Vehicles to help you save for retirement

There are always gains to be made on the stock market, which provides a strong argument for us all to plan for our retirement. Over the course of a 30 or 40-year period, significant gains can be made if a portfolio is well constructed and managed.

The major religions of the world prepare their followers for a ‘good death’. Wise investors instead should prepare themselves for a ‘good retirement’. Retirement can last for more than 30 years and you might have plans to do some amazing things when you retire — go to Samarkand, take up flying, become a vigneron. Can you money stretch that far?

Lets take a look at the main vehicles designed to help you save for retirement:

State pension

These are not provided in the UAE, but if you are from the UK do you still pay your National Insurance contributions in order to qualify for a full basic state pension? The UK government plans to raise the state pension age for men to 66, possible by 2016, while woman will move to a state pension age of 66 a few years after men. The default retirement age of 65 — at which point workers can legally be laid off — will also be axed.

Personal pension

Are you contributing into a structured investment plan whilst you are not paying tax living offshore? At a minimum, you should contribute 5-20 per cent of your earnings into some form of pension vehicle.

Self-invested personal pension

Have you considered investing in a SIPP? If you have existing UK pension savings you could transfer into a SIPP, which allows great flexibility and investment choice.

Company pension

Does your company pay a contribution on your behalf? If not, then there is a stronger argument for you to make separate arrangements into a personal pension.

However, there is a problem with all of these vehicles: some of them give meagre benefits, some weren’t designed for rising life expectancy and the annuities that many people rely on to produce retirement income are producing shrinking returns.

Most people used to a high income from their work should plan to have additional sources of income in retirement, such as personal investments in property and cash savings, as well as investments in equities and bonds.

You can organise all this yourself if you have the time and inclination. If not, independent financial advisers or wealth management companies will help you not just with building your portfolio, but managing it.

Here is a handy retirement checklist to help put you on the right track:

1) What are your goals for retirement?

Try and work out what you think you would like to pay yourself each year an an income from your retirement pot the times that by at least 30 years. This will give you a very basic idea of how much you will need in the pot.

2) Do you understand and have control of your retirement savings?

Are you saving at all or spending it all in the malls? If you are not saving it is time to become responsible and make hay while the sun shines, as these times may not last forever.

3) Have you made the best of any tax allowances you could claim?

Don’t get caught out with a tax charge if you ever return to your home country - take advice now.

4) How much of your retirement strategy is based on getting a lump sum and how much of an income stream?

What other streams of income could you potentially utilise? Could an investment property solve this for you?

5) Have you considered a balanced personal portfolio?

Best to take advice from a qualified adviser who comes recommended.

6) How flexible are you plans if your circumstances change?

Do not tie yourself into anything too long-term in case your circumstances do change.

Rupert J. Connor is a senior consultant at Acuma-Independent Wealth Advice. Opinions expressed here are his own and do not necessarily reflect that of Gulf News.