: you've got all of that information in one place, to make
Emma Byron: it easier to manage. The government certainly offers a very
Emma Byron: basic tracing service for lost pensions, but we'll also at Legal &
Emma Byron: General, we'll be launching our own tracing service later this
Emma Byron: year, which will help people to do exactly that. Find
Emma Byron: everything they've got, put it in one place. I'd always
Emma Byron: say though, it's not just about what you'd consider to
Emma Byron: be retirement assets, but also any other assets that you
Emma Byron: have, like bonds or savings accounts, ISAs, et cetera. So,
Emma Byron: in the same way as you, at the start of your working life
Emma Byron: would be thinking about what money you're going to have
Emma Byron: each month, it's the same thing really for retirement, getting
Emma Byron: that in order. And then, you can start thinking about
Emma Byron: a different range of scenarios, none of us know how
Emma Byron: long we're going to live for, or how long we're planning for, or
Emma Byron: therefore how long that money needs to last you. So,
Emma Byron: rather than try to pin yourself on the average life
Emma Byron: expectancy, I don't think any of us would consider ourselves
Emma Byron: to be average. I think it's about looking at about
Emma Byron: a different range of scenarios. How would you manage if
Emma Byron: you live to 110 versus if you live to 80,
Emma Byron: and think about it in that way, rather than trying to
Emma Byron: pin yourself to a single lifelong plan.
Shirley Ballas: Okay. Do you have to have it all worked out in
Shirley Ballas: your 40s or can you adapt and change your plans
Shirley Ballas: as you go along?
Emma Byron: Well, I'd hope you don't have to have it all
Emma Byron: worked out in your 40s. I'll be 40 in a
Emma Byron: few months and I certainly haven't got life all worked
Emma Byron: out, that's for sure. So, I think as you approach
Emma Byron: your 40s, it's is a good time to be thinking
Emma Byron: about it. You want to make sure that you are thinking
Emma Byron: about retirement early enough on, to make sure that you
Emma Byron: save enough money. And also, I think that people get familiar
Emma Byron: with some of the concepts and the products and so
Emma Byron: on, that you might want to use in retirement. The
Emma Byron: earlier you do that, I think, the easier it is
Emma Byron: when you come to retirement, doesn't feel like such a
Emma Byron: daunting decision, if you've engaged with your retirement savings much,
Emma Byron: much earlier. In terms of if you end up living
Emma Byron: longer than you expected, again, it's about, I think, scenario
Emma Byron: planning, thinking about if you did live longer, is there
Emma Byron: a different source of asset that you might want to
Emma Byron: draw down on? So, perhaps you'd want to use your housing
Emma Byron: equity, for example, as a backup plan, if you run
Emma Byron: out of money or you live longer than you expected,
Emma Byron: and then obviously having some form of secure, guaranteed income
Emma Byron: through retirement, such as an annuity or a defined benefit
Emma Byron: pension, if you're lucky enough to have one of those, also,
Emma Byron: will just give you a bit of peace of mind
Emma Byron: that you will have sufficient money to at least meet
Emma Byron: your basic living needs.
Shirley Ballas: Lots of notes there. Holly, what sort of people do
Shirley Ballas: you get coming to you for help with their retirement
Shirley Ballas: finances? What are the most common questions you hear?
