Pension Planning

Planning Ahead for Your Retirement

Good financial planning for your retirement can make the difference between the reassurance of knowing you will have enough to live on in later years or the worry of not wondering how you will manage.

Financial security in later life is something that many people take for granted – “I will have my State Pension” or “My house is my retirement fund” – but the reality is only sound planning will give you the retirement you want.

Benefits of Pension Saving

Tax Relief. Contributions into pensions are topped-up with tax relief from the Government, at the rate of 20% if you are a basic rate taxpayer, 40% for higher rate taxpayers, and 45% for additional rate taxpayers. Whilst you are saving you will benefit from growth on this tax relief. And when you retire, you may pay a lower rate of income tax on your pension income than the tax relief you benefited from.

Tax-free lump sum. When you retire, you can take a quarter of the fund as a tax-free lump sum. Which means, if you have a pension pot of £60,000 at age 55, you will be able to take £15,000 as a tax-free lump sum, and can draw the remainder as taxed flexible income or lump sums throughout retirement.

Flexible Income. The days of compulsory annuity purchase at retirement are long gone. Pensions are now one of the most flexible ways of saving and drawing income. From the age of 55, there are no longer any restrictions or limits on how you can draw your pensions, which means you can structure your retirement income to meet your changing circumstances, and draw lump sums as and when you need them, e.g. to buy a new car or pay for your son or daughter’s wedding. Of course it’s important to remember that your pension is designed to maintain your standard of living throughout retirement, so retirement planning is crucial to ensure you have a big enough fund to meet all of your capital and income expectations.

Death benefits. Pension funds in most circumstances fall outside the estate for Inheritance Tax purposes and are now one of the most important and tax-efficient tools in inter-generational financial planning. Providing you have valid death nomination instructions in place, you can pass your pension fund on tax-free to any of your named beneficiaries.

“But I won’t spend as much in retirement”

Many retirees find that instead of their cost of living decreasing in retirement, they end up spending MORE, especially in the early years, as they spend more money on leisure time, holidays, home improvements and helping the family.

The longer you leave it to save for your retirement, the harder it gets to achieve your retirement objectives. Someone looking to start saving for their retirement at age 40 will have to save nearly twice as much as someone aged 20 to accumulate the same size fund for their retirement income.

The decisions you make about where to invest your pension contributions will be a decisive factor in determining the success of meeting your retirement goals.

The flexibility afforded by modern pension contracts like Self Invested Personal Pensions (SIPPs) means you’re no longer restricted to a limited range of life companies’ own funds.

Annually reviewing the performance of your pension investments and their ongoing suitability in line with your objectives is an important part of the service we offer.

Our advisers can help you to set your retirement objectives and put together a financial plan to help you achieve them. They will consider your financial situation and help you contribute to pension savings tax efficiently, making use of all available tax allowances and reliefs.

This page is generic guidance as to some of the benefits of saving for retirement and does not constitute advice. There are risks and downsides to investing for retirement which would be outlined to you by your adviser based on your personal circumstances.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.