A pension can be so much more than a pot of cash you pay into for your working life and then draw from in retirement. It is the means by which you can be comfortable, secure and happy in life after work while also tax-efficiently managing your wealth. Pensions are the one sure way to reduce the tax bill on your assets. You may already have a pension, but perhaps are unsure of its value or what more you could, or should, invest into it. Understanding what you’ve got and how it can be used is vital, and the key to managing your pension is to never neglect it. We’ll set out an action plan detailing how much you need to save, and what you should do with it, for you to achieve your lifetime goals.
How will inflation affect my pension?
Inflation has a cumulative eroding effect on any money left resting in a place where the interest earned is less than the rate at which prices are increasing (inflation). Put simply, if your money is in an account paying 1% interest, and the inflation rate stays steady at 2% (example rate), then after a year the result will be the purchasing power of your money is 1% less than it was. Over a period of many years, you could see the effective value of your money halved. The best solution to avoid this is to put your money in a place where it will see growth. When we arrange your pension, we look closely at the investments available and will recommend the best possible areas to place your money, in line with your risk profile, for you to see stable growth.
What is the difference between a workplace pension and a SIPP?
A workplace pension is a policy your employer is legally obliged to put in place for you for your benefit. You will both pay into it during the years you are employed with that company, and at the end of your work you will be able to draw from the pot to help fund your retirement. You may have limited influence over the provider, or where the money will be invested, beyond a vague question of ‘how much risk do you want to take?’ A self-invested personal pension (SIPP) is where you can take control of your own destiny, your money and the funds you invest it into. You are able to choose from a far wider range of investment options for a SIPP, including equities and property. Around 1 million people in the UK use a SIPP to save for retirement.
I’ve got several pensions - what should I do with them?
Many people find they have two, three, or more pensions they have contributed to over the years, either through personal preference or from a range of products arranged by previous employers. You should consider each on its own merits and then seek the right advice, in accordance with your attitude to risk, to achieve your long-term goal. It all depends on what your idea of retirement is, what you want your life to look like, what you will want to spend every year, and when you want to see this life happen. Once we’ve worked out your targets, then we can design the route to reach them.
How do I withdraw my pension?
At the point you wish to retire or semi-retire, you’ll be presented with options to take tax-free cash, or a tax-free income. You may wish to consider allowances to retain certain entitlements to benefits, or you may wish to look at reinvesting your cash in different funds. The bigger question is not really how, but when? Legally and depending on your age, you are entitled to access the money tied up in your pension from the age of 55, but your timing should be in line with your personal financial plan so you reach your goals.
Our job is to ensure you have the most tax-efficient income possible, and to keep you up-to-date on the latest risks, so that your money is working hard for you, securing your future without unnecessary exposure to fluctuations in the market.
FOCUS ON YOU