What are your pension options when you retire?

Friday 25 October, 2019

In 2018 Lonsdale Services won the Best Individual Pension Advice award for the South East and Anglia region at the Retirement Planner Awards.   

Our qualified team of independent financial advisers offer pension advice to anyone looking for income in retirement from offices in St Albans, Harpenden, Barnet, Ware, Leeds / Bradford, Ringwood, Stafford.  For more information call us on 01727 845500

Your choices at retirement

Until the 2015/2016 tax year the choice of what to do with your pension at retirement was fairly straightforward. There were two main options, with a lot of individuals being limited to just the first of these:
 

Option 1 - Buy a pension annuity and receive a guaranteed income for life. There were various additions that could be included, but in its simplest form you would be securing a known level of income until your death. 

Option 2 - Enter into an income drawdown arrangement, where the income levels were capped by the government Actuarial department (GAD) rates, or uncapped if you could demonstrate a secure income of £20,000 per annum or more.

Richard Porter, independent financial adviser, St Albans, Hertfordshire said: 

‘The important thing to note is that whichever option you took, (or a combination of both options) you would receive a known retirement income. This greatly reduced the need for financial planning in the later stages of life, as a lot of savers would set up a ‘one and done’ policy and then live out their retirement.’

Your current pension choices?

Since pension freedoms the pension landscape has changed dramatically. 

• Anyone can access their pension pot, via flexible drawdown and you have flexibility in the amount of pension income you draw at one time, although you will still pay tax on this income and should consider your long-term income requirements.
• Pensions are also now incredibly efficient ways of passing money down to your beneficiaries without incurring inheritance tax charges. 

If you couple these changes with the decline of final salary pension schemes, and the reduction in pension annuity rates, leading to a reluctance by some to purchase a pension annuity you realise that most people will need to exercise far greater consideration when drawing their pension. 

Pension Annuity choices

There is still the choice of purchasing a pension annuity, and this will remain a valid choice for a percentage of people. But you might not want to lock into a pension annuity for life, or you might want to maximise how much money you leave behind to your beneficiaries, in which case you may well want to consider income drawdown. 

Tax efficient pension planning

If you are lucky enough to have other pots of money; ISAs, investment bonds, cash savings, or perhaps you have downsized your home, these new pension freedoms will allow even more flexibility and greater opportunities for tax-efficient planning.  

Even if you only have one pension, or a variety of different investments, you will want your investments to provide that income in a way that minimises how much tax you pay. You also need to understand how much income you can safely draw from your investments without running the risk of extinguishing your funds. 

Richard Porter, Lonsdale Services independent financial adviser and member of the St Albans, financial planning team continued:

‘It is possible to structure your finances in a way that both maximises the income you have in retirement as well as providing for your beneficiaries. However, this is complicated to do yourself.  At Lonsdale Wealth Management our qualified independent financial advisers use Lifetime Financial Planning to help you visualise your wealth to achieve your financial priorities.  Your cashflow plan will enable you to understand how your current and future income and expenditure, life events and other decisions impact your financial future.  We can review all your pension options and offer you financial advice that will enable you to make the most tax efficient financial planning choices to provide you with an income in retirement.   If you want financial advice please contact our Lonsdale Wealth Management teams in St Albans, Barnet, Ware, Harpenden, Stafford, Leeds/Bradford and Ringwood, or call us on 01727 845500.' 

 

 

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