Holly Mackay: We get all sorts, is the honest answer, we had
Holly Mackay: about half a million people on our site last year,
Holly Mackay: from people with millions of pounds to invest looking for
Holly Mackay: tips, to people who had 20 pounds a month to
Holly Mackay: save into an ISA. So, all sorts. What I would
Holly Mackay: say is amazing, pretty much everyone I ever talk to
Holly Mackay: about money, secretly feels really stupid about it. They assume that
Holly Mackay: everyone else is smarter than them, better at math than
Holly Mackay: them, richer than them, more organized than them. So, I
Holly Mackay: tend to spend a lot of time saying to people, "
Holly Mackay: It's not that you're dumb, it's that the industry explains
Holly Mackay: it in such a boring and a complicated manner." So,
Holly Mackay: I try and put people at ease. This is baffling
Holly Mackay: for many of us. The most common questions I hear,
Holly Mackay: I think, are sometimes it's just, " Where the hell do
Holly Mackay: I start? Should I be saving into an ISA or
Holly Mackay: a pension? Or what do I do there?" Risk is
Holly Mackay: a really, really common question. People saying, " How much might
Holly Mackay: I lose?" Actually, is the thing that most people start
Holly Mackay: off wanting to know, " How much could I make?" And
Holly Mackay: then around retirement as well, people even ask, " When can
Holly Mackay: I retire?" As if that's the job of a pension
Holly Mackay: company to tell them that, it's, I think, because it's
Holly Mackay: such a baffling area, people expect that someone's going to
Holly Mackay: tell them what to do. So, it's trying to work
Holly Mackay: with people to help them understand the choices that ultimately
Holly Mackay: are theirs to make. Of course, when you retire is
Holly Mackay: up to you. And as we'll go on to discuss,
Holly Mackay: I suspect, dependent largely on how much money you've got
Holly Mackay: saved up, but also in what you want to do.
Shirley Ballas: We heard a few different experiences of advice from our
Shirley Ballas: Rewirees. What would you recommend in regard to advice?
Holly Mackay: I think is difficult. I mean, the reality is that
Holly Mackay: advice still can be quite a tainted brand and lots
Holly Mackay: of people don't trust financial advisors, but the world has
Holly Mackay: changed over recent years. And there has been a split
Holly Mackay: now between advisors getting any sort of financial encouragement to
Holly Mackay: recommend any particular brands. So, that bias that was there
Holly Mackay: in the past, isn't there anymore. And I think, in
Holly Mackay: general, the profession is a lot tighter, a lot better
Holly Mackay: than it used to be. Something else other people don't
Holly Mackay: really know, is that you can pay on an hourly
Holly Mackay: basis for financial advice. You don't have to lock yourself
Holly Mackay: into a lifelong relationship, and fees range from about 150
Holly Mackay: pounds an hour to 200 pounds an hour. So, sometimes,
Holly Mackay: if you just want a steer that you're not doing
Holly Mackay: anything daft, you might be able to look at that
Holly Mackay: as an option. And there are other services. One, I
Holly Mackay: think that's quite interesting for people coming up to retirement
Holly Mackay: is called a cashflow modeling service. Now, this will set
Holly Mackay: you back typically about two or 3, 000 pounds, but
Holly Mackay: you sit with an advisor and you say, " This is
Holly Mackay: how much I've got." And they work it through with
Holly Mackay: you and effectively see if your plans are affordable or
Holly Mackay: whether you're likely to run out of money or not.
Holly Mackay: So, there are bite- sized ways you can get financial
Holly Mackay: advice without having to think that it's an ongoing relationship
Holly Mackay: for life.
Shirley Ballas: Emma, from your experience, what do you think are the
Shirley Ballas: common pitfalls people have in terms of their mindset? For
Shirley Ballas: example, do people assume they won't live as long as
Shirley Ballas: they do? Do they overspend in the first few years?
Emma Byron: I think the first mistake people often make, or the
Emma Byron: common pitfall for people is that they've put their head
Emma Byron: in the sand. They're scared to think about retirement. They
Emma Byron: don't understand the terminology. People who have to kind of bite
Emma Byron: the bullet and spend a day really thinking about retirement
Emma Byron: and trying to understand it. And there's lots of tools
Emma Byron: out there and information out there from the government in terms
Emma Byron: of Pension Wise and also on providers, websites and so
Emma Byron: on. So, I think the second one, as you mentioned,
Emma Byron: people do underestimate how long they'll live for. Often, people
Emma Byron: will use an indication of how long their parents have
Emma Byron: lived for and expect that that's how they themselves will live
Emma Byron: for. But as we know, people are living longer and
Emma Byron: longer thanks to medical science and healthier lifestyles, and so
Emma Byron: on, is much more related to education, socioeconomic factors, lifestyle
Emma Byron: factors, do you drink lots, do you smoke? None of us
Emma Byron: are average. Looking, there's life expectancy calculators out there, that
Emma Byron: would allow people to plug in some information and see
Emma Byron: how long they are expected to live for. But by
Emma Byron: definition, that's an average. So, some people will live for
Emma Byron: a lot longer than that and some people for less
Emma Byron: time. So, I think around that point, it would be
Emma Byron: back to, I think it's planning for different scenarios and
Emma Byron: really thinking through if you were to live significantly longer
Emma Byron: than you expected, how would you manage that? I think,
Emma Byron: in terms of overspending in the first few years, that there's
Emma Byron: a mixture of evidence around that. We see and we
Emma Byron: expect that the jubilation and excitement of being retired, off
Emma Byron: you go on many cruises and fulfilling the travel desires
Emma Byron: that you might not have been able to do, when
Emma Byron: you're retiring or giving grandchildren money, et cetera and now
Emma Byron: you have access to this additional funds. So, I think
Emma Byron: there is definitely a risk that people fall into that
Emma Byron: trap, but saying that, as long as you've thought a
Emma Byron: little bit further ahead, and you still, despite that perhaps
Emma Byron: excessive spending in the first few years, are comfortable, you
Emma Byron: have enough to last later, that's not necessarily something you
Emma Byron: can't do, but again, it's just about thinking through and
Emma Byron: planning for the different options and having some flexibility in
Emma Byron: your spending.
