The Salary Calculator

Weighing up early retirement

by Madaline Dunn

When it comes to thoughts about retirement, many can’t wait to clock out for the last time, willing it to come as fast as possible. A third of people, for example, want to retire by the age of 60.

That said, very few believe they’ll actually achieve this. Research from Hargreaves Lansdown found that adults aged 34 and under expect to retire when they’re 63, on average, while only one in eight believes in the feasibility of retiring by age 55. For those further on in their lives, for example, those aged 55 and over expect to retire much later, 68 years old on average, and as many as one in five believe they’ll have to wait until 70 years old to retire.

Research from Canada Life has, however, found that more than two in five UK adults aged 55-66 years old have taken early retirement since the beginning of the pandemic in March 2020. Still, it’s important to note that new research finds little evidence for the so-called ‘Great Retirement’ and instead cites long-term illness as the reason for large swathes of older workers leaving the workforce.

In this week’s article, we’ll explore the following:

• The motivations behind people pursuing early retirement,
• What’s required to retire early and how to plan for it,
• The risks associated with early retirement.

The motivations for early retirement

While many view retirement as the end of one’s working life, for many, it can actually be an opportunity to pursue a new career, look into consulting, volunteering, or even get back into education and study. Others see it as an opportunity to spend more time with their family and get back in touch with themselves and their passions.

Of course, not all are looking to leave the workforce solely to enjoy their golden years. According to Dr Afik Gal, co-founder of Assured Allies, age discrimination can play a part in pushing people into early retirement. Likewise, layoffs can also be a reason for early retirement, as can declining health.

What’s required to retire early and how to plan for it

When considering taking early retirement, there are a few things that will be required to ensure the process is as smooth and sustainable as possible. To begin with, it’s worth asking yourself some questions to ensure that you’re both emotionally and financially ready to retire. Some of these questions include:

• Have I got any debts I need to pay off? When looking to retire early, it’s important to ensure that you pay off debt and avoid accumulating further debt, as far as possible. Long-term and short-term loans come with interest and divert money away from savings.
• Do I need to pay off my mortgage? If you can afford it, making overpayments on your mortgage can help you pay it off sooner rather than later, and you’ll pay less overall. That said, be sure to check whether you’ll be faced with any repayment penalties before doing this. Some advisors also warn that you might risk depleting your liquidity, so make sure to check whether it’s the right move for you.
• How much money will I spend each month, and do I have enough for daily expenses? Having a clear idea of where you are financially will help you make this decision much more easily and work out a budget for basic day-to-day living. It’s also worth noting that the figure you come to will likely increase yearly with inflation.
• How much do I require for my discretionary funds? While you may have the basics covered, it’s important to factor in the money you’ll want to spend on leisure activities, treats and holidays. If you’re in a situation where you’re just scraping by each month, you’re unlikely to enjoy your early retirement.
• Have I planned for unexpected events and emergency savings? For most, life is rarely straightforward, and whether it’s a medical emergency, a burst pipe, or, say… a pandemic, you’ll likely face a few curveballs in the years to come. It’s a good idea to have an emergency savings fund to prepare for these unforeseen events.
• What are my plans for after I retire? Experts say that it’s key to make plans post-retirement for fulfilment and mental stimulation. Do you plan to pursue a new hobby, volunteer, or study?

When you’ve weighed up whether or not an early retirement is for you, there are a few actionable ways you can plan ahead.

Once you’ve figured out the sum of what you’ll need to survive and thrive in retirement, it is key to make an inventory of all of your assets, so you can determine where your retirement income will be derived.

You’ll need to review your pension options, too. You won’t be able to access your state pension until you reach state pension age, and if you retire early, you might be entitled to less. Likewise, it’s important to check the rules around your personal or company pension – in some cases, you may not be able to access it early, but on the other hand, if you retire due to circumstances out of your control, such as illness, you might be able to access an enhanced pension. The details will also be different regarding defined contribution pension schemes, so be sure to get your ducks in a row.

Once you’ve looked into your pension pots, also assess any investments you have, how much your property is worth, and whether downsizing could be an option. Equally, you may decide on a phased retirement or decide to take up part-time work to supplement your retirement income.

After that, experts advise you to make a savings and investment plan, and if you follow the FIRE movement to retire early, set aside 25% and 50% of your monthly income.

