Planning for Retirement
It doesn’t matter whether you are 25, 45 or 55, planning ahead is essential if you want a secure financial future in retirement. With the demographics of the UK changing as life expectancy increases and the number of babies born remains constant, it will become extremely difficult to rely upon Government funded pensions (State Old Age Pension, State Earnings Related Pension Scheme and State Second Pension – SOAP, SERPS and S2P). Developing an appropriate strategy therefore is vital in order to accrue sufficient funds in retirement from which income can be derived.
One of the most tax-efficient ways of investing for retirement is through a pension scheme; to encourage people to invest for their retirement, the Government currently provides tax relief on contributions made to an appropriate pension scheme. Basic rate and non taxpayers can receive tax relief at 20% (subject to a maximum of £720 for non taxpayers) whilst higher rate taxpayers receive relief at 40%.
However, although perhaps the most tax efficient, pensions are not the only method of accruing funds for retirement. It may be beneficial to consider additional forms of investment vehicles such as Individual Savings Accounts and buy-to-let investment property.
Wessex Investment Management’s IFAs are able to provide advice on all forms of investment for retirement.
Approaching or At Retirement
Entering retirement will be one of the most important times in your life. It should also be one of the most enjoyable, not just because it means an end to all the stresses, restrictions and routines of working life, but because it should provide the freedom to pursue new interests, travel and the ability to spend more time with family and friends.
However, you’ll need to ensure you make the right investment choices at this critical time as the decisions one can make at retirement are probably some of the most important that can ever be made. Many, once made, cannot be changed – there is no going back and there is little opportunity to compensate for errors.
The immediate concern will be to ensure sufficient income in order to maintain your standard of living throughout retirement, whilst setting aside sufficient reserves to meet planned expenditure and to act as an emergency fund.
The first area to address is, of course, your pension provision and to assess the benefits available. This could include State entitlement and any additional Company or Personal Pensions that may have been accrued over a working life. The decisions made here can make a substantial difference to your income for the rest of your life, and that of any partner. For example, if purchasing an annuity the variance between the best and worst annuity provider can be as much as 30%. Or perhaps you should defer the purchase of an annuity and utilise income drawdown?
If you are already in retirement and wish to supplement pension income from existing investments then we can highlight the alternatives available and recommend a suitable strategy.
Whatever your needs, Wessex Investment Management can help to ensure you enjoy life in retirement and not retirement from life.
When in retirement it is important to continue to monitor and review the options selected and investments made when you first retired. Inflation is an important factor as it can reduce the buying power of your money and if you are no longer able to replenish the funds spent, you need to be in control of your investments to ensure they continue to satisfy your needs.
The strategies employed for the management and preservation of the wealth that has been accumulated become more important as time goes by. The balance between providing income and capital growth will change especially if long term care is required.