Reaching Retirement – your choices
Friday 15 April, 2016
As some of the pension decisions you make now may not be reversed later, it is important you make the right choices and shape your retirement plans to best meet your individual needs and circumstances. Each week leading up to the Budget in March we will be adding pension articles from our brochure – Your Retirement Options - Freedom & Choice: before, at and in retirement to help you make sense of the new pension changes.
Richard Porter, Independent Financial Adviser, St Albans, reviews what you should consider when you at retirement?
1. Review your Lonsdale Lifetime Financial Plan to ensure your retirement income will achieve your financial goals.
2. You may want to continue working and want to factor this into your long-term plans.
When we review your Lifetime Financial Plan, your Financial Adviser will discuss the following with you:
Should you take some tax-free cash from your pension or not?
How can you take income from your pension in the most tax-efficient way?
How can you be flexible in the amount of future pension income you take?
How to minimise the risk of your investment portfolio?
How can you pass wealth to any dependents tax efficiently?
How should you provide now for later life?
Case Study
Sam – 65 years old – supermarket manager earning £40,000 p.a.
Defined contribution pension scheme – value £260,000.
Joyce – 60 years old – care worker earning £15,000 p.a.
No private pension but entitled to a full state pension.
No dependents. £30,000 mortgage on main residence.
Savings and investments valued at £75,000.
Key Considerations
1. The couple want to know more about their options at retirement, and whether they can afford a 6-month round-the-world holiday.
2. Sam wants to continue working part-time but is uncertain of the tax implications.
3. The couple want to know if they can afford to pay off their mortgage.
Richard Porter, Independent Financial Adviser, St Albans, said:
‘It is important that Sam and Joyce understand how the recent ‘Freedom & Choice in Pensions’ changes will affect their pension options. Before producing a Lifetime Financial Plan for the couple, I would want to understand their key priorities for retirement. I would review their current expenditure and analyse their investment portfolio to ensure they weren’t taking on too much investment risk now they were retired. This would enable me to present different scenarios to the couple. For example, I could demonstrate how they could afford their round-the-world holiday in retirement if they invested their savings more tax-efficiently, and took some of Sam’s tax-free cash from his pension.’
Conclusion
The couple were delighted to see that by making a few changes to their current investment portfolio they could fund their round-the-world holiday. Their Lifetime Financial Plan also showed Sam that if he worked part-time for another 5 years he would be able to pay off the couple’s mortgage while living off his pension income.
Lonsdale Services operate offices in St Albans, Barnet, Harpenden, Leeds, Stafford, and Ware supporting a variety of wealth management and employee benefit clients across the United Kingdom.
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