How to plot out your route to retirement

WITH retirement on their minds but wondering how they could do it without jeopardising their finances, investing in advice from a financial planner was a move that paid handsome dividends for the Armstrongs.

Campbell Armstrong, a head- teacher in Kilmarnock, decided it was time to get some help when he and his wife, both 59, last year turned their thoughts to retiring.

“We needed to talk to someone about whether we could actually afford to retire,” Armstrong said. “Someone who could ask the right questions, clarify what we had, what we wanted and what our commitments would be.”

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It may sound simple, but mapping the way ahead with a qualified financial planner in that way can make all the difference when it comes to working out where you stand financially and how to make the best of it.

Duncan Glassey, financial planner and partner at Edinburgh-based Wealthflow, said: “Financial planning isn’t just about ‘getting rich’ or offering the latest piece of investment advice. It’s about financial independence – helping you achieve your goals in life, no matter how much money you have.”

And now is a good time to get a grip on money matters, as government spending cuts, high unemployment and rising prices combine to pile the pressure on household finances.

Just one in five Scots thinks they are saving enough for the future and almost half worry that they haven’t saved enough for a comfortable retirement, according to new survey results. Almost six in ten worry about money either all or most of the time.

The research was carried out to mark Financial Planning Week, a national awareness campaign starting tomorrow organised by the Institute of Financial Planning (IFP).

Nick Cann, chief executive of the IFP, said: “These findings present a worrying picture for so many people who are facing an uncertain future yet not taking appropriate steps to improve their situation.”

So, as Financial Planning Week gets under way, here are some tips on sorting out your finances.

Work out a budget

This is the foundation stone of financial planning, without which it’s difficult to know how to get on the right track and stay there.

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Set aside an hour or two and jot down all the money coming in and the money going out, producing columns comparing income and expenditure. This should help pinpoint areas where you can cut your spending without having to make sacrifices. Can you switch to a cheaper energy supplier, for example, or do you have regular direct debit payments that need cancelling?

What do you want to do?

Think about your goals for the future, suggests Mark Brownridge of Mazars Financial Planning. “This would include things such as when do you want to retire and what you want to do with what little time you have left on this planet,” he said. “Once finished, you will know where you stand currently and where you want to get to in the future.”

For inspiration, try out the lifetime cashflow planning tool at

How much do you owe and what is it costing you?

If you’ve got a range of debts, such as a mortgage, personal loans, credit cards and store cards, work out how much you are spending on them and if there’s a way to ease the burden. Mortgage or rental payments take priority but, beyond that, make sure you’re paying off the highest-interest debts first, such as credit cards. But be careful to prioritise your household payments, factoring in tax and utility bills, for example.

Are you paying too much tax?

From savers failing to use tax-free individual savings accounts (Isas) to married couples not taking advantage of both capital gains tax (CGT) allowances, millions of pounds are being wasted on unnecessary tax.

Brownridge explained: “You can use your annual Isa allowance to invest up to £10,680 in either a cash account or in stocks and shares and you won’t pay any income tax on your interest.

“Also, remember that everyone can realise capital gains up to £10,600 in 2011-12, and married couples can transfer assets between them on a no-gain, no-loss basis. So if you are planning on selling an asset, such as a property, make the most of both your CGT allowances by transferring all or part of an asset to your partner at no extra cost.”

Do you have a safety net?

The number of Scots saving money each month is rising even as real incomes fall, according to new research by Aviva. As fears grow over the economic outlook, the threat of redundancy and a possible double-dip recession, building a rainy-day fund has moved up the priority list. If you have a lot of debts to pay off, they come first; but if they’re under control, a rainy-day fund is important.

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Financial advisers generally recommend keeping a savings pot of between three and six months’ pay, to cover you in the event of redundancy or unexpected expenses. The rates on savings accounts may currently fall short of inflation but it’s well worth shopping around for the best deal available if you’re in one of the many accounts paying 1 per cent or less.

What about investments?

When that safety net is in place, turn your attention to saving for the longer term. Set goals: whether it is funding for a home deposit, paying for a wedding or putting money aside for retirement. That opens up the savings options to include Isas, fixed rate bonds and, further up the risk scale, collective funds giving exposure to the stock market.

Can you withstand shocks?

In the current economic climate, the financial consequences for families of events such as redundancy, illness and death can be particularly far-reaching. Make sure the household’s breadwinners have insurance in place that pays out in the event of being unable to work due to illness or redundancy – income protection is the best option.

Also cover other assets such as your house and car, taking time to search the comparison sites for the most competitive deals rather than renewing automatically.

A surprising number of families have no will in place, meaning any assets left behind on death may not go to the preferred beneficiaries.

Glassey said: “Anyone who owns assets has an estate. Upon a person’s death, those assets must, by law, be properly distributed. Without proper planning, a court could determine their distribution, which may not be the wishes of the deceased.”

When do you want to retire, and what will you live on?

Start by working out what you have. You can obtain a forecast of your state pension entitlement from the Pension Service (0845 3000 168 or

Your pension company can provide a figure for your projected fund at retirement, although some may be based on over-optimistic growth assumptions.

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It’s all too easy to underestimate how much income you’ll need to enjoy a financially comfortable retirement.

Glassey said: “Most Scots don’t know how much to save and aren’t saving enough for retirement, according to numerous polls and experts. Increasing life expectancy has made saving for retirement even more complex. It’s never too soon, or late for that matter, to begin.”

That means taking advantage of any workplace pension available – especially if your employer makes contributions as well – and making your own provision, using personal pensions and Isas for maximum tax efficiency.

Fewer than three in ten Scots are making any kind of pension savings, according to the IFP, yet 40 per cent would take action if it meant they didn’t have to delay their retirement age.

Working out how they could afford to retire was the main reason why the Armstrongs went to a financial planner, Kevin Garfagnini of Mazars. And the good news is that it more than paid off, with the couple having both retired in August this year.

“We retired as we had intended, but without financial planning we wouldn’t have been able to do it with the same confidence,” said Campbell.

“You’ve got to pay for it, but the cost of the advice was laid out before we did anything else and it has more than paid dividends. It was definitely worth doing.”

For more tips on boosting your finances, visit