Words About Things

A recent study by the financial services company Prudential has shown that only 18% of people nearing retirement age feel that they have saved enough money for a comfortable retirement. Of the 1,001 people interviewed for the study 57% said that they would be willing to work past their retirement age in order to receive more money once they did stop working. While most had money saved up in financial investments and current accounts they did not feel that it was enough to maintain the standard of living they had become accustomed to.

Around 25% of people due to retire within the next year said that they would be happy to work for another 5 years in order to save more money. 7% of participants had considered working for an extra 10 years in order to make their retirement years more comfortable. Only 1 in 5 felt that they were financially ready to retire. Vince Smith-Hughes of Prudential said that these figure represent an issue faced by many of retirement age:

“”Working beyond the normal retirement age is already a reality for many people who either have insufficient savings or simply want a greater income when they do come to retire. But for a lot of people planning to retire in the very near future the state retirement age is sacred and their expectation has always been to retire at 65. Once they reach that milestone, regardless of the amount of money they have, they simply do not want to work anymore.”

Around a third of people expect their standard of living to fall once they retire compared to only 12% who expect their retirement to account for a raise in their standard of living. Most of us look forward to our retirement but these figures show that we must focus on preparing financially in order to be relaxed about our futures. Without significant saving we may find that retirement is a struggle when it should be a pleasure.

A recent report quoted in the Times says that one in five men have a savings account that their partner knows nothing about. These accounts contain on average around £2000 hidden away from prying eyes. Whilst it is not unusual to have separate savings accounts it may come as a surprise to some women that their boyfriend or husband has a secret account. In contrast only 10% of women had an account that their partner did not know about.

One theory is that men wish to have a portion of their savings which are not accessible to their partners. This isn’t necessarily just money to spend in strip clubs and on the horses.  The accounts may be more symbolic than useful although they may also have practical uses. They may be long term investments or instant access savings accounts for day to day spending. They could be used for a variety of reasons:  guilt free spending, risky investments or just to ensure a feeling of independence. The fact that it is men who are more likely to have these accounts  sheds a little light on the differences between how men and women think about money:

“It comes as no surprise that more men have a savings account unknown to partners, and more men make major financial decisions without their partners. Both on a biological and societal level, men perceive such concepts as ‘success’, ‘dominance’, ‘ambition’ and ‘money’ to be bound up together, leading men to view money as the tangible proof of their personal and work success. The more money that is stashed or negotiated, the higher a man deems his self-image and social standing to be.” – Psychologist Donna Dawson

It might not entirely be based on self image however, consider the rise in divorce rates. A secret account may be a less offensive step for a man to take than a prenuptial agreement.  Your partner discovering your secret account may be worse however than both agreeing on a Pre-Nup. Hiding savings (or even worse, debt) is never a good idea however, being open and discussing money must be the best policy.

So if your partner turns out to have a secret savings account should you be worried? Perhaps not but you should necessarily be excited either, only 7% of people with a secret account said that they were saving money to spend on a present for their partner.

The amount of money that can be saved in a tax free ISA was increased on the 6th of October for those aged 50 and over. The rest of us will see our ISA allowance increase at the beginning of the new tax year in April 2010. The new top limit is £10,200 half of which can be cash with the other half being shares:

A cash component: a cash deposit that is similar to any other ordinary savings account, apart from the tax-free status. A TOISA must consist solely of a cash deposit.

A stocks and shares component: the money is invested in ‘qualifying investments’ consisting of any combination of stock market equity investments (with no geographic restriction), public debt securities such as government or corporate bonds, or cash “awaiting investment”. As a consequence, the risk profile of the ISA may be anything from low to high. The investments may also include or consist of property funds or derivatives such as options. This element may be self-invested and managed through a stockbroker, but the majority of investors invest collectively through a collective investment such as a unit trust, OEIC or investment trust.

The limit has risen from £3600 per year cash allowing us to save an extra £1500 tax free. Unfortunately 40% of Britons feel unable to save. Those who can save may not see a great deal of benefit in having their money in a low-interest ISA rather than a standard savings account. Still an ISA is a good way of saving and keeping the dreaded tax man at bay.

Today it was reported that the country is still in the grips of a recession much to the surprise of most. The nation’s economy contracted by 0.4% between July and September which was the sixth consecutive quarter to see a reduction.

As the graph above shows the GDP has reduced by less this quarter but the fact that there was a reduction means that this is the longest recession we have witnessed.

A recent survey has shown that almost half of Britons are unable to save. Only 60 percent of those asked managed to put money into their savings account each month, saving on average £206. Back in January 34% said that they were unable to save. Of those who were able to top up their savings 65% used instant access savings accounts.

Another survey back in July found that a quarter of people had no savings put aside at all. With unemployment still rising those who are not saving must be concerned about what will happen if the are made redundant. We are lucky enough in this country to have support systems in place for those out of work but it is still not a good time to be job hunting.

Those unable to save should console themselves with the fact that ISA interest rates have hit an all time low. Its great to have saving to fall back on but those savings wont be growing by much until the economy recovers.