Whether looking for the flexibility to retire early, fund that dream holiday, or simply the security of sustainable income, a robust retirement plan can give you confidence & peace of mind
Following the introduction of pension freedoms by the UK government in 2015, there has been an upsurge…
Whether starting to save or increasing the amount you save, private pensions can be an excellent, tax efficient way to save for retirement…
Pensions for self-employed and business owners can make for a potent, tax-efficient tool…
Pensions can grow into significant assets given time. However, the fate of these assets at death may not be as you would expect…
Retirement Planning: approaching retirement
One of the most common enquiries we receive is from clients that are close to retirement. Commonly looking to make sense of their pensions, understand their options and ensure they able to retire comfortably.
We understand that many of the decisions required heading into retirement can seem perplexing.
- Should I take the lump sum?
- When can I afford to retire?
- Annuity or drawdown?
- How will tax affect my income?
- What level of income will be sustainable for my lifetime?
- What state pension entitlement will I have and how will that interact with any other income?
- What happens to my pension when I die?
With Pension & Retirement Planning, our advice process will take account of all of your concerns and perhaps identify some we may have that you have not considered. We employ cash-flow modelling software to give an understanding of what level of income you may expect that is both realistic and can be made to last. As independent financial advisers, we will ensure that the assets you have earmarked for retirement are well placed to meet your financial aspirations and deliver the peace of mind you require.
“We understand that planning for retirement can be a daunting task.
Pension legislation has changed dramatically and will continue to do so under successive governments. At Glasgow Wealth, we believe the provision of adequate, tax-efficient income in retirement should be a high priority for all clients and your specialist financial adviser will work with you to this end.
We understand that planning for retirement can be a daunting task. Pensions and retirement plans are often put together piecemeal as a collection of current and former employers pension schemes, private pensions sold by banks, never-to-be-seen-again ‘advisers’ or savings that have been set aside with retirement in mind.
To establish a firm grasp on making retirement work for you financially, it is paramount that planning takes priority. Your Adviser will work closely with you to understand when you want to retire, what level of income you require to do so comfortably, what arrangements you have already made and otherwise build a thorough understanding of your retirement goals.
“We have received excellent advice from Michael over many years particularly regarding pensions and investments. Our accounts are meticulously handled and amended to maintain our income position when Michael determines a change is necessary. Michael has always been extremely professional and courteous and we feel very comfortable to have him handling our financial affairs.”
– Mr & Mrs Hood,Retired, Kilmarnock
“We appreciate that what you will want to spend your income on will be very different earlier in retirement compared to later in life.
When this has been achieved, we can then look to establish whether any improvements may be made. Sometimes, the right advice is to do nothing. Otherwise, we will be able to recommend where we can improve tax-efficiency, reduce costs or better investment performance.
We use cutting-edge software to model your income requirements in retirement and plan as far as possible to ensure that you provide sufficient income (or capital) as it is required in retirement. We appreciate that what you will want to spend your income on will be very different earlier in retirement compared to later in life. It is also good practice to have an understanding of what happens to your pensions or retirement plans in the event of your death, we will give you feedback on this and ensure that you have what you need to put you pension ‘house’ in order.
“As an independent firm, we will ensure that the assets you have earmarked for retirement are well placed to meet your financial aspirations and deliver the peace of mind you require.
Get in touch now for an initial review with a Consultant and gain an understanding of how we work and why we are the trusted financial adviser for many individuals and families.
Accessing your pension
When deciding on how you access your pension, there are a number of options to choose from. Our advisers will be able to go through each of these options with you to identify the most suitable option. Detailed below are some of the more common ways that you can access your pension:
- Pension Annuity
- Flexi Access Drawdown
- UFPLS – Uncrystallised Funds Pension Lump Sum
An annuity is generally what people understand to be a pension plan in the traditional sense of the word. That is, purchasing an annuity provides a secure income for the remainder of the annuitant’s life. This grants security and peace of mind in retirement as all future income payments are known from the outset. Once an annuity is purchased, however, the terms are fixed and cannot be changed at a later date. It is crucial to therefore get things right at the first attempt.
Moreover, when retirement comes around the pension provider will write out with their own annuity terms. At this point, pension investors have an opportunity to shop around and secure better terms from another provider. This is called an Open Market Option and simply identifying the best provider can uplift pension income by 50%. In the event that the annuitant has ill-health or even minor ailments, better annuity terms may be achieved as rates are set based upon life expectancy. So cold, hard medical statistics can be used to leverage a higher income in retirement in the right situation.
