Retirement Planning
Over a generation retirement has changed considerably, partially due to choice and partially due to the economic climate. People are now likely to retire much earlier than their parents did and enjoy a longer healthier retirement.
Many people will find retirement hard financially and this guide aims to provide useful information on the main financial decisions you may face. A few hours spent planning now will pay off in the future.
Anyone approaching retirement faces a major change in circumstances and several key issues need to be addressed.
The first is to maximise any pension benefits built up from pensionable employment. You should always ensure that your pension benefits meet your requirements and any necessary guarantees are put in place for your family i.e. widow(er) benefits.
When taking pension benefits one of the most popular routes is to purchase a Conventional Annuity after drawing off the tax free cash. The Annuity provides a guaranteed level of income on retirement.
If an Annuity purchase is considered then your pension provider must advise you of the “Open Market Option” facility. This enables you to transfer your accumulated fund to another provider to take your pension benefits. This could increase your pension payments.
Other options available are:
• With Profit Annuity (which is a variation of the
above)
• Income Drawdown
• Phased Retirement Annuity
All of the above three options contain an investment element. It is important to regularly review contracts where there is an investment element.
Secondly any existing Investment plans should be revisited to ensure that they are working to the best advantage in the way required. For example to improve and maximise Income as well as ensuring that Investments are appropriate to the desired chosen risk profile.
Thirdly it may be necessary to look at expenditure and outgoings and consolidate and reduce any un-necessary items in order to ensure that the maximum disposable Income is available to enjoy your chosen pursuits on retirement.
Where will your money go?
Your money will go on a variety of needs including regular outgoings, irrecgular outgoings such as holidays and fixed outgoings such as your mortgage, council tax and other household bills.
Where will your money come from?
Before you can work out if you have sufficient income to live on during retirement you need to know how much income you have. This could be from a number of sources:
Basic State Pension
Not everyone is entitled to full Basic State Pension. You must have paid National Insurance Contributions or have credits for 30 years to obtain full single person pension.
To find out how much Basic State Pension you are likely to receive you should complete form BR19 which is available from your Local Benefits Office or any of our offices.
Extra state pension benefits may be earned from previous state 2nd pension arrangements. If you are entitled to any of these benefits you will receive details at the same time as you receive your entitlement to Basic State Pension.
Occupational Pension Schemes
If you are a member of your Employer’s Pension Scheme ask for an estimate of your benefits at normal retirement age. You may also be entitled to a pension from previous employment.
Personal Pension Schemes
If you have one or more Personal Pension Plans you should write to the providers requesting an estimate of your benefits at the selected retirement age. When considering taking tax free cash as a percentage of your accumulated fund please remember to include this figure when calculating available capital and income.
Investment/Earnings
There are a variety of benefits available if you are on a very low income and have few savings. If you think that you may qualify you can obtain more information from the Citizens Advice Bureau or the DSS.
Pension Credit
This is a scheme where anyone over aged 60 and on a low income may qualify for an additional benefit up to a guaranteed element. The Scheme also rewards individuals who have some savings by the calculation of a savings credit.
Treatment of Income
In terms of your income, taxable income will include pensions, building society interest and share dividends. Non taxable income will include income support, housing benefit and PEP's and ISA's.
