Are you approaching retirement? is it time to consider your options? Are you confused? What will you do with the pension fund you have built up? Many people tell us they are concerned about how they will generate sufficient income from their pensions in retirement. We tend to suggest the key retirement planning issues to consider are as follows:
First Steps In Any Retirement Planning Process
The first step in any retirement planning exercise is to work out how much you will have in retirement. What will be the total value of your pension (or pensions) plus other investments?
With an estimated retirement fund established the next step is to review:
- Who do you need to provide for
- Are you in a position to help out beneficiaries after your death.
- What happens if your health fails and you need care
- What level of flexibility do you need and what level of risk is acceptable
- How you will live in retirement. Will you retire abroad?
After considering the above you should be able to decide the level of income you will need in retirement. You may then review your retirement options and management of your pension funds and investments.
Depending on your circumstances you may need to continue to work part time past your retirement age. Or, if things have gone well over your working life you may be able to retire early.
How we can help
Our first step is to understand you, your personal circumstances and your current plans for your retirement. We will gather information on your dependents, your health and your attitude to risk. We will collect everything required to make an assessment of your current pension funds and assets.
We are approachable and offer straightforward pension advice. We don’t judge and everything we discuss will be in the strictest confidence. After consideration of the information you provide, we will talk you through your pension and retirement options. We make a recommendation on the way forward.
We do not charge for our initial retirement planning reviews. We only charge if you wish to act on our recommendation. If you do want to proceed we will take whatever has been agreed forward to a conclusion. Ultimately, we aim to deliver financial peace of mind.
To arrange a review meeting (no cost or obligation) to discuss your retirement options complete the contact box below and we will call you back to arrange a convenient date and time.
How much will I have in retirement
If you have worked for a single employer for most of your working life making calculating your final pension fund value may be relatively easy. Unfortunately, for most, it is more complicated. Working for several employers generally means several frozen pension schemes may exist. There may also be personal (not workplace) based pensions to assess.
Perhaps some pensions will be defined benefit while others will be defined contribution. These types of schemes have different rules and this will impact on the pension options available. You may have other assets that may be added to the potential retirement pot.
You may have taken a tax free cash sum from a pension after reaching 55 years old or this may be something you are planning. This will obviously impact on the size of the remaining fund and must be factored into any calculations. If you are still several years from retirement there may be options available to boost your retirement fund.
What will you need in retirement
Some estimate you will need roughly 60% of your annual final salary to live a comfortable life in retirement. In reality, what you need depends on individual circumstances and aspirations.
When making your calculations there will always be one piece of crucial information missing. You don’t know when you (and your partner) will die. It could be within a week of retirement (let’s hope not) or thirty years or more into the future.
It is important to consider any debt you may take into retirement, who you will need to provide for, your personal aspirations and needs. You will also need to consider what growth you expect on your pension fund over time. Potential risks (such as inflation) to your retirement fund should also be considered.
Long term health and care
Ill health in later life is not a subject you may wish to think about but it is a potential issue you should prepare for as best you can. On a positive note, the treatment of serious health conditions continues to improve year on year. However, this also increases the likelihood of older people living for many years with a serious health condition.
According to Macmillan Cancer Support the number of over 65’s living with cancer increased 23% in the five years to 2015. According to the Alzheimers Society in 2015 The total population prevalence of dementia among over 65s was 7.1%.
The cost of care should be considered. If the worst happens the typical cost of ongoing care in a care home can range from £2,500 to in excess of £5,000 per month. The potential impact of ill health should be part of any retirement planning exercise. If you have health issues that may limit your life expectancy there are several potential options available that you should talk through with a financial adviser.
Pension investments flexibility and risk
Flexibility in retirement should be balanced against risk. You may decide that you want to limit your risk. In this case, choosing a pension option that guarantees to pay a fixed sum each month until you die could be the best choice. Or you may require some flexibility over what you take from your pension fund and when. You may be prepared to take on the level of risk that comes with that choice.
There are various risks that may impact on the value of a pension fund. Some of these may be addressed in full depending on your retirement choices. The impact of some may be limited depending on your motivations and personal circumstances.
Will you retire abroad
You can, of course, choose to retire abroad. You will be entitled to your state pension but depending on where you decide to live that pension may not be index linked. There are many issues to consider including the impact of foreign exchange. Becoming a resident of one country while still having financial commitments in another can cause tax problems. Should this be an issue it is important to take appropriate financial advice.
Retirement Planning Options
One of the key issues to consider during a retirement planning exercise is how to protect the interests of a spouse or partner after a pension holders death. Looking after children or other beneficiaries may also be a consideration.
Before the pension reforms (effective April 2015) most people used their pension fund to purchase an annuity. The provision for a spouse or partner was generally clear and specified as part of the terms of the annuity. The situation now is more complex with more pension options to consider to provide for a partner and potentially for children.
Flexi pension drawdown is now an option many consider as an alternative to an annuity. It is also possible to take a mixed approach – part in annuity and part in drawdown. The availability of more retirement options is a positive but with it comes more complexity.
If taking the drawdown option then you effectively become an investor. Your pension fund will be allocated to a range of investments in a portfolio. This investment portfolio must be managed, by you or your advisors. There will be a level of investment risk and fees and charges to consider.
There is a lot to consider and mistakes can be costly but retirement planning does not need to be complex. Some practical, straightforward, down to earth, common sense advice is what you need. That’s what we specialise in providing. Making the most suitable decision for you can mean a significantly more comfortable retirement. Enjoy the life you want with the flexibility you need.
Should you have any questions call us on 0800 043 8341 or email us at email@example.com and we will be happy to help.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance. This page is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. Tax regulations can change and any figures quoted above are at the date of publication.