Pensions and Retirement PlanningPlanning for retirement is a vital consideration for all of us. Unfortunately it's all too easy to postpone! The sooner you start planning for retirement the better your situation in retirement is likely to be. Waiting until later in life to start your retirement planning may very well mean missing your goals and retiring with less income than you'd like. Equally, assuming your employer's pension is sufficient without confirming this may not be wise! If you've been putting it off, take advice now and breath a little easier. Here's a little information to help you but remember - we'd strongly advise taking financial advice before taking any action. |
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Some common misconceptions about retirement planning
| Retirement planning doesn't necessarily mean locking your money away if that's not right for you. Pensions aren't the only way to invest for retirement. There's no denying pensions offer great tax advantages - few other investments allow us to claim back our income tax on the amounts we invest - and because of these advantages pensions are always our first consideration for our clients' retirement planning. However pensions do come with significant restrictions on how and when we can access them. If you feel you need fewer access restrictions to some or all of the funds you want to put away for your retirement then there are other alternatives which might be suitable for you. For example, investment ISAs or Offshore Bonds can sometimes be suitable for investing for retirement. Their tax advantages are normally not quite as attractive as pensions but they have fewer access restrictions. A professional financial adviser can assess your financial circumstances, needs, goals and preferences and will recommend the strategy most suitable for you. Taking a pension or investment doesn't mean you have to invest in the stock market. Money within a pension or investment can be invested in lots of different ways, in fact many investments and non-occupational pensions can be looked at as a "pot" within which you can invest in almost anything you please. As pensions are often long term investments "traditional" pension funds may invest quite heavily in stocks and shares to pursue long-term growth, but there's nothing to say you have to invest in this kind of fund. Investment options within most pensions and investments range from the high risk, such as stocks and shares, to the low risk such as cash funds or UK government bonds (known as "Gilts"). There are often options available where the provider offers a form of guarantee. A financial adviser can assess your attitude to risk as part of the factfinding process and will discuss this with you to agree a level of risk you are comfortable with. Some pension types even allow you to effectively invest the money yourself. You could invest your pension funds in almost anything you'd like, though there are some specific exceptions which are not allowed under legislation such as residential property or classic cars. If you have plenty of investment experience and you know what you want to invest in, this might be suitable for you. For self-employed people or company owner/directors this can be particularly appealing. For example it's quite common for small business owners to buy their business's commercial property through their pension, or lend money to their business from their pension. Pensions and investments need looking after. Pensions and other forms of investments should ideally be regularly reviewed with a financial adviser to ensure that they are adapted to your changing needs and circumstances. Furthermore it may be advisable to reduce the risk your investments/pensions are exposed to the closer you get to retirement. This is known as "lifestyling" and an example of such a strategy is shown in the table below. |
Our Retirement Planning Service
At Whitchurch IFA Ltd we normally follow a 3 stage retirement planning strategy;
| 1. We complete a full factfind with our client to gain as complete an understanding as possible of their personal financial circumstances, needs, goals and preferences. We will calculate how much income they expect to need at retirement, how this need may be financed and how this fits in with their other priorities. This step normally needs at least one 1-2 hour meeting to complete and our research after this meeting will normally take a couple of weeks. We'll need to assess the client's existing pensions and investments and request a prediction of their state pension income. 2. We will recommend the most suitable retirement planning strategy to maximise our client's chances of meeting their goals. This strategy will likely include pensions but may also include ISA investments, non-ISA unit trusts and OEICs, investment bonds or other investment types as appropriate. The structure and form of this strategy will depend on the client's tax status, attitude to risk, personal preferences and the level of access they think they'll need to their funds before retirement. It will also depend on their other financial goals, needs, liabilities and affordability constraints. 3. We recommend meeting up at least annually to review the performance of the client's retirement planning strategy and make adjustments according to any changes in the markets or to their own attitudes and preferences. We also normally recommend enacting a "lifestyling" strategy as illustrated above. |
Next Steps Don't put it off any longer - contact us.
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