Shirley Ballas: And I think, like you said, also, I mean, I
Shirley Ballas: find it's difficult to even talk to my ... It's difficult.
Shirley Ballas: People don't want to talk about finances, but it is a
Shirley Ballas: subject that needs to be pushed and you have to
Shirley Ballas: talk about it, I feel.
Emma Byron: Agree. I mean, from my perspective, I think it's the
Emma Byron: last remaining taboo in the world, people are much more
Emma Byron: open about sex and different things like that. But money
Emma Byron: is really the last taboo, people don't discuss how much
Emma Byron: money they earn. People don't discuss what savings they have,
Emma Byron: even with their closest family. And really, it is something that
Emma Byron: needs to change. Not that it means people have to go
Emma Byron: around and shouting about how much they're worth, but certainly
Emma Byron: they need to be able to discuss that in order
Emma Byron: to make sensible decisions.
Shirley Ballas: Is it ever too late to start saving for retirement?
Emma Byron: It's usually the meaningful moments in people's life where they
Emma Byron: start to think about saving or pensions, I often use
Emma Byron: the example that when you're in hospital, after having a
Emma Byron: baby, you're given a bounty pack, which has lots of
Emma Byron: leaflets in there about setting up wills and that sort
Emma Byron: of thing, because that's usually the time at which people
Emma Byron: would think about that. Once you have children and you think, "
Emma Byron: Well, I better have a will." And start thinking about
Emma Byron: those things more seriously. So, I think it's not necessarily
Emma Byron: a typical age where people start thinking seriously about things.
Emma Byron: It's normally something that happens in their life. I mean,
Emma Byron: certainly as you, as I said, get towards your 40s and
Emma Byron: you've probably been working for 20 years, you start thinking, "
Emma Byron: God, how much longer am I going to be working for?" And
Emma Byron: that's the time where you do start to think a
Emma Byron: little bit more about whether you've been saving sufficiently for
Emma Byron: your pension or not. And I think, definitely people approaching
Emma Byron: their 40s should be encouraged to take a financial MOT, if
Emma Byron: you like, and look at what they've got today and
Emma Byron: are they saving enough? Because at that age you still
Emma Byron: got time to correct the amount you're saving, if you've
Emma Byron: been undersaving up until that point. So, you've got time to
Emma Byron: improve it and make sure you're going to have the retirement
Emma Byron: that you want.
Shirley Ballas: Lots of people don't save nearly enough into their pension.
Shirley Ballas: What are the options when there won't be enough to
Shirley Ballas: live on when they retire?
Emma Byron: Clearly, if someone is reaching retirement age and they haven't
Emma Byron: saved into their pension, it's a little bit late to use
Emma Byron: a pension as the source of your retirement income, but
Emma Byron: people typically will have other assets. So, if they've been
Emma Byron: prioritizing buying a house and paying their mortgage throughout their
Emma Byron: life, which meant they had nothing left after paying all
Emma Byron: the bills to save into a pension product, their house
Emma Byron: is an asset that they can utilize. And many people,
Emma Byron: particularly coming to retirement now, who don't have huge amounts
Emma Byron: of pension savings and may not be lucky enough to
Emma Byron: have a final salary pension anymore. They do have a
Emma Byron: lot of housing wealth, and they may want to downsize
Emma Byron: there, which gives them one way of accessing that money.