It’s also worth speaking to a financial advisor, who will be able to guide you through the process and help you weigh up your options.

What are the risks associated with early retirement?

Early retirement is not without its risks. From a financial perspective, it’s important to note that economic recession, inflation and unexpected medical expenses can leave you in a position you may not have prepared for.

Right now, for example, inflation is at a 40-year high, and the cost of living is rising sharply. Likewise, if your pension doesn’t stretch as far as you thought it might, you may have to re-enter the workforce, which could come with challenges, especially with an employment gap. It’s also worth bearing in mind that you might live longer than you’d expected and so, it’s a good idea to make sure you can pay for the cost of care in later life.

Aside from the financial side of things, it’s also key to note that some research suggests that early retirement can be bad for the brain. Some research, for example, has found that those in retirement have a 38% faster rate of verbal and memory loss than those still working. Likewise, the National Institute of Health estimates that a third of individuals in retirement have symptoms of depression.

Tags: early retirement, Jobs, retirement, savings

Holiday deals, discounts and deposits

by Madaline Dunn

There are no two ways about it, for most people, January is one of the hardest months of the year, with February following close behind. In the months following Christmas, people are often feeling tired, tight on money and just generally a bit dismal. However, a good way to banish the winter blues is to find something to look forward to, such as a little (or big) getaway.

At The Salary Calculator, we know that it can be challenging to find a good deal when it comes to booking a holiday – you don’t want it to cost you an arm and a leg. So, below, we’ll walk you through the following:

• Our top holiday saving and low-cost holiday tips
• Some of the firms offering low-deposit options for holidays
• Some good holiday deals and places to compare deals
• Tips for avoiding holiday scams

Holiday saving & low-cost tips

Thinking about the total cost of a holiday can be a bit overwhelming, so you might feel tempted just to wing it and hope for the best. However, to ensure that everything goes to plan, it’s best to break down everything that you’re likely to need and make sure you set aside enough money so that you can enjoy your holiday to the fullest.

While you may have thought of the basics, such as accommodation and travel costs, make sure to also include the following in your list:

• Travel insurance – to cover you for any mishaps or lost luggage,
• Travel money and any currency exchanges you may have to sort out,
• Toiletries for your trip, including sun cream, so your holiday is not ruined by singed skin,
• Any new holiday clothes or swimwear you might be required to purchase,
• Whether you’ll need to hire a car once you’ve at your destination – don’t forget about car insurance too,
• Whether you’ll want to travel in and around the place you’re visiting and how much this is likely to cost,
• Entertainment costs,
• Food and drink costs – whether you’re planning on buying it at the supermarket or eating out.

Once you’ve identified the key areas you’ll be saving for, there are a number of ways you can then proceed with your savings mission, whether that’s in little ways, like putting your spare change in a jar each week or opening up a savings account. Why not use a savings or budget calculator, too, to make things even more straightforward for yourself?

Savings can also be made in other ways, for example, by booking your flights in advance. According to Expedia, international flights booked four or more months in advance end up saving people around 20% off their fights when compared with those booked closer to the flight, like two months prior. The same goes for train tickets if you arrange a getaway a little closer to home. Likewise, when flying with a group of friends or family, you might be tempted to pay extra to get a seat next to your group, however according to research by MSE, all airlines, aside from Ryanair, always aim to allocate group seats together – this can be further guaranteed by checking in to the airport as soon as possible.

Likewise, The Civil Aviation Authority (CAA), the aviation regulator, says airlines should “aim to sit parents close to children” – if this isn’t possible, they should not be separated by more than one aisle or more than one seat row.”

Firms offering small deposit options

In the months following Christmas, there is always an influx of holiday bargains to be had, and there is a wide range of companies offering small deposit options:

• EasyJet’ offers holidays with a £60pp deposit, a 23kg luggage allowance and an option to pay in instalments.
• First Choice offers a low deposit scheme to help those looking to go on holiday spread the cost of their getaway even if they don’t have the money at the time of booking. Its offerings start as low as £60pp.
• TUI also offers low deposit holidays with prices starting at £50pp.
• Jet2holidays offers customers the ability to pay a £60pp deposit to secure their holiday and then pay the balance ten weeks before they jet off.

