Options at retirement
Pension advice in Swindon and beyond
When you decide to retire, and this may be in a one-off action or over a period of time as you wind down your time at work, you will need to make some decisions relatively quickly.
It is important to remember that some of these decisions cannot be reversed so make sure that, where necessary, you get advice on the best course of action.
If you have not already done so, now is going to be a good time to undertake some form of cash flow planning as this will give a clearer picture of how much you can afford to spend and when. Don't forget to make allowances for the potential costs of later life care when undertaking this type of planning. Our expert, independent financial advisers can help with your pension planning and create a bespoke cashflow modelling report for you. Our head office is in Swindon, but we have advisers nationwide who can offer pension advice in your home.
Many individuals tend to under-estimate how long they are likely to live and can therefore make some poor decisions based on incorrect judgements.
Being tax efficient
With a finite amount of assets available to cover the cost of what could be the next 20, 30 or even 40 plus years of retirement means that being tax efficient with income and capital withdrawals will help your money go further.
Pensions will offer a level of tax free cash which could be taken in one go or over a period of time. The rest of the pension must be turned into an income but you can often control the level of income to make sure that it does not cause you to pay more tax than you need. This is where one of our independent financial advisers in Swindon or beyond can help.
Some will be fortunate enough to get a defined benefit pension from their employer which will offer an income without the concerns of any investment risk as this will be borne by the employer. However these types of pension are becoming rare and therefore many will face the need to decide for themselves how to take an income from their pension.
Purchasing an annuity
One of our independent financial adviser based in Swindon at our head office, or local to you, can help you understand what an annuity is and what options you have.
An annuity is a financial product that provides a regular income in exchange for a lump sum of money. Essentially, you give your money to an insurance company, and in return, they guarantee you a fixed income for a set period or for the rest of your life.
There are several types of annuities, including:
- Lifetime Annuity - This is the most common type of annuity, which provides a regular income for the rest of your life. The amount of income you receive depends on the amount you invest, your age, and your health. You have the option of taking income that remains level, or that increases (e.g. with inflation), but this will effect the starting level of what you will receive.
- Fixed-term Annuity - This type of annuity provides a regular income for a fixed period, usually between 1 and 30 years. At the end of the term, you can choose to take your remaining funds as a lump sum or reinvest in another annuity.
- Investment-Linked Annuity - This type of annuity invests your funds in various assets, such as stocks and bonds, to provide a potentially higher income. However, it also carries higher risk, and your income is not guaranteed.
- Enhanced Annuity - This is a type of lifetime annuity that provides a higher income if you have certain health or lifestyle conditions, such as smoking or being overweight. You don't have to be, what you consider, bad health to qualify for these annuities, so it's really important to speak to an independent financial adviser, like the ones in our Swindon head office.
As an independent financial adviser, I can help you choose the right annuity that suits your needs and financial goals. I can also help you shop around for the best annuity rates and the highest level of income and explain the tax implications of annuities. It is really important that you speak with an independent financial adviser like those at our offices in Swindon, as information that you think might not be relevant can often make a big difference on the amount of income you are entitled to, for example having high blood pressure or raised cholesterol. Other common health conditions will also mean you could be entitled to an enhanced or impaired annuity, like diabetes and an independent financial adviser can ensure you get the best level of income for your circumstances.
Investing in an annuity can be a complex decision. You will need to decide on whether you want to include death benefits and at what level, but with the right guidance and knowledge, you can make an informed decision that can provide you with financial security and peace of mind. CONTACT US to discuss your requirements of to get an annuity quote and decide if it's right for you. BOOK A CALL BACK for one of our experienced advisers in Swindon to get you the best annuity quote and best annuity income. They can then book you a face-to-face appointment with a local adviser.
Income from investments
A pension can at times allow you to take income directly from the investment. This is much more flexible than an annuity as you can adjust income levels to suit your needs. You are however continuing to take an investment risk if you do this and you would need to be comfortable with continuing to take this risk as you enter retirement.
Hopefully, as well as a pension, you will have other investments. Individual Savings Accounts (ISAs) will allow you to make withdrawals without incurring any tax liability. Other investments will offer the availability of a capital gains tax allowance. This will mean that you can take a level of investment gain each tax year without paying tax on it.
Investment bonds, which will have paid some tax on the investment returns within them, can be paid out to a basic rate taxpayer without further liability. If you can engineer yourself and/or your spouse or civil partner to be a basic rate taxpayer at some stage in your retirement, taking the benefits at that time can be tax efficient. These withdrawals can be staged over a number of years if appropriate.
This is why it is so important to speak with an independent financial adviser, like the ones at our Swindon head office, who can produce a cashflow planning report for you that will show the most tax efficient way of producing the income you need.
Why options are important?
As can be seen, if you have given yourself options, you can ensure that capital and income you receive in retirement can be highly tax efficient.
Finally, if you find yourself in the fortunate position of having more money than you need for your retirement years, you may wish to consider undertaking some estate planning. This could simply involve ensuring that you have a will and that it is up to date or could look at the ability to gift some of your assets either directly to your proposed heirs or into some form of trust.
Estate planning can be very tax efficient but it often needs time to be effective so don’t leave this type of planning too late into your retirement.
Your investments can go down as well as up. You may not get back the amount you invested.