Thinking of Retirement
When most people think of retirement, they think of pensions. And quite rightly so, as pensions are most people’s only form of income throughout their ‘golden years.’
However, retirement planning is so much more than ‘what will my pensions give me at retirement?.’ It is about the different ways that you can draw upon your pensions, such as whether you buy a type of Annuity or if you choose to draw flexibly from your pension via a relatively new concept called Flexi-Access Drawdown. We will get onto those in more detail in a moment.
It can be a daunting time and many of our existing clients over the years have become clients during this period of their lives. Most people find themselves saving into pensions their whole working lives to finally get to retirement with no clue of what they need in terms of income throughout their retirement, or how that income will be paid to them.
That is where we can help you decide on the most suitable way to take your pensions and when to start taking them. We can use a range of different ways to bring your retirement plans to life, such as cash flow planning, helping you work out budgets and showing you that your dream round-the-world holiday of a lifetime, or that car you have wanted for many years can be a possibility as opposed to just a fantasy.
Retirement planning is about making the most out of what you already have in place, making further savings if possible and needed, and seeing the bigger picture in relation to your finances. The sooner you start thinking about your retirement, the more time we have to get a robust plan in place and start working towards a more prosperous and rewarding future.
Drawdown, or Flexi-Access Drawdown as it is also called, is the option to access your pension benefits flexibly. Rather than having to buy an annuity you can choose to take your Tax-Free Cash (usually 25% of the pension fund value) and then leave the remaining 75% invested until you either need a regular income or you wish to take lump sums and are taxable at your highest marginal income tax rate.
The beauty of Drawdown is that you can manage withdrawals tax-efficiently whilst benefitting from investment growth. It is important that the underlying investments are invested according to the level of risk you are both willing to take and can afford to take. We can help you decide on the right investments throughout your retirement to make sure your pot is working as hard as possible for you.
An annuity is a type of retirement income product that you buy with some or all your pension pot. It pays a regular retirement income either for life or for a set period. Annuities are retirement income products sold by insurance companies and once bought, cannot be changed.
You can build in certain options such as a guarantee period (guarantees the pension payments for a defined number of years), spouses’ pension (for your husband or wife to receive if you pass away) and an increase option (increasing by a certain percentage each year, for life).
Uncrystallised Fund Pension Lump Sum (UFPLS)
An Uncrystallised Fund Pension Lump Sum (UFPLS) is a withdrawal of funds directly from the pension pot into which you have been saving into. It is possible to do this at any point once you reach pension freedom age, provided you have not already accessed the pot in any other way, such as setting up a drawdown scheme, buying an annuity, or taking a tax-free lump sum of 25% of the pot. We can help you decide if this is a suitable way to draw benefits.
Other ways to draw benefits
There are also some other ways you can draw benefits from your pension. Please get in touch for a free no-obligation meeting for us to be able to help you plan for your retirement