How getting financial protection can help you to save for retirement


If you’re the main or only earner in your household, a loss of income could have a serious impact on your finances and may affect your ability to save for retirement.

The pandemic has negatively affected the finances of millions of people and if you’re amongst them, it may have an impact on your savings. However, this is where having the right protection in place can be crucial. Read on to find out why financial protection can help you to save for retirement.

Having protection in place can help you to absorb financial shocks

One of the biggest impacts of the coronavirus outbreak is that it has caused many people to reduce or halt their pension contributions. A report by pension firm Hargreaves Lansdown, published in the Telegraph, found that around one in four people have reduced or stopped their pension contributions due to the financial strain caused by the pandemic.

This can impact your ability to save enough to fund the lifestyle you wish to have in retirement. Even a brief halt or small reduction in pension contributions can have a significant effect in the long term.

Furthermore, many people who have been affected financially have to dip into their savings to make ends meet. This is why having protection in place can be useful to stay on track and give you peace of mind.

According to a report by Royal London, most people typically make the decision to explore their options for financial protection when they reach a life milestone. Some of the biggest triggers for getting protection are life events such as starting a family or buying a home.

If you want to make sure that you can absorb financial shocks so they don’t affect your long-term goals, getting protection can be essential no matter what age or stage of life you’re at.

Whilst you probably already have an emergency fund in place, organising financial protection can be an even better way to ensure that you can meet your saving goals for retirement.

Income Protection pays you a portion of your salary if you’re unable to work

If you want to safeguard your income from short-term disruptions, Income Protection can be the best way to do so. This can be particularly useful if you have ongoing commitments such as mortgage payments or education fees for your children or grandchildren.

If you are unable to work due to illness or an accident, Income Protection can be invaluable as it will pay a portion of your salary each month whilst you get back on your feet. These payments typically continue until you recover and return to work or until the end of the policy period.

Income Protection usually covers most illnesses that leave you unable to work. However, there are exceptions to this so it’s important to read the terms of your policy thoroughly, so you know what you are protected against.

Having Income Protection in place can help you to ensure that you won’t have to dip into your savings if you’re unable to work.

Critical Illness Cover pays a lump sum if you’re diagnosed with a serious illness

If you get diagnosed with a serious illness, not only can it be emotionally devastating, but it can also have serious financial implications. This is where Critical Illness Cover can help you to stay on track.

Unlike with Income Protection, Critical Illness Cover will pay you a lump sum, rather than a monthly income, when you are diagnosed with a serious illness. This lump sum can be used to pay for private medical care, to repay your mortgage, or to maintain your standard of living if you have to take an extended leave from work to recover.

However, some policies may not cover all of the definitions of a critical illness, as the definitions often vary between providers. This is why it’s important to read the terms of your policy thoroughly, so you know what you are protected against.

If you don’t have Critical Illness Cover in place when you are diagnosed with a serious illness, you may be forced to dip into your savings. Having protection in place can allow you to rest easy whilst you recover, knowing that your long-term financial goals won’t be affected.

Life Insurance can help to prevent your loved ones from suffering financially if you were to die

If you are the primary earner in your household, your death could seriously impact your loved ones’ retirement prospects. Having life insurance in place can be crucial for protecting the finances of your loved ones if the worst were to happen.

There are several types of life insurance to consider, so it’s important to find the one that’s right for you. Some of the most popular forms of protection are:

  • Level Term Assurance: This policy will pay you out a lump sum if you pass away during the policy term. You may want to consider matching the term with the end of your mortgage payments, so that your spouse won’t have to pay it alone if you pass away.
  • Decreasing Term Assurance: With this policy, the payout sum decreases over time and can be useful if you have a repayment-style mortgage. Since the payout reduces over time, this is typically cheaper than Level Term Assurance.
  • Whole of life cover: This policy pays out whenever you die and has no fixed term. This can be useful for paying Inheritance Tax liabilities after you pass away, so your spouse doesn’t have to dip into their savings to pay the tax bill.

It’s important to bear in mind, however, that these types of policies typically have no cash value at any time and that cover will cease at the end of the term. Furthermore, your cover will lapse if you do not keep up with your premiums.

Having protection in place can be essential if you want to prevent short-term disruptions from affecting your retirement prospects. That’s why having the right protection in place can give you financial stability, as well as peace of mind.

Get in touch

If you want to get protected but aren’t sure which type of insurance is right for you, get in touch. Please email or call 0115 933 8433.