I had a meeting with a client last week, and I said to her at the end: “I really wish that I had videoed our meeting for the benefit of my younger clients”. I can try and nag my clients about savings until I’m blue in the face, but nothing is as effective as a real life example.
In a nutshell, this client has worked for 40 years, and is just about to retire on a personal pension of around £6,000 per year plus the Old Age Pension. To put this into perspective – to enable you to draw an income of that level at the age of 65, you would need a final pension fund of around £100,000. Bearing in mind the average pension fund at retirement in the UK is around £30,000, she is a lot better off than ‘average’.
She explained, rather tearfully, that her total pension income – which will be around £900 per month – would only just cover her fixed outgoings and monthly commitments. After further chatting and investigation, she remembered to tell me that she also had a savings plan which she had started a number of years back, which matures in October this year. When she cashes this in, it will give her an additional one-off lump sum of around £16,000.
What struck home about this was that she had started the plan as a favour to a friend who was ‘selling insurance’. She had told her friend that she wanted to do the ‘cheapest one’. It had not occurred to her at the time that she was only doing herself damage by not contributing more. As she rightly pointed out, if only she’d saved £40 per month, then she would have a lump sum of £32,000 in October.
Partly to try and cheer her up, and partly putting on my practical ‘adviser’ hat, I pointed out to her that she might not have been able to afford to put away any additional money 20 years ago. She shook her head, and said: “I could definitely have saved more, you just don’t think when you are that age. Retirement always seems so long away, but now I am here, there is nothing that I can do about it.”
I will be telling this story to a lot of clients in the weeks and months to come.
Find out how to start your personal pension if you don’t already have one!
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on email@example.com and we’ll put you in touch.