Finding good holiday deals

The best way to find the perfect holiday deal for you is by first checking out comparison sites. Skyscanner is a good site to visit if you’re looking to find the cheapest airline flights. Kayak is similarly a good starting point for finding both flights and hotels. Likewise, it’s always work checking out TravelSupermarket.

If you’re looking for sites that offer legitimate flash sales, check out Holiday Pirates or Travelzoo. However, you’ll also likely find good deals if you plan ahead, as many places offer early booking codes or discounts.

Likewise, who says that a holiday has to be abroad? These days, more and more people are opting for a staycation rather than travelling internationally. There are a number of companies offering affordable getaways in the UK, including:

• My Seaside Luxury, which offers a range of affordable sea-view apartments
• UniversityRooms.com allows you to stay in student accommodation, in some cases, for as little as £90 for en suite doubles, for those looking for a budget trip in a university town like Oxford or Cambridge.
• Malmaison similarly has hotels in 16 UK cities, and offers a £75 a night stay across 13 of these locations.

Watch out for holiday scams

Lots of people are keen to get away at this time of year and, in the cost of living crisis, are trying as hard as they can to identify the best deals. Statistics show that 25% feel they’ll be unable to afford a holiday without a good deal. Of course, when people are desperate for good deals, they’ll be people who take advantage of that, and charities are warning that holiday scams are on the rise.

A recent poll by Opinium found that one in ten people would book a holiday through an unknown provider if it meant paying less. Considering these statistics, it’s important to stress that when booking a holiday, you make sure that the company is legitimate and verified. The best tip here is to go with your gut, if you feel like something feels dodgy, for example, the links look suspicious, or the deal feels ‘too good,’ trust your instincts. Likewise, paying with a credit card can add another layer of security.

Tony Neate, CEO at Get Safe Online, outlines: “As the cost of living rises, we want to help protect everyone’s hard-earned cash and urge people to stay alert when it comes to booking a holiday. Trust your instincts and remember: if a deal looks too good to be true, then it probably is.”

Tags: holiday, holiday travel, savings, Travel

Seasonal saving tips

by Madaline Dunn

With merriment and mistletoe, gingerbread houses, and Christmas lights, the festive season can be a wonderful time to get together with loved ones. However, it can also be pretty pricey, especially these days. According to research from the Trades Union Congress (TUC), for example, the cost of traditional Christmas dinner food has risen by an average of 18% in the space of a year, three times faster than wages! Meanwhile, Finder predicts that those across the United Kingdom will spend £20.1 billion on Christmas gifts this year.

With the cost of living crisis making us feel the pinch more than ever, it’s likely you’re looking for ways to scrimp and save this Christmas. So, at The Salary Calculator, we’ve compiled a list of seasonal saving tips to make things a little less stressful.

At The Salary Calculator, we’ll explore the following:

• Ways to save on Christmas food shopping,
• Guidance on how to keep presents affordable,
• Tips for low-cost transport,
• The top tips for energy saving in the season, and
• Apps that keep saving simple.

Christmas Food Shopping Saving

With so many little bits and pieces to buy for the festive dinner, it can really add up! However, it can help to know some of the cheapest supermarkets to buy your Christmas food from. Alert conducted a study into this (not including Aldi and Lidl), and found that Asda has come top of the list at £55.90 for festive essentials this year. Holding the middle ground is Morrisons, at £64.24, while Waitrose, perhaps unsurprisingly, was the most expensive at £73.81.

In a separate review by MoneySupermarket, which included Aldi, the budget supermarket was crowned the cheapest supermarket for festive bits in 2022. This was followed successively by Asda, Tesco, and Lidl.

Once you’ve decided which supermarket you’ve chosen for your Christmas shop, you can save further by employing some of the following tips:

