Placeholder guide drafted for launch. Andrew to review, edit and approve before it goes live.
When you’re working, rising prices are painful but there’s at least a chance your salary catches up. In retirement there’s no pay rise. Every increase in the cost of food, energy or insurance comes out of the same pot of money, and that pot has to last.
It’s no surprise that people feel less in control. Almost half (47%) think their retirement finances are mainly shaped by things outside their control, and 45% expect their own retirement to be worse than their parents’.1
Separate the essentials from the rest
A useful first step is to split your spending in two:
- Essentials: housing, bills, food, insurance, transport.
- Lifestyle: holidays, hobbies, gifts, the things that make retirement worth looking forward to.
Many people aim to cover the essentials with reliable income, such as the State Pension, any defined benefit pension, or an annuity. The lifestyle spending can then come from more flexible sources, which you can turn up or down depending on how markets and prices are behaving.
Be careful with too much cash
When things feel uncertain, the natural reaction is to build up cash. Some cash is sensible: it gives you a buffer for emergencies and means you don’t have to sell investments at a bad time.
But too much cash over a long retirement can be a risk in its own right, because it may not keep pace with inflation. The FCA has highlighted that more people could benefit from investing rather than holding savings in cash for the long term.1 The right balance depends on your circumstances, your other income and how you feel about risk.
Review, don’t react
Short-term price spikes are a poor basis for long-term decisions. What helps is a plan that already allows for inflation, and regular reviews to check your income is still on track. Small adjustments made early are far less painful than big ones made late.
If rising costs are making you rethink your plans, book a conversation with us.
1. Standard Life Centre for the Future of Retirement, Retirement Voice.
This guide is for general information only and does not constitute personal financial advice. The value of investments can fall as well as rise and you may get back less than you invested. Tax rules can change and their effect depends on your individual circumstances.