Retirement Planning

Our aim is to land you safely in destination retirement with the level of income that you will need, to maintain your chosen lifestyle.

It is no longer likely that you can rely upon one, lifelong employer to provide a guaranteed, increasing pension to be taken between 60 and 65. It follows that it is vital that we all take time to take a peek at our own projected retirement position.

We can show you that picture, clearly and in colour! We can answer questions such as “how long will my capital last?” and “what does my financial future look like?” You can see if the picture looks look good or not and if not, shall we work towards a different picture?

You may want to take control to be able to choose to wind down ‘early’. We can work with you to quantify the income due from your occupational pensions, auto enrolment plan, state pension, personal pensions and investment funds to support your desired future lifestyle – and put your chosen retirement date firmly into the plan.

Earlier retirement and greater life expectancy present a financial planning challenge – how do you make your resources last for many years yet maintain your standard of living?

It may be time to consider the next generation, perhaps making gifts of capital to cascade wealth and reduce the value of your estate. Perhaps you would like to consider social investing or charity giving? Closer to home, it is also important to be aware of the potential costs of long term care and ensure your personal financial security.

If we choose to work together, at least once a year we will meet up to appraise your progress towards the target so that we can tweak the strategy if your plans change, or if the sands shift in the financial world.

First we need answers to the following questions:

    • When would you like to stop working full time?
    • Would you consider working part time?
    • What level of income are you as an individual due to receive from your existing pension arrangements and the state pension?
    • From what ages is this income payable?
    • If you are in a couple, what is your joint retirement position, and how is pension income apportioned between you? How do you view your joint finances?
    • What does your ideal retirement look like?
    • How much will you need to live on in retirement?

Having established the above we are in a stronger position to make plans. It may be that you need to start putting more cash aside, and the longer you have before that key birthday arrives, the better because TIME is the most important ingredient in financial planning.

Saving for Retirement – What’s available?

The onus is firmly on us as individuals to plan our financial security in retirement.

Today’s young-at-heart pensioners are increasingly taking on new challenges and exploring far flung places. This enthusiasm means that we expect income in retirement to fund increasingly active and diverse lifestyles. Pension benefits can be taken from age 55 but this age will creep upwards in line with state pension changes, and employers’ schemes will have their ‘normal retirement age’ which is typically 60/65.

You may take some of your most important decisions at retirement, setting your income streams for the rest of your life. Building up a meaningful fund requires commitment and discipline, balancing ‘living for today’ against ‘providing for the future’. The earlier you start the better to give the longest possible investment horizon. “Time” is a crucial factor. The message here is a firm “Don’t delay!”

Deciding how much to pay in should be based on affordability, individual tax status and an understanding of the fund that is required at retirement to provide enough on which to live.

It follows that this is a time when expert advice could add significant value to your affairs. Here at Eldon we have retirement specialists with high level qualifications, specific expertise and experience working with those with more complicated personal circumstances or with more bespoke requirements. We look at all options to generate the income that you need from your chosen retirement date as this is definitely not a time when “one size fits all”.

Despite the bad press and subsequent mistrust of ‘pensions’ this is still the most usual form of accumulation for retirement income, and the structure and favourable tax treatment makes pensions a first choice for most people. The new pensions freedoms have allayed some fears about money being ‘tied up’ in these arrangements.

Company Sponsored Schemes

The traditional ‘final salary’ scheme puts the responsibility for income generation in the hands of the employer, where the years worked and remuneration at retirement are relevant to the size of the pension and any tax free cash sum provided. These schemes are all but closed in the private sector so as time progresses we will see fewer and fewer retirees with these benefits. The public sector superannuation schemes continue in this format but they too have been changed to reflect our increased lifespans and the cost of buying pensions. You may well have choices to make with regard to the amount of ‘tax free cash’ taken versus the size of the pension from a final salary scheme, so we would urge you to take advice on this.

It is now common for people to belong to “money purchase” schemes. These are arrangements whereby the employer and employee drop money into an investment version of a bucket with the employee’s name on it and at retirement the bucket is tipped up and emptied. You can take it with you if you move jobs. This value is used to either buy an income for life (generally an annuity) with most often, a tax free lump sum, or the pot remains invested and lump sum or regular withdrawals are taken over time as an “income”. This is definitely a time for professional input.

The new auto enrolment schemes are money purchase arrangements that all employers must provide if they don’t offer an alternative. This has had modest beginnings so initially at least it shouldn’t be relied upon as the sole income stream in retirement. It is a start however, and will bring funding for retirement into focus for all workers; even the ‘one man band’.

Personal Pensions / Self Invested Pensions

You can have your own personal arrangement into which your employer may or may not contribute, and if you are self-employed you have to shoulder full responsibility for your retirement funding. Again this builds a pot of money which can be accessed from age 55 under current rules.

State Pension

There have been major changes to the state pension recently, somewhat controversially. Now, a flat rate will be paid to all those who have 35 ‘qualifying years’ at state pension age. State pension age is currently from ages 66 to 68. It’s a good idea to check your own entitlement well ahead of retirement to give time to boost the state pension if appropriate. It can be very cost effective to buy additional state pension, and we can advise on the options and the timing.

Taking the Benefits

Annuities versus drawing directly from the ‘pot’

Annuities come in different guises and it is imperative to understand your options before committing to an annuity as this cannot be changed after the event. In some circumstances it may be appropriate not to buy an annuity straight away but to ‘draw down’ from the pension fund itself in retirement. For this strategy to work you definitely need to involve a Financial Planner with appropriate expertise committed to a long term future service, as these arrangements need careful ongoing monitoring.

What else can I do to generate income?

There are other ways to generate sustainable income in retirement such as from an investment portfolio, property rented out, or continued working. Your health and appetite for personal involvement in the management of your affairs are key to the long term success of these strategies.