If you are approaching retirement and require help and guidance on what to do with your accumulated pension now is the time to speak to a professional pension adviser. You may have more options for drawing your pension than you think, some more suitable for your current circumstances than others. See here for a brief outline of the pension options available in our guide to retirement options or better still speak to one of our pension specialists today.
Pensions form a big part of financial planning as the tax relief on contributions is a big advantage for long term savers who are saving to fund for their retirement.
We help our clients understand the tax position, contribution limits and options available in retirement when saving for and accessing benefits in retirement.
If you already have a pension we can help you work out if it is better to leave it where it is or move it to a new product which may be more suitable for your needs. In particular we have experts dealing with the analysis of final salary pension schemes who are able advise on the benefits of the scheme and the schemes ability to meet your retirement goals compared to alternatives.
If you have a final salary pension scheme (defined benefits pension) you may wish to review this to see how suitable it is to meet your retirement objectives before choosing to take benefits.
Our view and the view of our regulator the FCA is in the majority of cases transferring a defined benefit or final salary pension scheme into a defined contributions pension scheme is unlikely to be suitable.
Our role is to help you evaluate the purpose of the scheme, the benefits available and how it may be suitable as part of your retirement objectives. If alternative solutions may be more suitable, we will help to demonstrate and model alternative possibilities and make a recommendation.
It is important to consider what you are giving up when considering a transfer and what you are taking on.
- Giving up the certainty of a guaranteed lifetime income for you and your dependents
- Losing inflationary protection in the scheme
- Having to pay charges to a pension provider and investment managers which are deducted from the transferred pot.
- Taking on the investment management and the risks associated with it or paying someone else to assist in the management of the investments.
- Your emotions when you see the value of your investment fall and rise.
- Accepting that there may be less money for you in retirement if your investment falls.
- The potential to run out of money in your lifetime.
- The less favourable tax treatment of Defined Contribution pensions in relation to; The lifetime allowance. Also accessing your DC pension and continuing contributions into another scheme.
An example where a transfer might be suitable would be, if you do not require any income or just require a partial amount of income from the scheme in retirement.
If a guaranteed income in retirement is important to you and you do not like the idea of investment risk and managing your money then it is unlikely that this will be a suitable solution for you.
If you are comfortable with the possibility of fluctuating income and can accept transfer risk and investment risk, a transfer to a defined contribution scheme may help you to choose a different shape of retirement income, pass on your pension wealth to nominated beneficiaries other than a spouse in the event of death or take part of your benefits such as tax free cash without the need for a regular income.
Before making any financial decision such as how to take your retirement benefits it is important to understand all your options, benefits risks and disadvantages and seek advice from a professional on the best outcomes for you. If you wish to transfer a defined benefit scheme with a transfer value above £30,000 you must seek and evidence, you have received financial advice before signing the transfer papers.
If you have already received a transfer value and it exceeds £250,000 or you have retirement benefits of £10,000 or more, you may be suitable for our advice process. If you wish to find out more regarding your pension options, then our video service will provide impartial guidance. If after completing the videos you are still interested in reviewing your pension, please contact us.
Click below to register for your FREE access to the Final Salary Portal. An interactive, educational video journey covering all the topics you need to know to help make the right decision.
If you have not looked at the options available to you in retirement for your pension savings you may be pleasantly surprised. You do not have to buy an annuity in retirement now and therefore can maintain full control of your accumulated pension. By maintaining control you are also able to drawdown payments or an income as and when you require them or if not required you can leave your pension to accumulate free of tax (subject to the lifetime allowance at the age of 75).
The most important questions in retirement are to understand how you want to retire and what goals and ambitions you would like to achieve. Our advisers will talk to you about these but it is a good idea to ask yourself the questions below that are relevant to you.
If you are approaching retirement and have savings in a personal pension you may wish to register for one or both of the videos below. They explain some of the options available to you when deciding to take an income from your pension savings.
- Do you want to stop working altogether, keep working as long as possible, or gradually reduce your working hours?
- Do you have a specific age in mind?
- Will you want to sell any assets, such as a business or a property?
- Are there any once in a lifetime dreams you want to fulfil?
- Have you any plans to move abroad, or purchase a second property?
- Do you anticipate living in your current house or downsizing?
- When will you need to generate retirement income and how much?
- Will you need your income monthly, quarterly or annually? Does it have to be paid on the same day?
- Do you need to pay specific bills or regular payments out of this income?
- Does it matter if some or all of your income fluctuates, and goes up or down? How much?
- If this income was not paid out how long could you last from other sources? What other income sources or assets do you have available?
- How important is certainty of income, is there a minimum you need to meet?
