Since pension freedoms came into place in April 2015 over £1.8 billion has been withdrawn according to figures from the Association of British Insurers (ABI).
What have people been spending their retirement funds on?
The travel association ABTA conducted research on a sample of participants aged between 55-75 and they found that more than a third intended to use their pension funds to have a holiday of a lifetime.
And it’s not just any old holiday they are planning either. Almost 60% said they would go on the holiday of a lifetime, with over a third of respondents looking to spend between £2,000 and £5,000 on a trip.
Vintage cars are a passion for some, other see it as an investment. The profit made from investing in Vintage Car does not attract capital gains, so besides it being a hobby it can prove rather lucrative. One has to have a good knowledge of the vintage market and mechanical skills an obvious advantage.
Why people should be investing?
“The full Basic State Pension is currently £115.95 a week. The amount of State Pension you get depends on your National Insurance contributions” according to AgeUK
2014 Family Spending data from the Office for National Statistics, said the average pensioner would need £215 per week to cover basic costs such as food, clothes, travel and heating.
The shortfall of £100 per week needs to be obtained from other sources of income. The safest form of income in retirement is an annuity because it guaranteed income. A 65-year old man with £100,000 pension savings could buy an annuity that would pay out £5,500 per year.
One questions whether one lives ones life just to get by and how much savings or income would we require to enjoy our retirement.
The need to invest in a low interest rate world
The Bank of England monetary policy committee had a decisive vote of 8-1 in favour of keeping the interest rates at an all time low. The prevailing lack of economic growth and subdued core inflation are the reasons behind maintaining the low base rate.
This is bad news for savers! The best high interest current account from Santander is paying 3% interest on balances between £3,000 and £20,000.
“Investors are becoming desperate to earn money on their savings and some are being drawn into high risk investments” says Investment Director Arran Kerkvliet. “I spoke with an investor yesterday who recently placed £25,000 in loans to a Brazilian Consumer Credit Company offering 12% interest. The returns sounded fantastic but there were no assets to back up the money he has invested.”
The risk involved with any investment is capital losses and these become more difficult to recover from, as we get older.
Investing in simple things that people understand.
Tangible asset backed investments can offer a greater measure of security. Residential property has been a long time favourite of the British Nation. An Englishman’s home is his castle as well as a wonderful store of wealth.
Capital values have increased substantially over the past three years with annual growth rate of 4.6% across the UK and 9.1% for London according to Land Registry (July2015).
Rental Yields have not been increasing as fast as capital values with 6.5% being achieved in Liverpool and only 4% rental yields in London.
Those looking for higher income and a measure of capital retention could explore simple commercial property investments such as car parks and care homes.
Car Park Investments
For the first time ever, Gatwick Car Park investments are being made accessible to everyday investors. Car Park investments are a long time favourite of pension funds because they are perceived as low risk steady investments that track inflation. A £25,000 investment will secure one parking space with a net rental income of 8% on a five-year lease, assured for the first two years.
Gatwick is the busiest single runway airport in Europe with over 38 million visitors and more than 500,000 bookings at long stay car park. Investors can purchase a car park in a sale and leaseback arrangement from an operator with 10 years experience of meet and greet parking at Gatwick.
Care Home Investments
The UK is facing a serious shortage of care facilities for the ageing population. Britain’s over-65’s now outnumber people under the age of 16 and there is a desperate need for more assisted living developments for the ageing population.
If you were wondering what to invest in UK, there is a particular scarcity of specialist care homes for dementia patients. The government is making cutbacks on NHS spending and privatising parts of the NHS. With £65,000, investors can purchase a leaseholdcare home investment that will provide care to elderly mentally infirm patients with a 10 year income stream of 10% Net after all management costs.