Options at Retirement
Building a pension pot is hard enough, but once you are approaching retirement you realise that managing your pension and your finances after you retire is not much easier. The decisions you make at this stage will affect the quality of your life and your family going forward – and some of the following concerns may come to mind:
- Will my pension pot last until I die?
- Will my income be sufficient to cover living costs if prices rise in the future?
- What if my situation changes? Will I be able to afford the cost of care in case of health issues?
- If I die early, will my spouse be provided for?
- Can I pass a portion of wealth to my children? How do I make that as tax-efficient as possible?
Finding a Balance
When you no longer have a salary to rely on, it is more important than ever to carefully manage risks, such as longevity risk (you outlive your savings), inflation risk (prices and your living costs will increase) or market risk (the value of your remaining assets will go down due to ongoing market developments). Financial planning in retirement is about finding a balance between security and flexibility – having the basics covered regardless of what happens in the years ahead, but allowing further growth of your wealth at the same time.
What to Do with Your Pension
The new pension freedoms have broadened the range of options you have with your pension when you reach retirement age, but at the same time have made the decisions even more complex. When you start to explore the various products and options, more questions will arise:
- Should I take a lump sum? When and how much?
- Should I buy an annuity, or seek a more flexible arrangement?
- Is it better to buy an annuity now, or wait until I reach a certain age?
- Should I seek inflation protection?
- How do I know what kind of product is right for me? When considering a particular offer, how do I know if I am getting a good deal?
- How do my other savings fit in? Which of my investments should I use for income and which should I keep for further growth?
- How do I make use of all the various allowances and minimise taxes?
There are no universal answers and no kind of product suitable to everyone. When making financial decisions in retirement, a number of factors must be considered.
Things to Consider
- Size of your pension pot – Other things being equal, a larger pot allows you to take more risk and gives you wider options, although that may also mean management will be more complex. On the contrary, if you only have limited funds available, making the right decisions is even more important.
- Other assets you own – Are you renting or living in your own property? Do you have any ISAs? Do you hold stocks, bonds or funds outside your pension or ISA? Do you own a business?
- Your family and dependants – Do you intend to pass considerable portion of your wealth to children when you die? Do you want your pension to provide income to your spouse should you die earlier?
- Your risk attitude – Are you willing to take reasonable risks for a chance of higher return and extra income in the future? Or is security all you want? Do you want guaranteed income to cover the very basics (housing, food, health), but also allow a portion of your assets to further grow to possibly enhance your lifestyle?
- Your willingness and ability to manage your investments – Do you prefer a hands-off setup, or do you want to continue actively managing your investments? Keep in mind that your ability to make financial decisions might deteriorate in older age.
- Your health (and your spouse's) – With some products, your current health determines how the provider views your life expectancy and therefore may affect the quotes you get. Even where this is not the case, health represents a very important part of retirement financial planning.
The above are just some of the factors to consider when deciding what to do with your pension at retirement. It is quite likely that there will be more, depending on your particular situation.
How We Can Help
As you can see, choosing the right options and making your finances work for you in older age is a complex task. A wrong decision can easily cost you a substantial portion of your hard earned funds and put you and your family in an uncomfortable position at a time when comfort and stability is most needed. At the same time, it is easy to misunderstand the details of particular offers and overlook important consequences without experience.
We have that experience. Over the years we have developed an effective retirement planning process to help you understand the challenges and the options you have, and make the right decisions.
- Retirement planning expertise – We have 30 years of experience advising clients on pensions and retirement planning. Although each of our clients is unique, it is very likely that we have worked with clients with a situation and needs similar to yours.
- Knowing the options – We have gained a deep understanding of the market and the ever-changing legislation. We know the strengths and weaknesses of different providers and products – what works and what doesn't in a particular situation.
- Independence – We are not part of any financial group, bank, insurance company or pension provider. Rather than selling financial products, we work for our clients, providing unbiased and impartial advice.
- Individual approach – We understand that each of our clients is different. In older age, your unique needs and aspirations are as important as ever. A highly personalised service is what differentiates us from large financial institutions.
The Process: What to Expect
- The first step is to contact us using the phone number or online contact form below.
- We obtain details of your pensions and the options they provide on retirement.
- We carry out a preliminary review, which is free of charge. This will determine whether we are able to assist you.
If we are able to assist you, our adviser will meet with you to discuss your financial and personal situation, risk attitude, goals and preferences in more detail. These are generally the items from the Things to Consider section above, plus some more.
- At this stage we will also agree out fees with you in cash terms before you are committed in any way.
- After getting to know both you and your finances, we will prepare a written report, discussing recommended actions.
- Once you have had a chance to consider our recommendations, our adviser will meet with you to explain them and answer any questions you may have.
- Once you have approved the recommended actions, we will execute them for you and communicate with the providers on your behalf. We will keep you informed of the progress.
- We will continue to work with you and provide a structured ongoing review service. This will ensure that your financial arrangements remain in line with your needs.