In the current unstable global economic environment, retirement planning is becoming increasingly important, according to Euronews.

Escalating trade tensions, coupled with persistently high inflation and relatively high interest rates in several parts of the world, have made it vital for people to protect their assets from market fluctuations.

Joshua White, financial expert and head of growth at Level Group, a credit institution specializing in family law, said in a note: "From April 2027, pension and inheritance tax rules will change significantly, as most unused pension funds will be included in the value of estates for inheritance tax purposes, removing the previous exemption."

It added that this change is likely to particularly affect people with defined income pension schemes, although it will not be as big an issue for those with defined contribution pension schemes.

"Given current property prices and the fiscal burden, we estimate that around one million properties in the UK that are currently just below the inheritance tax threshold could become taxable as a result of these changes. As property is often the main asset in an estate, this will result in many estates coming within the scope of inheritance tax for the first time," White said.

He also pointed out that this change is intended to prevent pensions from being used as a tax planning tool rather than a means of providing retirement income. Beneficiaries and executors should therefore start planning accordingly and be aware of the potential tax implications.

The 30:30:30:10 pension planning rule can be a great help in such rapidly changing situations, helping you to save consistently for your retirement, plan your budget better, and achieve your retirement goals in a sustainable way.

How does the 30:30:30:10 rule for retirement planning work?

The 30:30:30:10 retirement planning rule states that 30% of your savings should be invested in bonds, 30% in stocks and shares, 30% in real estate or property, and 10% in cash.

Antonia Medlicott, founder and managing director of Investing Insiders, a financial education company, said in a note: "The idea behind this rule is that spreading your investments roughly equally between real estate, bonds, and stocks will reduce the risk you take by protecting you from shocks in any of these markets, while allowing you to take advantage of their growth over the long term."

This can help you allocate your money in the most effective and profitable way, which in the long run can be much better than simply leaving it in a savings account. The reason is that most savings accounts do not offer interest rates that are high enough to counteract current inflation. This means that if high inflation continues, your savings could lose significant value by the time you reach retirement age.

The time value of money, which essentially means that €1 today will probably be worth considerably more than €1 in 20 or 30 years, also contributes to reducing the value of your savings over time. In this way, using the above rule can help you significantly overcome the risk of inflation.

The 30:30:30:10 retirement planning rule also ensures that by spreading your money across different assets, such as stocks, bonds, real estate, and cash, you significantly reduce your portfolio risk. In the event of an emergency, you still have access to cash through 10% of your portfolio allocated to cash and cash equivalents, without having to dip into your long-term investments.

Is the 30:30:30:10 rule for retirement planning right for you?

Medlicott emphasized: "The main drawback of following such a rule in retirement planning is that you may end up with lower returns in the long run. This is because stock market investments generally yield higher returns than bonds and real estate, and 30% is a fairly low percentage of your portfolio invested in the stock market.

Therefore, investors should bear in mind that this may be a "safer" way to plan for retirement, but it may not be the most profitable in the long run.

She also pointed out that pension funds typically take more risk with your money when you are younger. As you get older and approach retirement, pension funds tend to shift their funds into less risky assets.

"This ensures that you benefit from higher growth while you are able to withstand the impact of short-term volatility, and that you are exposed to less risk as you approach the time when you need to withdraw your money," Medlicott explained.

She added: "If you're not sure how best to save for retirement, it may be worth consulting a professional financial planner who can assess your risk tolerance and goals and help you structure your investments accordingly."

Robert Mulder, an operating partner at Senior Capital, explained that the 30:30:30:10 rule may not always be the best option for people who are already retired or close to retirement. These individuals may therefore need to explore other options for ensuring financial stability, especially given the uncertainty of investment returns.

"Reverse mortgages are gaining popularity in Europe as a viable option for retirees. These mortgages allow homeowners to use their property to supplement their retirement income without having to pay interest, thus providing a stable financial option in an environment of uncertain returns on investment," said Mulder.

He added: "The growing popularity of equity release mortgages is a natural response to the social challenges facing many European countries. These financial instruments provide retirees with a valuable opportunity to increase their financial flexibility. By releasing equity in their homes, retirees can increase their disposable income, thereby directly improving their quality of life in retirement."

Muldar noted that, when carefully managed with expert assistance, equity release mortgages can balance long-term goals, such as preserving wealth for future generations and maintaining financial health, with the immediate need for financial security.

It is important to remember that the 30:30:30:10 retirement planning rule, like any other financial or retirement planning rule, is not universal and should only be used with consideration of your own risk tolerance, financial goals, and available resources.

In some cases, you may find that changing the specific percentages to suit your individual goals can give you better results. For example, you may want to allocate a higher percentage to stocks or a lower percentage to bonds, depending on your risk preferences. |BGNES