• Go plant-based! – There’s a misconception that going plant-based is expensive, however, researchers from Quorn found that going meat-free this Christmas could save you up to 71%. Whether you buy a meat alternative, or make a nut roast, swapping out the meat components to your Christmas dinner can save a fortune, while also helping the planet and saving the animals!
• Check online codes for new shoppers & other discounts – Many supermarkets offer discount codes to first-time online shoppers, which can save you a tonne on your Christmas shopping. This can be as much as 30%. Plus, this time of year, there are lots of other discount codes available as well. Sites like VoucherCodes.co.uk can be a big help here.
• Use your leftovers, don’t throw them away – When you’ve finished your Christmas dinner and you’re full to the brim, often the thought of more food can make you a bit queasy and you may throw away the extra bits left uneaten. This leads to five million Christmas puddings, two million turkeys, and 74 million mince pies being sent to the rubbish tip while still edible. To make sure you don’t add to this, turn leftover veg into soups or bubble and squeak.
• Only buy what you’ll eat – For the above reasons, make sure to buy only what you know you’ll eat. It can be tempting to go ham on Christmas shopping and buy all the little trimmings and extras, but if you know it’s unlikely to get eaten, don’t buy it and save yourself a pretty penny.

Affordable gift giving

Gift-giving can be one of the most stress-inducing parts of Christmas and cause a lot of worry when it comes to finances. That said, there are things you can do to alleviate this stress and have a more affordable Christmas.

Agreeing to a price limit on gifts with friends and family can help to lessen the burden when it comes to gift-giving. This allows you to set a budget and stick to it.

Likewise, choosing ‘preloved’ presents can be another great way to cut the cost of Christmas. There can be a lot of pressure to buy your loved-ones new clothes, toys and ornaments, but there’s a whole world of preloved presents out there, just waiting for a new home. Charity shops can be a brilliant way to go, and you’ll be helping a good cause along the way, and not to mention the planet!

And, why not have a go at making Christmas presents this year? Whether that’s knitting a hat or making Christmas truffles or honeycomb, making your own Christmas presents can save a ton of money, be a fun activity, and add a personal touch to gift-giving.

Transport tips

Transport around the holiday can get pretty expensive, whether that’s because you’re travelling by train or you’re taking a cross-country car trip to see loved-ones. Luckily, we’ve got some travel tips to make things slightly cheaper.

One thing many people don’t think of when travelling by car, is how much extra fuel is used when the boot is packed in full. So, if you’re about to set off on your Christmas travels, remove any unnecessary items from the boot because this can end up costing you more than you’d imagine.

If you’re travelling via train, the age-old advice of booking your trains in advance has never been more true. Figures show that you can save up to 60% on your train fare by booking it early (up to 12 weeks in advance). If you’ve left it a bit late (after all, there is a lot to get done in the lead-up to Christmas), before you book an open return, see if you can buy single tickets or ‘split’ tickets to break up the journey, this can sometimes cut your ticket price by quite a bit.

Saving energy in the season

Everyone knows how expensive energy is right now, and unfortunately, prices aren’t expected to lower anytime soon. However, there are some practical ways to reduce your energy bill this Christmas.

Why not use the microwave for cooking your vegetables, rather than the hob? According to research by Quorn, carrots, sprouts, and peas can all be cooked in under three minutes, working out at around just 3p. The research team found that this is a 79% saving on using an electric hob, and a 6% saving on using the oven.

These days, it’s very much the age of the air fryer, and it’s not surprising why. Air fryers take less time to cook and use less energy – and they can be used for a whole variety of cooking. According to Jenny Tschiesche, the author of The Air Fryer Cookbook, you can cook just about anything, and even the star of the show of your Christmas meal can be popped in if the basket is at least 7-8 litres capacity.

While it might feel tempting to light up your house with an assortment of multi-colored lights and inflatable Christmas decorations, it might be a good idea to leave the lights off this year. You won’t be alone, either. According to a survey from GoCompare Energy, 27% of people are planning on putting up fewer lights this year and a sixth aren’t putting up any at all. However, if you’re overcome by the Christmas spirit, and feel the urge to light it up, purchase LED holiday string lights or timed lights that turn off automatically.

Best apps to help you budget and save

These days, there are lots of apps that can help you work out where you are with your finances and help you save.

The Too Good To Go app, for example, enables people to purchase and collect high-quality food from restaurants and supermarkets that would otherwise go to waste at an affordable price.

Meanwhile, the Emma app is a free budgeting app that tracks your subscriptions, sets up monthly budgets, tracks your payday, and makes payments within the app. Similarly, Money Dashboard links to over 90 UK banks and financial providers so you can get an overall view of your finances and budget accordingly.

