What should you be getting your money to do for you? It’s a question that is worth asking yourself on a regular basis, as your goals and needs will change as you age.
Your 20s and 30s: building a financial foundation
Getting into the savings habit as early as possible is a good discipline to get used to. If you are offered the chance to join your company pension scheme you should probably take it. Your employer will pay in money on your behalf. If you don’t join you may well regret it later in life as that money will be lost.
Any extra savings you wish to put aside can be placed in flexible and tax-efficient Individual Savings Accounts (ISAs). You can invest up to £20,000 a year into an ISA, with your money being kept in cash, equities, or both. At this stage of life, they can be a useful way to save for a house deposit, and as children potentially enter the picture, ISAs can also be put to work to save for your children’s education.
One thing that is important to bear in mind: thanks to compound interest, money invested early can grow significantly over the years and decades, so action taken now could have a big impact on your future.
Your 40s and 50s: making the most of your peak earnings
By your forties. you will probably be hitting peak earnings and enjoying a better quality of life than ever before. But there is no room for complacency: even if you feel your finances are in shape, it is a good idea to review them at least annually. That way you can make sure you are clear about whether your investments are on target to meet your goals and that you are using all the allowances available to you.
In theory, you could access your pension at 55 and retire. However, most people see their fifties as a stepping stone to retirement. It is a time to give your retirement savings a final boost and to make sure your finances are in order.
Your 60s and beyond: retirement reality
The closer you get to retirement the more carefully you need to think about how best to draw an income from your retirement savings, be they pensions or other investments.
If you have a large estate, you might also want to start developing a plan to reduce your estate for inheritance tax purposes. Gifting money is one of the easiest ways to reduce inheritance tax, but you don’t want to give away money you will later need.
This is also a time when financial gifts from parents or grandparents can make a huge difference to younger generations. A gift to help pay off university debts or to help with a deposit for a first home can provide a young person with greater freedom to save and invest, with the additional benefit that such gifts will reduce the grandparents’ estate for inheritance tax purposes.
The value of investments and any income from them can fall and you may get back less than you invested.
Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.
No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.