How are you planning for your retirement?

 
For most of us, we’ve understood that over the course of our working lives our regular pension contributions will build up a lump sum that will then pay us, hopefully, a healthy retirement income.

But now the rules have changed and pensioners have much more choice over what happens to that lump sum.

From April 2015 the Chancellor removed restrictions on how you access your pension savings with the tax paid on withdrawal cut to the personal rate.

Pension savings: what’s changed?

The new rules allow for the total amount taken as a lump sum to be tax-free on the first 25% with the remainder taxed at your standard rate.

The result of this means that instead of simply buying the traditional annuity, you’ll be able to cash in your entire fund to spend as you wish.

Naturally when this change was announced it was accompanied by concern that large sums of money would instantly be withdrawn and blown on expensive holidays and luxury cars, leaving pensioners devoid of the necessary income to fund their increasingly long retirement.

However the anticipated “dash for cash” hasn’t materialised. Instead, many pensioners have been left unsure as to what to do with their pension pots.

Your new pension savings options

Before, it was easy. You bought an annuity and it paid you a steady income for the rest of your life, whether you had other resources or not. But now there’s choice.

• Would it be better to invest it in shares or property?
• Maybe you don’t really need it and you do want that holiday?
• The reality is that many people have taken the time to review what’s available with a view to making the best decisions for their money.

Unsurprisingly the annuity continues to appeal to those whose priority is the security of a steady income, but over recent years such products have been criticised for being poor value compared to other possible income streams.

For those with other incomes, or people who are more inclined to take a risk, other opportunities based around drawing down their capital have proved popular. However even in these cases it’s largely been a partial drawdown.

The tax on anything above the 25% tax-free lump sum has increasingly made people pause to think about cashing in their full lifetimes savings.

Pension advice: what should you do?

First of all you need to plan your life after retirement. What do you want to do with your time and, crucially, how will you pay for it?

With a basic state pension of just £115.95 per week you probably won’t want to leave yourself entirely dependent on the state if you can avoid it. For this reason it really is a good idea to ensure that your pension savings are giving you a regular income of some sort. It’s here that a good financial advisor can really come into their own.

For many, it may be that you don’t want to use your savings at all. You may have a desire to continue working or be in receipt of other contributions still available to be paid in. Then there are concerns over building reserves for personal care or guarding against future inflation.

Planning for retirement: seeking advice

Expert Wealth Management understands that your retirement can bring a significant change in your lifestyle. You may have much more time to enjoy than you had before, but for most people retirement also represents a significant decrease in your disposable income.

Our advisers will help you to better understand the income streams available and evaluate your options to maximise your monthly income and ensure you can live your retirement in comfort.

To find out more about planning for retirement, call Expert Wealth Management today on 01993 772 467 or contact us online.