the times | Saturday September 5 2020 1GM 63
Money
your pension savings into funds that
generally have a lower risk profile and
provide a more predictable return as
you get closer to your planned retire-
ment date. It is usually a feature of a
workplace pension or private pension
from a life company.
As retirement edges nearer, holding
more money in cash or bonds reduces
the risk of sudden losses. This is ideal
for those who do not have investment
know-how or prefer to leave it to others.
Lifestyle switching normally starts
five years before the chosen pension
date. When this date arrives, all savings
will be invested in lower-risk funds.
While lifestyling has been valuable
for those focusing on capital preserva-
tion, many people have been forced to
delay retirement as a result of the pan-
demic. Those who decide to keep work-
ing past the scheme retirement age
may need to alert their pension com-
pany to override the automatic switch
to a lower risk strategy.
Hannah Edwards from Eva Capital
Management, a wealth manager, said:
“We are living longer and state pension
ages are increasing. Yet the switch from
shares to bonds starts sooner than you
think. Keep an eye on when you have
set your retirement date and look to op-
timise, not restrain, potential income.”
Even if you are not planning to delayretirement, automating investments is
not for everyone; some people prefer to
have more control over their invest-
ment planning as they approach retire-
ment. You can normally add or remove
lifestyle switching at any time.0 An automatic no-no
The automatic renewal of car and
home insurance is one system that goes
against all money-saving techniques.
By letting insurance companies
renew your policy on your behalf, you
will probably pay over the odds.
The price comparison site Money-
supermarket estimates that accepting
automatic renewals costs car ownersmanage your money
Double hit
to income
for older
freelancers
T
he self-employed and over-65s
have been badly affected by the
pandemic, so those who fall into
both categories are facing a double
whammy.
The fastest-growing age group of
self-employed people are the over-60s,
according to the Association of Inde-
pendent Professionals and the Self-
Employed (IPSE). Their numbers grew
11 per cent last year and have gone up
73 per cent since 2008. The number of
freelance workers among the over-60s
went up 7 per cent last year with a total
of 3.5 million people working that way
or considering doing so at the start of
2020, Charter Savings Bank said.
The average income of freelancers
fell 25 per cent during lockdown, but
some tumbled as much as 80 per cent,
according to a survey by IPSE and
the employment platform People Per
Hour. The number of self-employed
people fell a record 238,000 from April
to June as small businesses collapsed.
Three quarters of 50 to 64-year-olds
were in work last year — 10.6 million
people — but their hours have fallen an
average of 15 per cent since the start of
the pandemic, said Rest Less, a jobs site
for the over-50s. Over-65s lost the
most, at 20 per cent, since many were
forced to shield.
Patsy Clarke, 75, a researcher from
Oxford, has been freelancing for the
past eight years using Blume, an em-
ployment site aimed at over-50s. Hervaried career — from helping to release
a malaria vaccine in Kenya to training
a team of teachers in Kazakhstan — has
left her ineligible for the state pension.
Her freelancing income has been
crippled by coronavirus, even with help
from the self-employed income
support scheme. “If I count the benefit,
I estimate that my income has reduced
by 80 per cent. Unless there is some
return to normality, I expect my 2020
income to reduce by 70 per cent com-
pared with my usual earnings,” she said.
She is having to rely on the income of
her husband, a county court clerk.
Last month a second and final grant
payment of up to £6,570 was made
available through the self-employed
scheme, which was set up by Rishi
Sunak, the chancellor, to help self-
employed people whose livelihoods
have been hit by coronavirus. Of
the roughly five million people who
attempted to claim the support, only
about 2.6 million were successful.
Derek Cribb, the chief executive of
IPSE, said: “It is now clear from the
sharp drop in the number of self-
employed that this vital part of the
workforce has had nowhere near
enough support compared with em-
ployees. There were too many glaring
gaps in the scheme, such as for limited
company directors, the newly self-
employed and PAYE freelancers.”