Tags: cost of living, discounts, Economy, savings

Saving rates 

by Madaline Dunn

With so much chaos in the economic landscape, the pound yo-yoing, and the cost of living at its highest point for years, if you’ve managed to squirrel away some savings, it makes sense that you’d want to ensure that you’re getting the most out of your account.

Although the rising interest rates are unwelcome for many, for savers, after historically low-interest rates, it’s not all bad news; but savers need to watch out for the best deals.

In this article, we’ll walk you through the following:

• What saving is looking like during the cost of living crisis
• The saving rates rise
• Some of the best deals out there right now

Saving during the cost of living crisis

During the cost of living crisis a significant number of people have stopped paying into a savings account. According to a recent survey conducted by the Building Societies Association (BSA), 35% of those polled have stopped saving due to the rising cost of living, with 36% now relying on their savings to pay for day-to-day costs. Moreover, before the crisis, around one in 10 UK residents had no savings at all. However, millions of pounds are still in savings accounts and if you’re keeping your head above water and managing to save, you’ll likely be looking for the right account for you to secure the best deals.

Saving accounts come in a few different forms and typically are not subject to tax until you reach a certain threshold, this is called the personal savings allowance (PSA) and is dependent on what rate of income tax you pay. Basic rate taxpayers can earn £1,000 in interest each year without having to pay tax on that interest, for higher rate taxpayers this drops to £500. A basic rate tax payer who earned £1,200 in interest in would therefore only pay tax on the £200 above their PSA, which at 20% would be just £40 of tax on £1,200 of interest.

ISAs are comparable to a regular savings account, but whatever interest you earn remains entirely tax-free. However, ISAs tend to pay a lower rate of interest. For those looking for flexibility, an easy-access savings account can be a good option, as it allows you to dip into your savings at short notice without receiving penalties; likewise, the amount of money required to open an easy savings account is usually lower than other savings accounts. Fixed-rate savings accounts or bonds, on the other hand, while less flexible, offer you a guaranteed interest rate over a set period of time and typically offer higher interest rates.

A current account can be used as a savings account, although some basic accounts don’t offer interest on your balance. When looking into using a current account as a savings account, consider the interest rates and account requirements, as some will require you to pay a certain amount of money each month. Some current accounts can see interest rates exceed 5%, but this is often subject to a maximum sum you can save before it drops again.

Saving rates reach highest levels in over a decade

Savings rates in recent months have reached their highest levels in more than a decade. However, as Anna Bowes of independent comparison service Savings Champion says, things are changing so quickly, and she warned a week ago that people were “in danger of missing the peak.” Equally, research from BSA shows that many people aren’t sure what they’re getting with a savings account in the first place, with 31% of those with savings accounts never even checking their savings account interest rate.

Recent research on savings rates found that the average easy-access rates have risen from 0.25 to 1.05%, while since March, the average one-year deal has risen from 0.92 to 3.1%. However, banks and building societies have recently been pulling their savings accounts, Santander being one of them, withdrawing its best buy easy-access saving account two weeks ahead of schedule, and replacing it with a new issue paying a lower rate of 2%.

That said, a spokesperson for the Savings Guru, said that this withdrawal was not surprising and the likes of Skipton moving up to 2.55% is good news, and indicates that the market will consolidate around 2.25 to 2.5% on easy access. Likewise, the spokesperson said that the fixed rate changes that have been seen this week are unlikely to lead to a “full-blown market correction.”

The best saving rates right now

There is a wide range of saving rate deals currently available, and some are even breaking the 5% barrier. Below, we walk through a few of them.

The Barclays Rainy Day Saver account at the time of writing, was offering 5.12% interest on balances up to £5,000, after which this decreases to 0.15%. In a year, those with £5,000 saved will earn £250. There is, however, a £5 monthly membership fee, and you have to pay at least £800 each month. It also has some good rewards for those who are already Barclays customers. The Nationwide FlexDirect Current account is offering just below this at 5% on the first £1,500 saved, with no fees.

The Aldermore 1 Year Fixed Rate Cash ISA has also been highlighted as a good go-to, with 3.65% interest and a minimum deposit of £1000, with withdrawals subject to a deduction of 90 days’ interest.

With regard to fixed rates, those who choose this kind of savings account will be unable to access their money, typically for a period of at least three years, unless they pay a penalty fee. So, this won’t be a viable option for everyone. Investec Bank plc Raisin UK – 2 Year Fixed Term Deposit is currently offering a 4.61% rate for savings between £1,000 and £85,000, but the highest rate on the market is offered by Gatehouse bank, which has a five-year deal that pays 5.1%.