Annuity add-ons and their use in financial planning can be confusing. This is certainly a financial decision where good advice can really add value. As independent financial advisers, the advanced research software that we employ will make sure that you get the best out of an annuity.
Flexi Access Drawdown
Income drawdown offers a flexible alternative to annuity purchase at retirement. With annuities, the pension fund is essentially exchanged with an insurer for the right to lifetime income. With Flexi Access Drawdown, the pension fund remains invested and income is drawn-down as required. This offers more flexibility which may be desirable for a variety of reasons. For example, perhaps income is not required immediately, to defer annuity purchase until a later date or to allow higher income to be taken in the early years of retirement.
With pension drawdown investment risk remains to the extent that the fund remains invested. As such, there is the potential for the capital value of the fund to drop and correspondingly, future income payments may also be inhibited by poor performance. It is therefore paramount to have an investment strategy that is consistent with your tolerance for investment risk and that can continue to create a sustainable retirement income over the longer term. This is one area in which our advice process adds tangible value by monitoring risk, creating realistic income that lasts and managing tax. Let us demonstrate where this could benefit you.
UFPLS – Uncrystallised Funds Pension Lump Sum
UFPLS offers the option for pension savers aged 55-75 to access their entire pension fund as one lump-sum where no benefits have been taken from that fund previously. This change introduced in April 2015 supersedes trivial commutation which allowed smaller funds to be completely decanted in one sitting.
The main drawback of this situation is that 75% of the fund value will be added to the investors income position for the year and income tax paid at marginal rates thereon. Taking benefits in this way will also reduce the individual’s annual allowance to £10,000 meaning that any future pension contributions in excess of this will not attract tax relief.
UFPLS may be a solution for those with smaller pension funds with providers that do not offer flexi access drawdown and the cost of moving to a provider who does is inhibitive. The main drawback with UFPLS is tax as noted above and caution should be exercised to gauge the tax ramifications before putting pen to paper. For those looking to partially access funds from a pension policy, ‘smaller pots’ legislation will likely allow for more flexibility if less than £30,000 is required.
For more information on the pension options that you have available to you and retirement planning advice, contact us to book a consultation with one of our pension advisers:
Pension Death Benefits
Pensions can grow into significant assets given time, often overtaking even the value of your home with the right investment selection.
However, the fate of these assets at death may not be as you would expect. Until the time comes to actually take benefits from the pension, the trustee of the scheme will be the legal owner of the pension assets. That being the case, they have discretion over how this property is distributed in the event of death, unless directed otherwise. This may not be in keeping with the wishes of the investor. Moreover, given the significant values that pension assets can confer, this may also inadvertently create a liability to inheritance tax which can easily be avoided for the sake of filling out a simple form.
It is important to keep up to date with where pension benefits will go in the event of death and how this changes if you change provider or employer or if your family circumstances change e.g. marriage, death of a spouse, divorce or insolvency.
Furthermore, recent changes in pension legislation have augmented death benefits from pensions in some situations. This simple ‘housekeeping’ issue is one aspect of your overall affairs that your Glasgow Wealth adviser will take care of as a matter of course to make sure that your wishes are adhered to in the event of your demise before or after retirement.
Retirement Planning Advice free online consultation:
We are based in George Square, Glasgow, although with ongoing Covid-19 restrictions, we offer online consultations to discuss your pensions and retirement planning. Contact us to schedule a consultation with one of our financial advisers.
Other Retirement & Pension Information:
- Can I afford to retire?
- High earners falling foul of the Personal & Annual Allowance Taper
- Inheritance and Estate Planning
- Making the most of your investments
- Pension Advice Glasgow
- Also, further reading on Money Advice Service website
Find more opinion on our blog: https://www.glasgowwealth.co.uk/glasgow-wealth-profile/
“Contrary to my past experience of financial advisers, Michael is very knowledgeable and I feel that he is always striving to tailor his advice to my personal needs and circumstances. He follows up quickly on even the most trivial of queries, and explains everything clearly, which is a huge bonus for someone who understands little of matters financial! Whenever we meet he is extremely thorough, and he manages to makes my annual financial reviews as painless as possible! Furthermore, Michael initiates contact to arrange a review – another first in my experience. Always a personal service from a very personable, well-informed man – first rate!”
Mrs Kerr, Edinburgh
For more information of the different types of pensions schemes and how they differ can be found at: Pensions Advisory Service