— Let me tell you what it's all about with this
Explainer
What is this “Generation Pension Plan” ?
In a nutshell it is “A guide to securing the financial future of your children without you getting rich first!”
The simple premise is that as long as you get a stash of around £10,000 in a SIPP (Self Invested Pension Pot) by the time your children are 20, small contributions and compound interest will do the rest. The exact interest rate doesn’t matter it’s going to be effective because you are going to actively manage your investments and outdo the stock market or you are going to rely on the StockMarket’s historic annual return of around 12-13% either way you are going to beat the financial industry’s meagre offerings of around 5% (in a good year).
Why do you need this?
People are rarely educated or trained to manage their own finances. This seems strange until you realise there is a vast industry that wants you to see the process as confusing and complicated. “Leave it to them.” they say.
But you can’t leave it to them, they have a tried and tested plan to help themselves to your hard earned money. Apart from being plain greedy they are also excessively risk averse, for marketing reasons, so they underperform.
Your kids are amazing and will do amazing things but they may not get around to investing for their futures unless you help, guide and facilitate this. They may make bad financial decisions or just want to do something they love that pays badly…not only will The Generation Pension Plan circumvent these issues it will likely supercharge their confidence and freedom to do what they want.
We may tell ourselves that we’ll start our financial planning when we’re financially comfortable or better off and that day takes a long time arriving. Other expenses always seem to come first: houses, cars, weddings, kids, holidays… you get the problem.
In the end it just doesn’t happen for far too many people.
But what about….
Work place pensions
If we or our kids are lucky enough to have a great pension fund through their work their options and wealth at time of retiring will be greater. Sadly workplace pensions outside the finance industry and senior management at the biggest companies are usually meagre and adversely managed resulting in minimal contributions and poor returns. The government mandated stakeholder pension is great in theory but beset by all the same problems.
Accessible Tax efficient savings like ISAs (UK)
These are great add ons but the danger is that they will be accessed and spent, as they can be at anytime, undermining the whole point and leverage of long term investments. To keep the actual amount to be invested minimal anyway the true power for leveraging it is the compound interest over the long term.
I’m too busy to look at investments
I’m sharing a process with you. It’s pretty straightforward and anyone can do it. You’re going to make yourown investment decisions because I will share with you how to use a simple process to do so. It’s not time consuming and it’s not difficult.
But I don’t have the money right now…
The objective is to have the pot in place for a child by 20 and my suggestion is that people look as a family at the pots as they arise to see what can be done collaboratively to get it there when required. Afterall we all have financial ups and downs it’s a known and understood factor. Most people can surmount this pretty easily by working together. The exact target figure is not set in stone starting on the path is the critical step anyway.
What now?
Look at the financial scenarios to get an understanding of how the investments can build up over your child’s lifetime.
End Game
Nearly all of us have the ability to make a game changing once in a generation step change to our family’s financial strength. We can setup an investment pot for a remarkably small investment that will not only guarantee a secure future for our children but also free up their capital in retirement so they can build on the good work by repeating and further strengthening the financial futures of their descendants.
It’s not about money it’s about smart use of resources to engineer a brighter future for future generations. Taking responsibility now for matters that actually tend to be ignored until it’s too late and the growth opportunity has passed by.
But what about me?
Yes of course you can use the same investment strategy for yourself and you will be surprised at the catching up you can do if you haven’t even got started yet! But start with the kids and nobody in the family need find themselves with this dilemma again!