Emma Byron: Or, if they want to stay in their home, then
Emma Byron: using lifetime mortgages is another way in which you can
Emma Byron: utilize the equity in your house in order to provide
Emma Byron: you with money to live off in retirement.
Shirley Ballas: What do you think are the possible pitfalls when people
Shirley Ballas: manage their own pension income?
Emma Byron: People often don't plan for different scenarios. They'll plan for
Emma Byron: the average market return that they expect. And so, when
Emma Byron: there's significant falls in the market, they find that they
Emma Byron: haven't really allowed for that. I think people also often
Emma Byron: panic quite a lot in times of market downturn and
Emma Byron: then choose to do things which are not necessarily the
Emma Byron: most rational, such as switching to cash and so on,
Emma Byron: which would mean the assets wouldn't recover. I think another
Emma Byron: thing that people should always consider and I'm sure, or
Emma Byron: I hope, Holly would agree with me is having enough
Emma Byron: liquidity or a cash buffer around. It's important that you
Emma Byron: have some level of cash buffer available to you. That
Emma Byron: doesn't always mean just keeping it in cash, that there
Emma Byron: are different liquid assets you can use where you could
Emma Byron: be able to access the money easily, but you're earning
Emma Byron: more than a cash return. Products such as fixed term
Emma Byron: annuity product, zero income annuity products, allow you to put
Emma Byron: the money away, but should you need to surrender it
Emma Byron: or partially surrender at any point then you can.
Shirley Ballas: This is so interesting. Holly, any other do's and don'ts
Shirley Ballas: for minimizing the worry in the run up to retirement?
Holly Mackay: Yeah, Shirley, I think pensions are like kind men. You
Holly Mackay: only realize in your 40s how attractive they are and
Holly Mackay: when you're in your 20s, they're just boring. Most of
Holly Mackay: us will always look to our retirement and think, " Golly,
Holly Mackay: I wish I'd done more earlier. I wish I'd started."
Holly Mackay: So, I think we just have to get over that
Holly Mackay: and park that. We are where we are. To me,
Holly Mackay: I worry about things that I can't see. I worry about
Holly Mackay: things I don't fully understand. So, I think the starting
Holly Mackay: point is work out how much you've got and think of
Holly Mackay: your retirement income like a cocktail with three shots. You've
Holly Mackay: got your state pension, the full state pension, if you're
Holly Mackay: eligible for that, you can check on the government's website,
Holly Mackay: is about 9, 000 pounds a year. The second element
Holly Mackay: will be any workplace pension you have, that might be
Holly Mackay: an old final salary scheme. It might be a workplace
Holly Mackay: pension you have today. Now, find out how much you've
Holly Mackay: got in total in your workplace pensions. And a helpful
Holly Mackay: rule of thumb, I think, is to work out how
Holly Mackay: much that might buy you, a year, in terms of
Holly Mackay: retirement income. Divide it by about 20 or 25 and that'll give
Holly Mackay: you an indicator of what annual income you might expect
Holly Mackay: from that chunk of money. And then, the third short
Holly Mackay: is just other sources of assets you have, as Emma
Holly Mackay: said earlier, that might be some cash savings, perhaps some
Holly Mackay: rental income, any ISAs. So, I think jot it all
Holly Mackay: down and just get a very loose feel for how
Holly Mackay: much you're looking at. Then, when you actually can compute
Holly Mackay: that and see it in front of you, then you
Holly Mackay: know what your options are. And we don't have endless
Holly Mackay: options. And for most of us, if the numbers written
Holly Mackay: down in front of us, don't look appealing, our options
Holly Mackay: are either to spend less or to delay retirement and
Holly Mackay: consider some sort of part- time working or indeed delaying
Holly Mackay: retirement entirely for a few years. But I think we've
Holly Mackay: always got to start by just trying to get a sense
Holly Mackay: in our head of what that number is and trying
Holly Mackay: to work through it. I would say as well, Pension
Holly Mackay: Wise is the government's free source of help and guidance
Holly Mackay: for people on this, you can phone them up. They
Holly Mackay: can't tell you exactly what products to buy, but they
Holly Mackay: can give you a very good steer and talk you
Holly Mackay: through all the tax consequences and all the jargon and
Holly Mackay: all the gobbledygook around it and help set your mind
Holly Mackay: at ease a bit.
