Since the government in UK introduced Pension freedoms in 2015 over 90% of UK people have taken most of not all of their private pension pots, but what do they spend their money on?
Don’t wait to Travel the world
According to one national newspaper many 55 years olds believe as much in today than they do in the future realising that they are not getting any younger.
is 55 the new 65?
One former 56 year old engineer from Essex told them:
“You see all these pensioners in the holiday resorts asleep all day, I mean some of them fall asleep during the best parts of their holiday, proving that you can wait too long to enjoy yourself. So for me I wanted to enjoy myself whilst I can, I would kick myself if I had loads of money when I am 70 but can’t even get up the stairs to the wonders of the world.
One of my bucket list things to do is I want to see the Great Barrier reef and SCUBA dive the corals, but I am concerned that they won’t let me go if I am too old. So it is a balance between being young enough to enjoy life and not too old to remember it, so for these reasons I took my pension pot at 55 last year and been on a couple of life changing holidays since!”
Another somber reason people took their pension pots was they have become increasing concerned about mortality having seen many young virile friends die to many causes.
Road traffic accidents was one. We asked a group of Students at Liverpool University campus in 2018 (about 20 rather inebriated 20 somethings I might add, nice to see your grant money put to good use) who had had friends die from car or motorcycle accidents, and around 6 had lost friends, then we asked about suicide and 4 had their hands up, drug induced deaths 7 told us they lost friends to drug abuse, but the one telling factor was cancer it was astonishing to see only 4 people had their hands down and had lost young friends and family to this devastating disease.
At the end of the day 55 year olds will have seen many family members die over their lifetimes, (sorry students if you think University was hard, strap in sweeties because the ride is just going to get a lot rougher for you) Our middle aged people would be lucky to still have at least one parent still about. Also at 55 they will have lost friends and colleagues to all the above causes.
So to this end 55 years old feel as mortal as anyone, but still would probably have a lot of wherewithal to continue through life with some degree of health and vitality, so is now the time to enjoy life before the grey hair and bones start to ache too much? Only you can decide this.
Point of our little students union excursion was a few beers and the realization that even young people look both ways when they cross the road, and just to make it to state pension age is not a given. The UK Office of National statistics tells us that around 13% of all people do not make it to 65 years old in all race creed and religions.
When the UK government introduced the state pension just after World War 2 for men turning 65 years old, they knew that few people actually made it to 65, so they were always going to be ‘quids in’ on the deal to take cash of you monthly to save for your state pension, and if you die well before your 65th Birthday like the majority did back then, you never not get it back of the government, unlike you can with a private pension ( as in your family could claim it after you die).
Invest in thy self
Due to the advent of the internet and freedom of knowledge more people are learning about investing and compound interest, good financial advisors are educating the world about the basics of how money can make money and although most trust others to manage their pension pots, some are learning the basics of wealth and cashing in their private pensions and learning to invest.
The key tenets are always that savvy investors think long term and never invest more than can afford to cry over and lastly to diversify, in high middle and low risk investments accept that you will lose some and win some and it’s the middle ground where the income comes from.
We spoke to an Australian man who has been day trading on etorro, an online investment application where he takes consul from top investors and mirrors their day investments for many years, and it has afforded his travel around the world for the last ten years he told us
“It’ all about composure, setting in stops so I don’t lose more than I can afford, and taking small to very good returns each day, some days I make a dollar some days I make 100 I never get too excited and just see it as work. I put the hours in read the news, watch Bloomberg and never let emotion get involved, It is not a casino, sure when you make a lot you smile, but be ready because there is a loss somewhere that usually corrects it, most of all it is fun for me.
I recently cashed in a pension pot last year but I have not put all my cash in day trading, I bought some Government bonds, Invested some in Gold, I do some forex as well as some riskier investments. If you are not really interested in world affairs or have some leaning towards finance yourself, then give your cash to a trusted advisor who has been recommended to you, and let them manage your cash, just don’t blow it in the casino or you will be a sorry mess”
If you use some of your pension pot to educate yourself to make more cash, then the world can become your oyster!
Most 55 year olds will have a career or two under their belt and would be considered experts in one or two fields, and will by now lamenting why they know about so much stuff now, when life is 60% over. We always ask ourselves; if you could be twenty again and now what you know now, what would you do different? Why don’t 20 years olds listen to us? And why we moan so much?
In recent research 18 % of all 55 year olds have invested the pension pots in their own start businesses, again the internet is making it possible for almost every industry to sell products and services online. However many pre 55 year olds want to start but need some startup cash and have to look around for an Investor.
Finding an investor seems so easy if you believe what the internet tells you, just join a crowd funding site and soon cash will come pouring in, the sad fact is you have to find investors who have more than a slight interest in your business model, investing is like dating, you have to find the right fit and your investor is probably wealthy and wants to help you so they are looking for businesses that they know and if your business model is new and dynamic it will take a lot longer to get bites.
Further to this you are giving away equity, sounds fine now as you are a startup but what if your model really takes off and you find yourself sat across the table from a really big consortium who is talking 8 figures in USD and you have given away 48% already.
Releasing a pension pot and putting some towards your own capital you need to get going may be an avenue that is right for you, if you are convinced you have a world beating idea then what is to stop you using your own cash for yourself?
Learning about investors and Venture capitalists is another career in itself, plus your new start up career and the two previous ones you did to get to where you are now, there is business plans, meetings, pitches and then marketing yourself, you have to learn to be an all-rounder to be successful whilst not getting a salary for many years if you are bootstrapping, and then after all this you meet a Venture Capitalist at a boozy networking event and the first word out of their mouths is:
“What’s your profit right now?” and you have to resist throwing your cucumber sandwich in their face!
Cashing in a pension and using some of the cash can save you a lot of heartache giving away equity, surviving on breadcrumbs, and conversing with people who care little about how you want to change the world.
The boring stuff
Other notable but mundane things people spend their pension pots on at 55 were weddings, home improvements and a new family car, 2% actually admitted they will spend it in the casino, so perhaps opening a casino would be actually quite a good startup idea, we have already done the research, you are welcome!
For help cashing in some or all your pension pot especially if you have a QROPS that will allow FULL access and encashment from age 55 tax free by moving to our new jurisdiction of Jersey in the Channel Islands and other free impartial financial advice