For more information on the best saving rates, check out MoneyFacts or MoneySupermarket. 

Tags: cost of living crisis, interest, interest rates, ISAs, savings

Investing in financially challenging times 

by Madaline Dunn

When each day the headlines regarding the economy are worse than the last, warnings of skyrocketing energy prices, excessive food and petrol costs, and forecasts that it’s only going to get worse, you may be counting every penny. Investing is likely to be the last thing on your mind when juggling your finances in this challenging financial crisis.

That’s what the research shows, too. According to one study, 24% have stopped contributing to investments and savings because of the cost of living crisis. Meanwhile, 14.1% of British households don’t hold any investment, even though most have at least six months’ worth of “essential spending cash.”

That said, experts say that it’s perhaps not the best plan to abandon ship and that continuing to invest might actually benefit you in the long run.

At The Salary Calculator, we’ll walk you through:

• Whether not you should continue investing during the cost of living crisis
• What are the risks and how can you safeguard yourself
• How you should invest

Should you invest?

People are indeed becoming more cautious around investment, however, Becky O’Connor, head of pensions and savings at Interactive Investor says some are still making regular contributions. However, O’Connor explained that it’s “understandable” that people are more reluctant to part ways with their money and expose it to risk, “given the current outlook for household budgets” that people are “looking to make cutbacks wherever they can.”

As a result, research from Scottish Friendly reveals that investment levels have fallen to their lowest in three years in the second quarter of the year. This figure stands alongside the total value of new adult investment ISA policies, which has dropped 6%.

Explaining the reason for this decline, Simon Phillips, an independent financial adviser and partner at Devon-based Continuum, said: “Cash is not making anything due to inflation, but many people tend to think that if the economy is struggling or the stockmarket is volatile, that they should cut back on stocks and shares and keep money safe in cash.” However, Phillips argues that from a financial point of view, that approach is the “worst thing you can do” because it means you will miss out on investing at “what could be a good time from an equity standpoint.”

Sarah Coles echoes similar sentiments when discussing future savings:: “If you do cut back on saving for the future when money is tight, it’s worth considering when you’ll be able to bump contributions back up. A few months away from a pension isn’t going to make a dramatic difference to your retirement, but if it drags on and you don’t have a plan for beefing payments up again when your finances ease, then you could end up with a horrible surprise in retirement.”

According to the experts, if you have built up a robust emergency fund to ensure that you have security when the hard times come, it could be beneficial for you to explore investment.

What are the risks and how should you safeguard yourself?

One of the main barriers to people diving into the world of investment is that many don’t feel confident exploring that space. For many, there’s the misconception that investment is only for people with lots of money. This perhaps explains why 46% of people don’t feel confident when it comes to investing.

It is certainly true that investment comes with risks. After all, if the stock markets blossom, so will the value of your investment, and vice versa, if the markets crash, your investments could take a hit. Not all investments are created equal though, and some pose more risks than others. According to the experts, government bonds are considered less risky, but will return less profit, meanwhile, shares are riskier, as are trusts and cryptocurrency, the latter of which is becoming increasingly popular, but also incredibly volatile.

When it comes to minimising risk, diversification is an essential component, while Barclays recommends investing globally to get access to a range of economies. It’s also suggested that when thinking about investment, you consider the long-term implications and you only invest funds you don’t need across the next five years. It’s also important that you review your investment portfolio regularly to make sure that you’re meeting your goals and not exposing yourself to risk.

Tips for how you should invest?

When considering investing, it’s important that you put the research in, and make sure you pick the right options for you, your financial situation, and take into account the level of risk you are willing to expose yourself to.

In a cost of living crisis, some recommend that investing in defensive stocks, which include “essential goods and services,” can be a good option, as they often outperform the market, when there are financially difficult times. Likewise, dividend stocks can also generate funds quickly.

Guidance from finance experts also suggests that you should drip-feed your money into investments, which can reportedly help you benefit from pound-cost averaging. It’s also important to note that when the economy looks grim, you are also more likely to be able to buy low-priced stocks.

Tags: cost of living crisis, Economy, investments, savings