How we should be planning our finances for our retirement

I recently ran an Instagram live with Amy Goodall-Smith from Goodall-Smith Wealth Management about pensions and retirement. It is something we all have to face but we may not be best prepared due to our lack of knowledge. This is where Amy steps in as she is here to help, to translate the letters from your pension fund, to explain what would be the best way forward.

AMY GOODALL-SMITH

Below I am going to sum up some of the most important points that Amy made during this conversation however, listed to the IG Live at the bottom of this article for all the detail.

Pension annuity:

A guaranteed income for a fixed period or for the rest of your life. When you retire, you can choose to use some or all of your pension savings to buy an annuity. On your death if your spouse is still alive they will give him 50%. However, if your children are over 23 yrs they will not be able to inherit it. So the balance gets ‘lost’. Currently, annuity rates are incredibly low and so you won’t get a very good income from what can be very high sums.

Drawdown:

This would appear to be a better option as you can drawdown from your pension what you need when you need it. The benefit of this is that, on your death, you can pass the whole amount remaining to your spouse, to your children or to whomever you like i.e. you can gift it away. This option gives you much more flexibility.

You get taxed on pension income whichever option you choose. You also get taxed on your state pension. You do not get taxed on 25% of your pot so it is the rest that gets taxed.

However, whenever you pay into a pension you get the tax back on that money and when you take it out you get taxed but by then you are usually a lower rate taxpayer.

It’s a much more flexible option i.e. you can choose when and how much you want to draw.

You can also change your provider but do take advice if you want to do this.

Final Salary Scheme:

Work in a similar way to the Annuity ie a guaranteed income for life. However, they may try to encourage you to take it at a later date because then they do not have to buy an annuity. They may want you to do this as they don’t want to commit to an income for the rest of your life.

Again these schemes can be moved before you take any income from them, you can trade the income they offer you for a lump sum.  They may offer you quite a decent lump sum as it is often cheaper than buying you an annuity. Once again you need expert advice in this area in particular as this is very highly regulated.

Consolidating schemes:

You may have different schemes from different employers. However, they may not naturally merge so again you will need an expert to look at all of the terms of each scheme and then advise you what would work best for you. It is simpler to consolidate your schemes as when you want to start drawing from your pension, then you don’t have to do this with multiple schemes.  However, some schemes have some good benefits that you would lose if you were to consolidate so it is important not to do this yourself.

Finding an adviser:

Normally the first consultation is free of charge to see if you ‘gel’ with your potential adviser.

A good way to find an adviser is by personal recommendation so ask your friends.

Most advisers get paid by a small proportion of the annual management charge that you pay on your pension.  However, some advisers charge a fee for their time in addition to this.  Just make sure they are transparent about how they get paid.

How to find out if you have an unclaimed or unknown pension

There is a government tracing service and they use your national insurance number to trace you – click HERE. However, this is not always so effective. The best way is to ring all of your old employers.

There are £40 billion of unclaimed pensions according to the pensions advice service UK.

Anyone can talk to Amy – you do not have to have unlimited resources. She is there to make her advice as accessible as possible. You may just need a 30-minute consultation and then you can decide what you want to do.

Divorce:

Pensions are often overlooked in financial settlements. If you have not worked and have been looking after the family home during your married life you are loften eligible for 50% of your husband/wife’s pension. It can be split and a new pension set up.

Growth:

It is all unpredictable. The more risk you take the more potential growth you could get but you might get big losses i.e. high volatility. But adversely if you take small risk you will get less growth. You need to find the right risk position that suits you and your stage of life.

A financial adviser will help you create a portfolio to suit your circumstances and age. It can be invested in stocks and shares, bonds, property, or alternatives such as gold, timber or oil. Taking advice is key.

To contact Amy Goodall-Smith at Goodall-Smith Wealth Management:

  • Website – https://goodallsmith.co.uk/
  • Telephone – 01184 655055
  • Email – amy.goodall-smith@sjpp.co.uk

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