Retire

Having a comfortable retirement takes financial planning to achieve, which can mean making personal pension arrangements to supplement your savings and what the State will provide.

Government incentives mean that putting money into a pension is still one of the most tax efficient ways to save.

The sooner you contribute, the longer your money has to grow.

Exactly what type of pension scheme to choose will depend on factors such as your time until retirement and likely income levels you want or need when you get there.

Ways to save for retirement

Anyone automatically enrolled into a workplace pension scheme benefits not only from their own pension contributions, which get tax relief, but also a minimum level of employer contributions.

Some employers also offer Salary Exchange in return for their greater pension contributions, which immediately provides tax relief at your highest marginal rate.

You can, of course, opt out of your employer pension scheme and avoid any deduction in salary. Whilst this can be tempting, especially with so many other financial commitments during a working life, it is unwise.

Every year delayed in making contributions can delay by five years the time until you can retire with the lifestyle you want.

If you have a Final Salary policy, or are still accruing benefits, the best advice is to stay put. These are the gold standard of workplace pensions. Extreme care is needed if considering transferring to an alternative policy, you may lose valuable benefits without realising if you don’t seek financial advice.

Investing pension contributions

You should view a pension policy as a long-term investment. There are also annual and total lifetime allowance amounts that can be saved to ensure you attract tax relief. Charges apply if these are exceeded.

With numerous funds available to invest in within a pension portfolio, the general advice is to select higher-risk investments the further you are away from retirement and take a more cautious approach when nearing it. You may find that your individual attitude to risk changes at different stages in your life so regular reviews are important.

Taking pension retirement benefits

There are a number of options when the time comes to retire, depending on the pension policy. These are:

• Tax free cash, currently a quarter of the value of a fund, with the balance taxed at your marginal rate.
• A scheme pension.
• Flexibly accessing the accumulated fund.
• Buying an annuity.

Each method has its benefits, depending on your circumstances. But there are also longer term considerations.

Providing for dependants

Pension wealth built up throughout a working life can be lost when you die and not go to loved ones.

The use of a Will is often viewed as a guarantee of wishes upon death. However, pension schemes cannot be bequeathed in them. Instead, Trustees of the scheme have discretion over who receives the benefits available.

This makes it important to keep your pension Death Benefit Nomination and Expression of Wishes up to date.

As retained pension benefits are normally free of Inheritance Tax this can also be a useful estate planning tool.

Other retirement considerations

As retirement nears you may find it sensible to minimise or eliminate any debt and consider any later life care provisions you may require.

Business owners often fail to set up pension plans for themselves, assuming that the sale of their enterprise will fill that role. However, this can be a risk if retirement means a sale is attempted during a market slowdown – or if the value of the business is heavily dependent upon your own skills and involvement. It’s also common for business owners to place too much reliance on their own estimation of the sale value of their business. Sometimes the market may not agree: so it’s wise to speak with a corporate finance expert well in advance.

If you are looking to retire and would like some expert guidance, contact us to arrange to speak with one of our specialists in London, Kent or Sussex.

Contact our experts