Retirement Planning

It’s worth thinking about your future finances before you reach your planned retirement age, so you can work out what your best options are.

To do this you should also think about your other pension savings and the State Pension. One of the main areas of ‘retirement confusion’ is changing regulations and choices that face individuals approaching retirement.

Pre and post retirement planning has always been one of the key areas of advice Adrian Smith Wealth Management. Our DFM Solutions is at the core of our investment structure and sits superbly well in the management of pension portfolios whether in Personal Pension, Self-Invested Personal Pension (SIPP) or Small Self-Administered Schemes (SASS).

We regularly advise clients who have a number of pension plans both personal and occupational schemes who are looking to amalgamate or fully understand their options for the future.

Our in-house Pensions Expert, Mike Tuxford, has vast experience in this area. Together, we can guide you through the maze of regulation in order that you receive the most flexible, tax efficient benefits when you decide to retire and make the most of the investment potential of the underlying fund whilst you are still working.

TAX BENEFITS

Think of a personal pension as a long-term savings plan which comes with the added benefit of tax relief. Whatever money you save into your pension will get tax relief so any contribution you make to your pension means more money in your pocket and less going to the government. There are also tax benefits when you retire. When you reach retirement age, 55 at the earliest, you can take 25% of your pension fund as a tax-free lump sum. The remaining funds will be paid to you as income and taxed at normal levels, depending on how much income you have in any one year.

ANYONE CAN CONTRIBUTE

You can have a personal pension plan if you are employed, self-employed or not working. Along with any contributions you make, other people can also pay into your personal pension plan. If you are employed, your employer can make payments into your personal pension scheme. If you have a spouse who doesn’t work, you may decide to help them make provisions for their retirement by contributing to a pension they own. The same is true of a child, should you wish to help them get a head start in planning their long-term financial future.

FLEXIBILITY

The majority of personal pensions are flexible and portable so if your circumstances change, you start a new job or you stop working you can continue contributing to the same plan.

GUARANTEED RETIREMENT INCOME

On retirement you can take 25% of your pension pot as a tax-free lump sum and draw the remaining funds as income directly from your pension pot. Drawing an income this way means that you may still be able to benefit from returns on the investment your pension is in. Another option is to use your pension funds to buy an annuity and provide a guaranteed income for your retirement years.

COMPOUND INTEREST

The earlier you start contributing to a pension, the more you can benefit from the compound interest you can earn. Whenever you make a payment into a pension you benefit from the tax relief and you also start making returns on the investment. In year one you’ll benefit from interest returns on your initial contribution. In the second year, you’ll earn interest on the initial contribution and the first-year return. By the third year you’ll be earning interest on your original contribution and two years of returns you’ve already accrued – these gains continue to multiply as you keep making your regular tax-free contributions. Which should, ultimately, add up to a healthy retirement pot. With the benefits of compound interest in mind, it’s also worth noting the benefits of being able to choose how your pension fund is invested. While different funds have varying risk profiles, it can be hugely profitable to pay some attention to how your pension is invested.

INVESTMENT RISKS

Your pension fund will be invested in bonds and other investments, or stocks and shares, if you have a higher appetite for risk. While you can mitigate the risks associated by seeking advice and making astute investment decisions, it’s impossible to guarantee that the investment your pension is in will perform as required and you could lose money if the investment fails to perform. Most financial investments come with the risk that the share price can fall as well as rise and this is something you have little control of once your investment is in place. However, since a pension is a long-term investment and even if you suffer losses, in the short term the long-term gains may outweigh any losses you incur.

WHEN PLANNING YOUR RETIREMENT, PLEASE BE AWARE.

The choice you make when you take your pension is permanent and you cannot change your mind once your pension is in payment.

As your pension increases each year you may find that although it currently meets HMRC’s requirements for a one-off cash lump sum, when you come to take your pension it has increased to be worth more than the limits in place at the time and you won’t be able to take it as a cash lump sum.

WHEN PLANNING YOUR RETIREMENT, PLEASE BE AWARE.

TAKING MY PENSION WHILE WORKING

Most companies allow you to take your pension and carry on working. You will need to agree with your managers if you also want to change your working hours.

If you are thinking of doing this, remember that your pension is taxable income, so it may affect your tax situation if you have taxable income from other sources.

TAKING MY PENSION WHILE WORKING

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