- Would you rather take some risk with this income to see if you can get more even if this means it may go down and you could lose it altogether
- Is it important for you to retain flexibility accepting this comes with some additional risk, or would you prefer to make an irreversible decision in return for greater certainty of income?
- Are you more concerned about the risk of inflation eroding the relative value of your money, or investment fluctuations eroding the absolute value of it?
- Are you comfortable with retaining an ongoing involvement in managing your retirement income, albeit with professional help, or would you rather make a decision and then forget about it?
- How healthy are you? Do you have any illnesses or any concerns about how long you might live, or require income for?
- Do you have any future financial obligations to meet, such as debts?
- Do you have dependants, such as family, who would be reliant on your income when you die? When if at all, would this dependency end?
- Do you wish to leave an inheritance?
- Should you need specialist care in later life, do you have any views on what type of care you would prefer?
Whilst thinking about these questions and your forthcoming retirement, there are also a number of factors that you should consider carefully. The decision you make now in respect of your retirement could be irreversible so please take the time to consider the factors below. Our advisers will help highlight risks that are relevant to your ultimate decision regarding retirement.
- Your state of health
- Whether your pension savings offer any form of guarantee
- The ongoing needs of your partner and/or dependants
- The effect of inflation
- Whether you have considered all the options available to you
- Whether you will have a sustainable income in retirement
- What the tax implications are
- Whether you understand the charges involved
- The impact on any means tested benefits
- Do you have debt – how will taking your pension affect this?
- Are you aware of pension and investment scams and what they look like?
We have produced a guide to your retirement options which you can download here. It is worth having a read of this to help understand all the variables you can consider for your retirement. However with answers to the above questions and further detail about your financial situation our advisers are well placed to talk to you about these options and why they might be suitable for you whilst discounting options that are less suitable in terms of meeting your retirement objectives.
Many people often underestimate how long their pension will need to last. They base this on their parents or grandparents history of mortality and don’t have a good indication of their own mortality.
It is important to understand the likelihood of reaching a certain age so we can reasonably plan for how long your retirement income will need to last.
Please use the calculator below to estimate your life expectancy. Is it higher or lower than you expected?
By saving into a pension you’ve taken an important step towards a more comfortable retirement – and taken advantage of significant tax breaks that could help you enjoy the quality of life you deserve in the future.
- When did you last take a look at your pension?
- Can you be sure your pension is on course to provide the retirement you deserve?
- Are your payments invested in the fund(s) that meet your investment needs and views?
The fact is, if you want your pension to support you as you expect in later life, you need to keep a keen eye on it now and give it a boost if necessary. That could mean topping up the amount you’re paying in, or simply checking that you’re happy with the choice of funds in which your money is being invested.
Many employer run defined contribution pensions will select a default fund for contributions. Popular funds often started de-risking your investment as you approached retirement in preparation to purchase an annuity. Many clients do not now wish to purchase an annuity therefore this type of life styling fund may mean you are missing out on potential growth opportunities as you approach retirement. What was once suitable may now not be suitable as you may wish a different shape for income in retirement.
If you are taking an income from your drawdown pension it is important that you review it regularly and fully understand some additional risks which may impact the amount of income you can take from your pension. You need to ensure the withdrawals are sustainable over the longer term and will continue to meet your goals and objectives. It may be prudent to adjust the income regularly to help protect your invested capital. You should also consider sequencing risk which impacts when your investments have a lower value during periods of market volatility and downturn. Drawing benefits when investment unit values are low means you need to sell more units to reach the level of drawings required. This means you have fewer units in your pension pot to increase in value, if and when markets recover.
You will also need to review your tax situation and consider the makeup of your withdrawals, whether they come from any available tax-free cash you may have, are made up partially of tax-free cash or are fully taxable at your marginal rate.
You should consider if remaining in a drawdown plan is right for you. If you prefer not to take investment, sequencing and longevity risk then an annuity may be a better solution for you. Your health is an important factor and may change the design of your pension or affect annuity rates. Enhanced annuity rates may be available to you since you last looked at them if your health has deteriorated. If offered an annuity with enhanced rates may now be a more suitable option.
Reviewing how your plan is performing and ensuring it remains the most suitable solution for you at least annually is important. The videos below give further explanation about drawdown review and what you can expect when reviewing a drawdown plan with a financial adviser.
If you have collected various pensions throughout your life you may wish to consider consolidating them to assist in their ongoing management. Some of the benefits of consolidation are;
- Migrating to newer style plans which have access to features which will aid your retirement such as flexible drawdown.
- Consistent investment approach
- Discounts in administration fees
- Less paperwork
Our services will review each pension and provide analysis of features, charges and investments in comparison with a new consolidated approach.
Should you require assistance in reviewing your pension requirements one of our consultants will be happy to assist you. Please complete our independent pension advice enquiry form.