Making the most of your pension
At retirement
You’ve worked to establish and accumulate your funds for your retirement. Now’s the time decide how to take the benefits from your funds.
At retirement
Retirement isn’t necessarily the end of your career. Once upon a time, you’d reach mandatory retirement age and finish work.
Employment law changes and a developing society mean retirement may be phased in. In fact, you may choose to never fully retire. You have options at retirement and making the right decision is essential. Knowing your choices is vital. Some decisions can be binding. What’s right for one person is not necessarily right for another. That’s where we can help.
Make the right choices
What are my options?
At retirement, there are three options available for drawing your pension benefits:
Scheme pension
There are many benefits associated with your workplace pension. For a ‘defined benefits’ pension – also known as a final salary or career average earnings pension – there’s likely to be a limited choice on offer, paid for by the scheme directly. Usually, there are options over a regular pension income payment and a tax-free lump sum. Often, there are choices of more or less tax-free cash which impacts the taxable income payable. However, once chosen, your scheme’s benefits are usually irreversible. Your scheme promises to pay for whichever choice you make, for the rest of your life. Your pension income will be paid directly by scheme. Additional options may be offered at the outset, such as annual increases, spouse’s benefits or guarantees which reduce your own income.
Annuities
Private pensions, or defined contributions workplace schemes, will also give options for tax-free cash, almost certainly limited to 25% of the investment fund. The remaining residual 75% is taxable (as though salary via PAYE system) and potentially subject to Income Tax at your highest marginal rate. The traditional option with the residual fund was to buy a lifetime income (otherwise known as an annuity). Some pension providers will provide options to buy your annuity through them direct. However, it’s not compulsory to buy from your pension provider (if they offer them as not all do). It’s wise to shop around to see if there are better rates of income available from other annuity providers. We can help you do the shopping around.
Similar to a scheme pension, once a decision is made and in payment, the benefits are irreversible. Additional options can be selected at outset, such as annual increases, spouse’s benefits or guarantees which reduce your own income. Enhanced levels of annuity income may be available for you, too, if you have a health record which may lead to a shorter life expectancy.
Drawdown
Rather than committing to a lifetime income via an annuity with your pension fund, a popular alternative is drawdown. There are several types of drawdown, including flexi, capped and UFPLS. Drawdown means your private pension or defined contributions funds remain invested as they were pre-retirement, so special care needed, as they remain subject to investment risk.
However, despite remaining invested, with the hope for further growth (not guaranteed), you can draw down a taxable income and/or tax-free cash payment simultaneously to recreate retirement income. Unlike an annuity or scheme pension, this income is not guaranteed for life and so could exhaust before your demise. Unlike an annuity or scheme pension, this type of option provides flexibility which means the withdrawals can be more tailored to meet your needs which could change throughout your retirement. Unlike an annuity, there’s an option to change from drawdown into an annuity. Currently, legislation doesn’t allow changing from annuity back into drawdown.
Phasing retirement is increasing popular. This may mean a combination of taking benefits from each of the above main options could work best. Choosing the right option needs great care, so you should seek expert financial advice.
It could be that you take some benefits where available via an annuity and some via drawdown. Wherever you’re at, our expert, independent team will be by your side to help you understand your situation and options and make the right decisions.
Your investment preferences
Understanding risk is a vital part of the investing equation.
But it’s also very significant for us to understand your investment preferences.
Ethical investment is becoming an increasingly high priority for investors.
Climate awareness and treating and protecting sustainable assets and services can be an integral part of the investing criteria for some. Investments demonstrating responsibility shown by companies towards people or the environment can also be factored into modern investment solutions, whether in a pension or investment. If making a difference by positive impact investing is central to your beliefs and values, we’ll work with you to build a bespoke solution that meets these preferences.
Stress test and management
Not all investments perform as expected all the time. While past performance isn’t necessarily a guide to future performance, we can model the impact and consequences of unexpected under performance. We can stress test the impact of under-performance and identify the consequences should this happen on your financial position, so you can understand the risks and make the right choices.
Benefits of professional financial advice
Expert financial advice can help you make informed pension decisions and achieve your retirement goals with confidence. Partnering with Belper IFS for your pension planning offers several benefits, including:
Expertise
Our friendly, local team of advisers stay up-to-date with the latest pension trends, regulations and opportunities to provide accurate and insightful advice.
Risk management
We’ll help you navigate the complexities of pension investments to diversify your portfolio, maximise returns and minimise exposure to market volatility.
Peace of mind
We’ll guide you through the process, answer your questions and ensure you clearly understand your pension plan and its potential outcomes.
Tax efficiency
We’ll help you maximise available tax relief, optimising your contributions to ensure your pension plan remains tax-efficient throughout your journey.
Goal setting
We can help you define your retirement goals, develop a customised pension plan to achieve them and stay on track by regularly reviewing your progress.
Long-term partnership
Your financial wellbeing and retirement goals are our top priority. We’ll be by your side every step of the way, adjusting your pension plan as your circumstances evolve.
Expert, friendly, trusted
Why Belper IFS?
our retirement should be a time of joy, fulfilment and financial security. With Belper IFS, you can take control of your journey and build a pension plan that aligns with your dreams and aspirations.
Our passion lies in building a long-term relationship with you, providing quality financial advice andpractical solutions to help you achieve your goals.
With our expertise and guidance, you can have peace of mind knowing that we’ll take care of all the necessary steps to make your plans a reality.
Don’t leave your future to chance – get in touch with our expert team today to start securing your financial wellbeing in retirement.