Home' Trinidad and Tobago Guardian : June 28th 2015 Contents SBG12 PERSONAL FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JUNE 28 • 2015
Balancing the realities of
an ageing population and
increased life expectancy
means that for the mod-
ern Trinbagonian, retire-
ment may no longer be
guaranteed but now, a
matter of prudent invest-
As life expectancy increases, the need for
extended retirement planning has become a
matter of necessity. The current age of retire-
ment in T&T is standardised at 60 years of
age. While this has been the subject of active
debate, it also seems unlikely to change in the
The most recent data (sourced from T&T s
National Financial Literacy Programme) illus-
trates that as far back as 2006, people 60
years old and over numbered 130,000 or 10
per cent of the population, compared to 87,000
or eight per cent of the population in 1980.
These realities mean that proper and prudent
retirement planning should become part of
our daily work life.
The real need for this type of foresight in
retirement planning comes specifically from:
1. The risk of inflation. This risk is real, and
is one that can erode savings over time. Prudent
investment of savings in investment products
that are specifically designed as inflationary
hedges will minimise this risk.
2. To protect against the unforeseen events
and large expenses in post-retirement years.
This likely applies to large ticket items such
as home loans, which should be fully repaid
in advance of retirement.
3. Advancing years and failing health go
hand in hand. One of the main measures one
needs to take in planning for retirement is
anticipating the need for increased health serv-
ices costs in old age.
In a perfect world, we would all start our
retirement planning at the inception of work
T&T is one of the party capitals of the mod-
ern Caribbean and many if not most young
people have not flagged inflation as an issue
for immediate attention.
However, just because we haven t begun
planning at age 20 there is no need to despair.
For instance, if we are to assume a retirement
age of 60, we can assume that the individual
over the life of employment should have:
• 480 paychecks to retirement, should they
begin planning at age 20;
• 360 paychecks to retirement, should they
begin planning at age 30; and
• 240 paychecks to retirement, should they
begin planning at age 40.
The earlier the start date, the greater the
ability to accommodate a more aggressive
structure in your portfolio. This can allow for
higher rates of return, as well as a longer recov-
ery period if your proposed portfolio does not
perform as planned.
The development of a personal retirement
plan requires the individual to assess the type
of risk that they are willing to undertake in
order to reap the best reward and support a
desired post-retirement lifestyle.
As we have previously mentioned this will
also be strongly influenced by the time-horizon
to retirement. The important points to remem-
ber in developing the portfolio structure you
Diversification of portfolio
There are a number of assets which you
can include in your portfolio. Namely:
1. Fixed deposits and other savings
2. Treasury bills;
3 Government bonds;
4. Money market funds;
5. Stocks and shares;
6. Equity-based mutual funds;
7. Annuities; and
8. Entrepreneurial pursuits.
These instruments will vary according to
their projected returns. Equity prices are more
volatile than fixed income instruments and
there is no guarantee of a payout from an
equity product. Therefore, it is generally con-
sidered "safer" for a retiree to invest in less
Ideally, in order to safeguard capital, there
should be a diversification of the personal
retirement portfolio among these instruments.
Thus will allow the retiree to protect capital
(by investing in safer long term instruments)
as well as generate higher rates of return (by
investing in some higher risk equity based
Maintaining a stable saving level
While we plan for retirement, it is important
to ensure there is enough liquid assets available
to cover basic monthly expenses. It is usually
difficult to determine what will be required
on a monthly basis to protect against the
uncertainty of post-retirement expenses.
This is due to the fact that there are a num-
ber of unknowns--how long our viable working
life will be, how the global investment market
will perform, what unforeseen events will be
thrown our way and our life expectancy.
Therefore, it is best to be as conservative
as possible while maintaining a level of dis-
posable income that can ensure stable quality
of life. It is important to factor in the concept
of the replacement rate. This is the percentage
of your salary that you ll receive in retirement
benefit after you retirement.
For instance, if your annual salary was in
the range of $120,000 and retirement payments
are $50,000, then your replacement rate is
41.67 per cent, which is going to be too low
for most people.
Focus on your future
Personal empowerment is key in retirement
planning. This means that individuals should
seek out knowledge of the various tools and
investment options that are available for retire-
With renewed emphasis on financial literacy,
there is a wealth of information available online
or through local governmental organisations
(see the National Financial Literacy Programme,
The T&T Association of Retired Persons
(TTARP) and Government Pensioners Asso-
ciation of T&T (GPATT)).
Mindful of the foregoing the Unit Trust
Corporation has developed a suite of invest-
ment products which are geared specifically
towards retirement, and are invested mainly
in local securities.
These are the Universal Retirement Fund,
the Individual Retirement Unit Account and
Pensions Plus. The Universal Retirement Fund,
for instance, has shown consistent performance
over the last five years with net return to
unitholders averaging 6.76 per cent in an often
unstable market, year to date net return to
our unitholders of 2.17 per cent as at May 31,
While personal discipline is ultimately the
master key of a proper retirement plan, one
does not have to go it alone. Representatives
of the UTC s advisory services department
are available to develop a comprehensive retire-
ment plan that is unique to you.
Also, customers can feel free to speak to
any of our customer service representatives
at our investment centres throughout T&T
for general guidance on planning for the golden
Unit Trust Corporation
Retirement and you
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