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before Retirement

8 things to consider before retirement

29.01.2018

Retirement; what does that word mean for you?

A chance to do those things you were never able to when you were working? Spending time with the grandchildren? Taking up new hobbies?

Everyone has different retirement plans. However, they will be far more enjoyable when we aren’t worried about money. Achieving financial independence takes careful planning, not just at the time when you want to retire, but in the years before.

If your thoughts are turning to retirement, you should start thinking about these eight things sooner, rather than later:

1. Know your numbers
Until you know what you want to do in retirement, you won’t be able to calculate the income and capital you need.
Once you know those numbers you will be able to build a plan to achieve them.

2. Understand the state pension
For most of us, living on the state pension alone would be difficult. However, for many people it forms a sound financial base for their retirement. As such, it’s important to understand exactly what you will get, and when.

3. Maximise pension tax-relief
Pensions have been given a new lease of life since the introduction of pension freedoms and the changes to the way they can be distributed on your death.

Although it has become more restricted, it is usually sensible to take advantage of the valuable tax-relief that is still available.

4. Use other allowances
If you can’t pay further amounts in to a pension, perhaps because you’ve already paid the maximum allowable amount this year, or you have protection on your pension due to its size relative to the lifetime allowance, there are still other tax-efficient options to consider.

The annual ISA (Individual Savings Account) allowance is now a relatively generous £20.000.

Many of these allowances don’t roll forward if you fail to use them, so planning ahead is vital.

5. Think differently
Traditionally, retirement meant taking an income from your pensions.

However, the way pensions can now be passed on after your death, means that for some people, creating an income from savings or investments can be more tax-efficient. This is especially true for those people with large estates, which might be liable for inheritance tax.

Understanding the new rules, and how they can be used to your advantage, is hugely important.

6. Review existing pensions
When we suggest reviewing pensions people naturally think of charges and performance. These are of course important, however there are other things which often gets overlooked.

Ensuring that your pension allows you to withdraw an income via your chosen option, for example flexi-access drawdown, and that your beneficiaries preferred options on your death are available are vital.

Furthermore, many pensions were set up with the anticipation of buying an Annuity and thus included ‘lifestyling’ options which move the assets held in your pension slowly away from equities to bonds and cash

Most people  longer buy an Annuity, making these options less relevant.

7. Review your final salary and defined benefit pensions
For the majority of people, leaving their defined benefit or final salary pension well alone is the right thing to do. However, there are some circumstances when transferring away is the right thing to do.

If you have one of these pensions, you should at least consider all options before making a final decision.

8. It’s not all about the money
In our experience, those people who are happiest in retirement are those who have financial security and know what retirement means to them.

If you would like to discuss your retirement options, please get in touch with your Partner. We can help you mould your finances to help you achieve your financial objectives.

The value of your investment can go down as well as up and you may not get back the full amount invested.

Accessing pension benefits early may impact on levels of retirement income and is not suitable for everyone. You should seek advice to understand your options at retirement.

The Financial Conduct Authority does not regulate taxation and trust advice.