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Savings Struggle

For Generation Nearing Retirement crack

The generation nearing retirement has struggled to put much aside in a savings pot - despite being financially one of the luckiest ever. It enjoyed house price booms from 1970, almost-free university education and (for many) secure final salary pensions.

Aviva’s Real Retirement report claimed this week that one in five Britons aged over 55 expects to work until their 70th birthday – and some possibly even longer.

Although the average home owned by people in this group is worth £236,600, the average home loan outstanding is £11,430. Nearly 20% of them still have a mortgage, and a quarter hold less than £2,000 in savings.

Aviva says many over-55s will need an easier ‘part-tirement’ job to keep afloat financially through their 60s. More than half those it surveyed expect to retire eventually between 71 and 74.

Now the ‘lucky’ generation has another headache - the coalition Government is looking at proposals to more than double Capital Gains Tax (CGT) on sales of shares, buy-to-let property and other non-business assets - hitting savers more heavily than anyone else.

A survey by 1st Exchange, a financial services technology specialist, says 60% of financial advisers (IFAs) are planning to move clients’ money away from assets attracting CGT.

But where to, exactly? If pensions, shares and cash in the bank (shrinking fast in value as inflation returns) are leaving the 50-plus generation hard up, what other assets can secure a comfortable old age?

The obvious haven in stormy economic times is gold, where the spot price on London markets has soared in
the past year from £593 per ounce to £828 - breaking all previous records.

The German firm which opened a gold vending machine at Munich Airport last year added a second at the spectacular Emirates Palace Hotel in Abu Dhabi - providing bars of 24-carat gold in one, five and 10 grammes, sold with a money back guarantee.

“An extra special gift idea”, says the publicity blurb. But a sign too of growing unease about sovereign debts built up by so many countries around the world. Adrian Ash - head of research at, an online service for gold bullion trading and ownership - says: “Gold owners have more than trebled their money in the last five years, and quadrupled it since spring 2000.”

Around half of Bullion Vault’s client base is UK-based, holding an average 33 ounce of gold apiece - worth £23,000. Ash adds:

“People buy gold when they don’t trust the alternatives. Gold has risen by more than 15% versus the pound, and a coalition cabinet, near-zero rates of interest and fast-spreading fears of a genuine Government debt crisis all point to further gains ahead.

While gold can offer security and capital growth, however, it rarely provides income.

Income is minimal too from BlackRock Gold and General, a celebrated £2.1 billion fund which invests in gold, mining and precious metal-related shares and has for some years been the most popular choice for small investors seeking exposure to precious metals in their portfolios.

Mick Gilligan, at brokers Killik & Co, says: “The fund is up 37% over the past year, in line with a 36% appreciation in the spot gold price, with strong demand from central banks such as China and India supporting the high prices.”

He says investors could use their full £10,100 ISA allocation - £20,200 per couple - to have a tax-free exposure to gold markets through BlackRock Gold & General, if not to the metal itself.

“It is prudent to have between 2.5% and 10% of an overall portfolio exposed to gold. A higher figure making sense the more negative you expect the effects of inflation may be”, he adds.

A racier play on current upheavals and the flight to gold as a safe haven is the £28 million Junior Mining fund. Around 70% of the fund is invested in small mining firms, with the top four holdings in Medusa (Southern Philippines); Centamin (Egypt), Norseman Gold (Australia) and Spanish Mountain Gold, based in Canada.

Private investors are strongly advised to take advice from a financial advisor (IFA) before they invest.

But Junior Mining fund manager Angelos Damaskos says: “We see the macro-economic background as very favourable to us, with massive debt problems in Greece and elsewhere, including the UK and US. Historically, the chosen way governments escape this problem is to print money.

“Although some strong currencies remain - notably the Canadian dollar, the Australian dollar, the Norwegian Kroner and the safe haven Swiss franc - investors are seeking other stores of value, and gold is an obvious choice.”

Aviva has launched an online retirement calculator, to make it easier for customers to understand annuity options available to them and to work out the likely income from a pension fund - without the need to disclose personal details.

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