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Pensions & Retirement Planning

Retirement planning is about making sure that you have enough money to live on when you retire. But it goes further than that – most people want to live and not just survive, so building a retirement fund should be one of life’s major goals.

Let’s be clear, this is not just about pensions, it is about building, storing and preserving wealth to create income in the future.

It starts with identifying your goals and we will encourage you to spend time with us building a lifetime cashflow model. This shows when you will need money and how much, and helps you to identify how much you need to save.

Planning for retirement?

Pensions are one of the most tax-efficient long-term savings vehicles, but also probably the least well understood. How would you like a savings plan that offered these benefits?

  • Your savings are increased by a rebate of Income Tax (known as “tax relief”)
  • If you pay higher rate (40%) tax, or additional rate (45%) tax, you get the higher rate refunded
  • You won’t pay any capital gains tax on your investment growth
  • When you retire you can take 25% of the fund tax free
  • You can draw the rest any time after 55, in whichever way is best for you, but subject to income tax
  • You can pass the savings to your spouse or children tax free when you die

Sounds like a pretty good deal, doesn’t it? And the costs are now lower then ever as a result of using technology driven solutions, which are explained here.

So how much should you aim to save for retirement? Well that depends on how long you plan to live and how much you need to live on.

We can help you calculate how much you need in assets by retirement age to live a comfortable and secure future, and then create a plan tailored to what you are able to afford.

But my property/business is my pension?

Some people store their wealth in property or a business so that at retirement they can downsize and release capital, or buy properties to rent out and create an income stream this way. This works for many people because they understand property and can see the asset there each time they drive past it.

Between 1997 and 2007 property had a long steady period of growth in the UK. However property is subject to cycles just like everything else, but they tend to be longer and slower. But don’t be fooled into believing that they don’t exist. These are the downsides:

  • Property needs to be maintained and you need to set aside 2-5% of the income each year for general maintenance, and 20-40% of the annual income every 5 years for more major refurbishment
  • Buying and selling property costs thousands in fees, and all these costs diminish your profits
  • Income from property is taxable the same as other investment income
  • The gain (profit) you make on the capital value is taxable too. Don’t forget to factor in the taxman
  • Property is notoriously illiquid, meaning that you can’t easily make partial withdrawals, and selling can be a long and expensive process
  • After taking out costs and tax, typical yields are about the same as could be provided from a balanced investment portfolio, which can be sold much more cheaply and easily if you need access to money

Retiring now?

As you approach retirement you will have some important and life-changing decisions to make. It isn’t possible to overstate the importance of good financial advice at this time because some of these decisions may be permanent, i.e. once set up they can’t be changed.

Annuities, drawdown or …?

For many people a guaranteed income for the rest of their lives with no complications and no investment decisions still makes the much criticised annuity an attractive choice.

Buying an annuity provides a straightforward income that can be protected against inflation and can provide for your spouse or partner too.

We specialise in seeking out the best income from the market using the Open Market Option built in to most pensions. Don’t assume that you are automatically being offered the highest annuity, let us check it for you. Have a look at our annuity case study.

Recent changes mean that you don’t have to buy a pension annuity- ever. If you are worried about losing control of a large pension fund, or if the inflexibility of a fixed pattern of income doesn’t suit your needs, you may prefer a flexible Income Drawdown plan that lets you take what you want, when you want.

And there are some who want the best of both worlds who may find a “3rd Way” guaranteed income product the best option.

Whatever your preference we will take time to discover your needs and outline your options, to make sure that you make the right choice, before helping you to put your plans in place.

If you are researching annuities and find all the terminology complicated, click the link to have a look at our Investment Glossary.

So come and speak to us now about taking control of your future.

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