It’s not uncommon for people to push the thought of retirement and pensions to the back of their minds for most of their lives – after all, no-one wants to dwell on the prospect of getting older and becoming an OAP!

As a consequence, I find that people only really begin to focus on the things they need to do to ensure their retirement position at the last minute, by which I mean within maybe three years of their retirement date.

It’s around this time that people need to start getting themselves positioned to take advantage of their pensions when they need them rather than scurrying around when they’re about to start drawing on their funds to see whether their pensions do the job they want them to.

So, if you’ve only got a few years to go until you hang up your working hat then these are some of the key issues to look for:

Consider Your Options

1) Does your employer’s scheme provide you with the options that might be available with a private pension?

For example, does it offer flexible drawdown? Does it offer Uncrystallised Funds Pension Lump Sum (UFPLS)? Or, does it just offer you the option of purchasing an annuity or transferring the fund elsewhere?

If you want drawdown then plainly you need to be in a position to take that as and when you need it. The consequences of not having it are that all the other options, including taking an annuity or UFPLS, involve taking an element of taxable income.

If you want to control the amount of income you’re taking then having flexible drawdown enables you to do that by just taking lump sums of tax free cash, if you wish to, and reduced amounts of income if that’s your need.

Having this option is particularly worthwhile if you have other sources of income coming in, such as investment income, or if you’re just doing less work rather than retiring altogether.

2) If you have a private pension it may still not offer some of these options, so it’s worth investigating this, or having someone do it for you.

If they’re more mature policies then invariably they won’t offer flexible drawdown and probably won’t offer UFPLS. They will offer the option of an annuity and an option to buy an annuity with another provider or a transfer of your fund value to another pension plan. Sometimes they offer special guaranteed annuity rates which can be quite valuable, particularly if they fit your need for income.

Flexibility

But even so, if you demand more flexibility then sometimes taking a guaranteed annuity rate just because it’s guaranteed and better than a normal annuity rate might not meet your needs, especially if you have no need for taxable income.

So again it takes a bit of ferreting around to find out what options exist for you and whether they fit within your current needs.

3) The other thing to bear in mind is that retirement planning is not just about pension funds. It’s also about other investments that might be better positioned in a different way.

For example, if one spouse doesn’t use their full personal allowance, let’s say they have a relatively small state pension or they’re not yet in receipt of it, transferring savings or investments to them can enable income to be used against that unused allowance and that can be quite a tax efficient way to plan things.

4) You need to remember that not every pension is the same and certainly not every pension will suit your needs for income or your tax position so it’s well worth having a review done to compare your current pension or pensions to see whether they meet your needs in retirement.

5) You may also want to ensure that your wealth cascades down the generations. Some pensions pay only to the holder and maybe a spouse but you may wish your children to benefit as well, particularly if they have a health need and are likely to be long term dependent.

Beneficial

In this situation having a residual pension fund that becomes available to help support that child when you die can be a very beneficial thing.

We can help you with all aspects of pension planning so if you’re currently in this position and would like to give us a call then we’ll gladly assist.

Remember, the value of your investments can go down as well as up. Past performance is not a reliable indicator of future outcomes.

Remember, the value of your investments can go down as well as up. Past performance is not a reliable indicator of future outcomes.

For a free consultation about your financial needs call 0118 974 0159 or email andy@faronpartnership.co.uk.