Shirley Ballas: What if someone has a one- off expense they want
Shirley Ballas: to make happen, like a big bucket list holiday.
Holly Mackay: Oh, doesn't that sound great right now? I'd love to
Holly Mackay: go on a big bucket list holiday right now. I
Holly Mackay: think the only thing, I think, when it comes to
Holly Mackay: pensions and retirement income, I've seen it with many people
Holly Mackay: that perhaps don't trust the financial services industry or they
Holly Mackay: feel nervous. And that for some people, there's a tendency, as soon
Holly Mackay: as you can get your hands on your pension, you want to take
Holly Mackay: it all away and stick it under the mattress and
Holly Mackay: it's mine and it's in my control now. There can be
Holly Mackay: disastrous tax consequences if you rip great big sums of
Holly Mackay: money out of your pension, do read up on it,
Holly Mackay: consider even taking one- off financial advice or at least
Holly Mackay: make sure you check out the tax consequences because I've
Holly Mackay: seen lots of people get burned that way.
Shirley Ballas: Emma, can you summarize for us the steps people should
Shirley Ballas: take when thinking about how to use their money in
Shirley Ballas: retirement? Presumably, they need to start by working out exactly
Shirley Ballas: what they've got.
Emma Byron: Yeah, absolutely. So, I think there's probably four main steps.
Emma Byron: The first being, really, find out all of the assets
Emma Byron: that you've got, the second thing, and this should be
Emma Byron: quite obvious to people, most people budget on a monthly
Emma Byron: basis and know how much they need to cover, rent,
Emma Byron: mortgage, food bills, et cetera. So, working out your basic
Emma Byron: necessities, I think, is the next part. And then, I
Emma Byron: think, trying to plan what your other expenditures, non- discretional spend
Emma Byron: would look like for 30 years is a near impossible
Emma Byron: task. So, I'd say, think about that maybe over the
Emma Byron: next five years, how many holidays do you think you'll
Emma Byron: go on? How often do you think you'll go out for
Emma Byron: meals with friends, family and so on. So, what's that non-
Emma Byron: discretionary spend that you would need? What sources of income
Emma Byron: have you got that you're definitely going to get for
Emma Byron: the rest of your life, irrespective of how long you are
Emma Byron: going to live and is that enough to meet those
Emma Byron: basic needs that you've set out in the second step? And
Emma Byron: then, you can start thinking about the other assets where
Emma Byron: you may have more flexibility to draw down on those
Emma Byron: and move the amount you're spending up and down. So,
Emma Byron: working that into a retirement plan, it is important that
Emma Byron: people don't just plan for a best case scenario, that
Emma Byron: they also think about what would happen if stock markets
Emma Byron: fell or if they lived longer than expected, or should
Emma Byron: they need to have care costs later in life, to
Emma Byron: make sure there's a bit of a buffer there and
Emma Byron: give them even more financial security.
Shirley Ballas: Gosh, I should write a book on this, I feel so educated. Well, there's
Shirley Ballas: a lot to think about, but great to know you
Shirley Ballas: don't have to have it all figured out in one
Shirley Ballas: go. I hope that's helped you map out the path
Shirley Ballas: to planning your finances and staying on top of them
Shirley Ballas: between now and retirement. You can find out more about
Shirley Ballas: retirement planning legalandgeneral. com/ retirement. Next time, we're looking at
Shirley Ballas: what to do when you actually get there and how
Shirley Ballas: to enjoy the lifestyle you've dreamed of in your Rewirement
Shirley Ballas: years. Subscribe on your podcast listening platform. You'll get it
Shirley Ballas: on your device as soon as it's available. Thanks for
Shirley Ballas: listening. I'm Shirley Ballas, and I'll catch you next time.