35 years on from the big bang
On Monday 27 October 1986, the London stock market was deregulated. In a matter of hours, a once...
Did you know there is an official Pensions Awareness Day each year on the 15th September? Me neither, but there is. In fact, it’s a whole week of raising awareness and it couldn’t have fallen at a better time. According to research from Royal London, two in five millennials* cut their pension payments in lockdown. While – understandably – affordability was the most common reason for altering pension contributions, given the number of people on furlough or worried about their finances, even a temporary pause in pension contributions can have a lasting effect. So it’s vitally important that those who have made changes reinstate their payments as soon as they can – especially women who also have to contend with the post pandemic pay gap. With a longer life expectancy than previous generations, millennials could have to fund their retirement for longer.
“The question isn’t at what age I want to retire; it’s at what income.” — George Foreman
For those of you in your twenties, who may have just started to put away money for retirement, it’s suggested that you should look to have one year of salary saved before you’re 30. Having double your annual salary saved should be the goal of 35-year-olds. Four times your yearly salary is the target for people who at the ripe old age of 40.
According to the Office for National Statistics, the average employee in their 20s earns £22,880 in the UK. This means a 24-year-old looking to start saving for retirement would need to save £318 a month for the next 6 years, to have one year’s salary saved before turning 30. Chances are, for many that’s a daunting, if not impossible task, especially if you are also trying to pay off student loans or are saving for a house deposit.
But that figure is also assuming you are saving into a cash account that is paying you no interest. If you take a bit more risk and invest your money instead, an investment that either pays you 5% income per annum or that grows 5% per annum would require lower monthly contributions of £270. And the earlier you begin saving, the more work compound interest will do the hard work for you for you.
Baillie Gifford Shin Nippon – Focusing on emerging sectors of the economy the manager of this fund seeks innovative opportunities in Japan’s smaller companies. The trust has recently updated its policy to allow for up to 10% in unlisted companies, which allows for more growth potential from younger, earlier-stage companies. The trust has returned 698% over the past decade compared with 287.9% for its average peer.*
LF Gresham House UK Micro Cap – Closer to home, this fund invests in some of the UK’s smallest listed companies. The fund has returned 341.1% over the past ten years, while the sector average has returned 179.4%.*
Guinness Global Equity Income – A concentrated fund of 35 equally-weighted stocks, this fund looks to provide both income and capital appreciation. The fund is celebrating its 10 year anniversary in December this year and has returned 165.9% since launch, compared with 102.6% for the sector average.**
Marlborough Multi-Cap Growth – Manager Richard Hallett has an excellent track record picking companies from across the whole of the UK stock market. The fund invests in leading companies in growing industries and has returned 202% in the past decade compared with 79.1% for the sector average.*
Want to find out where the FundCalibre millennials are investing their pensions? Last year we compared the guys and girls in the office to see if the choices differed by gender.
*Source: FE Analytics, total returns in sterling, 9 September 2010 to 9 September 2020
**Source: FE Analytics, total returns in sterling, 31 December 2010 to 9 September 2020