Self-employed workers contributed
30 per cent less to their pensions at the
end of the tax year, according to Pen-
sionBee. Ruth Winden, a career man-
agement coach for over-50s, said that
many freelancers will need to find new
ways to make a living because many are
facing a “triple whammy of age, health
risks and employment status”.
Laura Miller£674 million a year; and more than
40 per cent — about 17 million —
admit to letting their cover automati-
cally renew. A quarter reported a £40
increase in cost and one in five policies
went up between £51 and £125.
Insurers must prominently display
the renewal price alongside what you
paid last year for the existing policy —
by order of the Financial Conduct
Authority. To get a better deal, you
must act. It takes a simple phone call to
challenge the premium and the conver-
sation will usually end with a better
price. It is worth finding the best price
on the market first. If your insurer
refuses to match it, switch.Not a fan of robots?
If you don’t like the idea of
relinquishing control, there are
still some seriously useful services
around that spoon-feed you the
best deals on the market.1 Mortgages
Remortgaging cannot be
automated because of the need for
affordability checks. The next best
thing is using a service that alerts
you to a deal that can save you
money. Customers who use Trussle
— a fee-free mortgage broker —
get an extra service that compares
your mortgage with the market
each day. If a new deal is launched
that can save you money, you will
be automatically notified and can
agree to the switch. It lets you know
if your mortgage can save you even
as little as £1, but clearly you might
want to wait for a bigger saving.
trussle.com2 Savings
Getting the best interest rate on
savings is not rocket science, but
more than £173 billion languishes
in accounts paying 0 per cent,
according to Easymoney, an
investment platform. The advice
site Savings Champion offers a free
service that alerts you if the rate on
your account changes and tries to
find you a better deal. You can also
register children’s savings accounts.
savingschampion.co.uk3 Mobile and broadband
Plenty of apps can help with saving
money on household bills. The
latest is Snoop, which will notify
users if their mobile deal,
broadband bill or energy tariff is on
the high side or if there has been a
price rise, so they can then switch
supplier and save from within the
app. It plans to add mortgages to
the list soon.
snoop.appDon’t grab all that tax-free retirement cash at once
W
hen you hit 55, you can access
a tax-free lump sum of up to
25 per cent of your pensionpot, but it is not necessary to take the
whole chunk at once. Pension rules are
much more flexible than savers may
think, and by using them cleverly you
can make your tax-free cash last much
longer. We examine your options.
0 Don’t take too much too soon
There’s little point in withdrawing
money from your pension pot and then
simply sticking it into a bank account
paying little or no interest. Yet this is
what 14 per cent of savers who with-
draw money from personal pensions
end up doing. Tom Selby from AJ Bell,
a wealth manager, said: “If you do this,
the value of the cash you have with-
drawn and put into a bank account will
be eroded over time by inflation.
“If instead you leave it invested with-
in your pension it can continue to grow
tax-free.”
He said that someone with a
£100,000 pension pot who took the
25 per cent lump sum and put it into a
bank account paying 0.01 per cent in-
terest — the going rate on high street
banks’ easy access accounts — and did
not touch it for ten years would earn£25. If that person left it in their pension
pot, assuming a modest growth rate of
4 per cent a year after charges, they
would have a pot of £142,000 after ten
years. They could then take a much big-
ger 25 per cent lump sum of £36,000.0 Take bite-sized chunks
If you have a £100,000 pot you could
choose to withdraw, say, £10,000 tax-
free rather than the maximum of
£25,000. Simply put £40,000 to one
side of your pension pot, then take out
25 per cent of it (£10,000), and leave the
remaining £30,000 within this ring-
fenced pot. When you come to with-draw money again, there will be no
more tax-free lump sum on this
£30,000 part of the pot, but you will be
able to make additional 25 per cent tax
free withdrawals from the remaining
£60,000.
Nathan Long from Hargreaves Lans-
down said: “In other words, by spread-
ing the withdrawal of your tax-free cash
over some years and allowing your pot
of money to grow, you can withdraw
more tax-free cash overall.”
Your pension company might charge
you for making a withdrawal, or limit
how many you can make in a year.
Mark Atherton£14,070
maximum grant available through the
self-employed income support scheme