31 January 2012

Plan for More Income!

I am often surprised by the number of people I come across who have a good income but simply spend it all, leaving little in the way of savings or investments.

If I prepare a financial plan for a client I would generally recommend a strategy which will include easy-access savings, plus investments which can build up to provide a worthwhile and flexible nest-egg to be used later in life. This could include investing the tax-free lump sum which is generally available when you first take your pension.

Apart from spending sums on capital items (like the house or car), or holidays, etc., it gives you the option of increasing your income in retirement. Investing for income requires a different approach (although it's easy enough to make changes when required).

Various types of investment are available which pay out regularly, including unit trust or investment trust funds which focus on "fixed interest" investments like corporate bonds, or on shares which pay dividends - known as "equity income" funds. Then there are structured products which pay a regular sum (possibly subject to the stock market keeping above a certain level). Investment bonds issued by insurance companies (either onshore or offshore) have a different tax treatment and are the best approach for some people.

All in all, it's worth increasing your options for the future by having a plan to put some aside in the present!

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