Whether you’re just starting your career, or nearing the end of your working life, we will help you make the most of your funds so you can enjoy a comfortable and fulfilling retirement.
The Pension Freedoms, introduced in 2015, offer fantastic flexibility with numerous options for taking benefits from your retirement fund. But this flexibility can significantly increase financial risk. The manner in which you take your benefits should be derived from a logical assessment of your financial situation, your plans for retirement and with consideration given to your beneficiaries.
Planning For Retirement
When will you retire and how much income will you need?
At some point in your life you are going to ask yourself this question. The earlier you ask it, the better because by answering it you will set yourself a financial objective. That is the first step in creating a retirement plan.
At Retirement Options
Please note that each of the retirement options below allow you to take 25% of the entire fund as tax free cash (at the outset for lifetime annuities and uncrystalised funds pension lump sum and as required for flexi-access drawdown).
A lifetime annuity provides a guaranteed income, from the time of the annuity purchase until death. Prior to 2015, most people in money purchase schemes used the funds, they had accumulated during their working life, to purchase a lifetime annuity (workplace ‘scheme’ pensions offer a similar lifetime income guarantee).
The advantage of a guaranteed income for life is obvious and in many cases is still the most suitable option. For anyone taking an annuity, it is sensible they research the whole market for the best deal, rather than taking the default offer from their current provider.
If you die within a few years of purchasing an annuity you may have only received, as income, a small proportion of the purchase cost and there will be no residual funds to leave to your beneficiaries. To counter this, annuities are available that guarantee to keeping paying the income for a guaranteed number of years, or that will pay a spousal / dependent’s annuity.
Annuities are often suitable for those who are risk averse, are in good health and who do not have alternative income sources in retirement.
A Flexi-Access Drawdown (FAD) plan allows you to leave your funds invested and take lump sums and/or income as required. On death, any remaining funds can be left to your beneficiaries with no liability to inheritence tax (or income tax if you die before age 75). The entire fund, or a proportion of the fund, in FAD can be used to purchase short term (e.g. 5-10 years) and lifetime annuities if required.
The flexibility offered by FAD appeals to a large number of retirees. However, there is a serious risk that your funds could be depleted before you die. Consequently, careful financial planning and ongoing monitoring of returns and spending are necessary.
FAD is suited to those with a moderate to adventurous attitude to risk, who have other sources of retirement income and/or who wish to leave funds to their beneficiaries.
This provides the option to take the entirety of your pension pot in one lump sum. It is important to remember that only 25% will be tax free, with the remainder liable to income tax.