Retirement savers now have an opportunity to plan their futures with a flexibility unknown to previous generations.
Today, there is no longer a hard stop after which you are expected to rely on a preset income stream regardless of changing circumstances. Instead, you are more in control than ever before and can tailor a plan to suit you as you move into retirement.
However, with the increase in choices available, deciding which options are best for you can sometimes be overwhelming. In this article, we will take you through the main considerations when assessing your retirement benefits and discuss how to work out what you will need. We generally focus on those with Defined Contribution (DC) pensions, although some consideration is given to those with Defined Benefit (DB) pensions.
At all stages, it’s important to remember that you have the flexibility to combine any of the following options to best suit your needs. Talk to me to plan the best outcome for you and your family.What are the options for accessing my pension?
It’s important to remember that your retirement income is not entirely dependent on your pension. While that is likely to be the most important source, other investments and savings can act as a portfolio of assets that you utilise to achieve your retirement plans.
This ability to switch different sources of income on and off is particularly useful if you’re planning to gradually shift from working to being fully retired, as opposed to stopping work for good on a set date.
When working out how much you need for the rest of your life, a good starting point is to understand that there is no magic number. The figure will be different for everyone, and the only way to arrive at something that works for you is to sit with your adviser, decide what your objectives are for later life and see when certain incomes are going to switch on and off. Mapping out your retirement plans should take the following into account:
Your loved ones can receive your DC pension pot when you die and, as your DC pension typically sits outside your estate, it is not taken into consideration when calculating Inheritance Tax. Income Tax is payable at the marginal rate of the beneficiary, depending on the age of death and whether you have started to access the pension.Weighing up your options with an adviser
It can be overwhelming with so much choice on offer, but don’t think you have to make all the decisions on day one. You now have the freedom and choice to plan the second half of your life according to your goals and the specific circumstances you face.
I can help take the emotion out of any decisions you make and put a plan in place that is bespoke to you.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
`Income drawdown' will reduce the size of your pension fund and the investment growth may not be sufficient to maintain the level of income you wish to draw. If you withdraw money at a rate greater than the growth achieved by your investments, your remaining fund will reduce in value. The level of income you take will need to be reviewed if the fund becomes too small - this is more likely the higher the level of income you take.
The income you receive may be lower than the amount you could receive from an annuity, depending on the performance of your investments.
As annuity rates can change substantially and rapidly, there is no guarantee that when you do purchase an annuity the rates will be favourable. This could mean that your pension thereafter may be less than you hoped for.
The rules governing how much income you can take directly from your pension fund may change. This could mean that the income you can take from the investment no longer meets your requirements
As a Chartered Financial Planner and Fellow of the CII, I have satisfied rigorous criteria relating to professional qualifications and ethical good practice.
Post articles and opinions on London Professionals
to attract new clients and referrals. Feature in newsletters.
Join for free today and upload your articles for new contacts to read and enquire further.