Don’t let your retirement plans freeze.

As your working and family life evolves over time, it’s worth taking a moment to make sure that your retirement plans are on track. There are so many factors that could have an impact on your future retirement, and it might not just be your personal circumstances that change. The rise and fall of the stock markets, economic and political changes can all have an impact.

On a practical level, if you have moved jobs during your career, it’s worth considering what retirement savings you have built up, how easy they are to manage and where they are held.

Is it worth consolidating, or do you leave them where they are? Do you know if you have any gaps in your National Insurance contributions? Do you need to make any changes to your investment strategy, and are you saving enough?

A good financial plan is not a one-time decision. It requires adjusting along the way, and financial advice and regular reviews can help you make the changes that will best keep you on track to help you achieve your objectives.

Regularly reviewing your pension plans is essential for ensuring that your retirement savings are on course to meet your long-term goals. 

Regular reviews help identify any gaps in your retirement strategy, ensuring that you stay on track for a secure and comfortable retirement. By reviewing your plans regularly, you can make informed adjustments that enhance your financial security. This proactive approach allows you to feel more in control of your pension(s) and ensure that you are fully prepared for the years to come. Many people mistakenly believe that having a pension means they are set for the future. However, without regular checks, you may overlook important updates and changes that could affect your retirement. 

Setting Retirement Goals

To establish clear retirement goals, it is essential to assess your income needs and understand when you plan to retire. These aspects play a significant role in your overall retirement strategy.

Begin by calculating how much money you will require in retirement. Consider your current expenses and any plans for extra costs, such as travel or healthcare.

Key factors to include:

• Current income - look at what you earn now to estimate future needs.
• Living expenses - factor in housing, food, utilities, and leisure activities like holidays.
• Inflation - remember that prices will likely go up over time.

Once you have an estimate, explore your pension(s) and other savings to check if they will meet your needs. 

Tax Relief on Contributions

When you contribute to your pension, you may be eligible for tax relief. This effectively increases your investment without additional cost to you – simply put, an instant return.

For example, if you pay in £800, the government adds £200 in tax relief at source if you're a basic rate taxpayer. This means your total contribution becomes £1,000.

• Higher and additional rate taxpayers can claim further relief through their tax returns.
• Annual allowance limits apply, so be aware of how much you can contribute without facing penalties. 

You may have additional allowance available via a carry forward assessment.

Balancing Risk and Return

Understanding your risk tolerance is key to making informed decisions about your pension investments. Different investment options involve different levels of risk.

• Investments in equities typically offer higher returns but come with more risk. You must decide if you're comfortable with potential fluctuations in value.
• Government and corporate bonds or savings accounts provide stability but often yield lower returns. This can lead to growth that may not keep pace with inflation.

To find the right balance, regularly evaluate your investment performance. Ensure that your asset mix aligns with your comfort level regarding risk and your long-term retirement savings goals. Adjusting this mix can help you maximise returns while managing risk appropriately. 

Have you considered your capacity for loss?

Options for drawing your pension(s)

Understanding these options is essential for making informed decisions regarding your retirement savings.

Annuities

An annuity is a financial product you can purchase with your pension pot. It guarantees a regular income for a set period or for your lifetime. This can be suitable if you prefer certainty in your income stream. There are several types of annuities. You should consider factors like your health, life expectancy, and financial needs (including inflation) when choosing an annuity. 

Drawdown

With pension drawdown, you have different strategies to access your pension pot. You can take a lump sum, a regular income, or a combination of both. You can manage the remaining funds through flexible withdrawals. You have control over how much you take out and when. It's crucial to plan your withdrawals carefully. Regular reviews help you ensure you're not depleting your funds too quickly. You should also assess the investment options for your remaining pension pot, as these can affect your long-term income.

Tax-free cash – most pension pots have the facility to drawdown up to 25% in tax-free cash (this could be limited by the lump-sum allowance).

Financial Advisers

Financial advisers could play a key part in your pension planning. They can have the knowledge and experience to assess your current pension status and identify potential shortcomings. A financial adviser could provide you with insights into whether your pension is performing as expected. They analyse factors like investment options, your retirement objectives and the fees you are paying. By offering personalised advice, they help you tailor and adjust your retirement strategy as needed.

We always recommend taking financial advice when reviewing your pensions.

Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of financial advice. We recommend that you take financial advice before making any financial decisions.