Which Union do the retired savers turn to?

Employment rights have come a long way in recent decades. We are all guaranteed a minimum wage, a limit to the number of hours we can work and trade unions to fight our every battle.

So what would happen if say, your employer decided to reduce your salary by 70% over a six-month period. With no notice. You’d probably be a tad upset and an urgent call to your union rep would ensue. Strikes would be called, sympathetic and worried co-workers would come out in support and if it were in France, there would probably be some good-natured management kidnapping as well.

There are however a category of people who have suffered exactly this and have absolutely no recourse. No union, no picket lines, no clenched fist waving at the management. The forgotten group to whom we refer are the retired savers who rely on their capital to provide an income.

This time last year a fair but modest 6-8% return per year could be achieved with careful planning and a good tailwind. Today however, achieving 2.5% is difficult and this has meant a substantial drop in income for a lot of people.

They are left with little option but to either live on a much-reduced income or to start drawing capital to subsidise their living costs. Neither of which is much fun, nor sustainable in the long term.

You will be glad to know however, that there are ways to achieve a solid income from your investments. It is really just about taking a structured, cohesive approach to building a savings portfolio. Professional advisers and Wealth Managers like Joslin Rhodes will tell you that the secret is to break down the process as follows.

Firstly, tax. You should aim to use as many of your tax allowance as possible. This means utilising your ISA’s and ensuring that if you are a couple, both of your personal allowances have been used. Also, many people fail to use their Capital Gains Tax exemption, which allows you to make gains of £10,100 each per year without liability to tax. Non tax-efficient investments mean that you will be liable to basic rate tax at 20%, and 40% for higher rate taxpayers. Oh, and just because you’re a non-taxpayer doesn’t mean to say that your investment isn’t paying tax in the underlying fund, which you can’t reclaim.

Secondly, don’t put all your eggs in one basket. Build a portfolio of different products, with different providers to dilute your risk and spread your assets. For the majority of those seeking income, their risk profile will be at the cautious end of the scale. This means that the majority of the holdings should be spread between cash, fixed interest, corporate bonds, structured products, and absolute return funds which are a relatively new concept, designed to give a fixed rate of return, irrespective of the markets.

The key point is that each one is a different type of asset in a different sector. When one sector is performing poorly another is likely to be flourishing. Conversely, if you have all your money in one place then you are taking a large risk. If that investment provider or asset type suffers then you are going to suffer with it.

Above all, the best advice we can give is not to just plonk your money into a deposit account and expect it to produce an inflation beating income. It will, but for the bank, not you.