The base rate has been a very low 0.5% since it was cut by the Bank of England in 2009 and there is the possibility that it might be cut even further. This meant I was concerned when I read a recent study by Canada Life that found that 23% workers felt forced to carry on working longer due to the impact low rates have on their savings. It also stated that 85% of 21-30 year olds and 58% of 61-65 year olds were likely to work past 65.
Yet there are steps you can take to give yourself the best chance of retiring at the age you wish to.
- Consider increasing your workplace pension contributions. Auto-enrolment means that employers now are legally required to contribute to your pension pot (unless you opt out) and many will increase the percentage of their contributions as you increase yours.
- The new Lifetime ISA also gives you the option of increasing your retirement savings and beats the current low interest rates. Savers can put in £4000 a year and receive a government bonus of 25%, though beware there are penalties if the cash is taken before retirement or not used for the purchase of a first home.
- A final consideration is moving your savings into a stocks and shares ISA which could offer better returns than cash ISAs. Research has shown that investors would need smaller sums to retire if they invested these in a diversified portfolio, than if they were held in cash, earning low interest rates.
At CBAM we offer a stocks and shares ISA on our Self-Directed platform, you can find out more here.
Please be aware, the value of investments will go up and down and you may get back less than you invested. Any tax benefits or tax planning opportunities depend on individual circumstances and are subject to change.
Nearly one in four workers have seen plans to retire at age 65 knocked off course by ultra-low savings rates for the past seven years, a new survey reveals. Poor returns from savings could have affected the retirement goals of some 7.2 million people in the UK, according to the findings from Canada Life.