Category: Retirement


How Planning for Retirement Can Boost Your Health and Wellbeing

Retirement is one of those major life events that can throw up all sorts of emotions, from excitement to blind panic. But your reaction to this looming milestone can depend largely on how you deal with it in advance.

If you’re prepared for retirement and have taken the right advice, you can look forward to your post-working life with confidence rather than anxiety, which benefits both your physical and mental health as the years pass. And this doesn’t have to be complicated…

Financial Advice Can Make a Huge Difference
You shouldn’t need to be a financial expert with a detailed understanding of every product, rule and regulation to make good decisions. But the complexity of the marketplace does make the very idea of financial planning extremely daunting and overwhelming.

That, in turn, can lead to people putting off getting their finances in order and kicking the can down the road.

But ultimately, that doesn’t cure the underlying anxiety people will have about funding their retirement. That’s why it’s so beneficial to speak to a qualified specialist financial planner as soon as you can.

An expert in pension and retirement planning can work with you to identify what you want from life, and from your retirement in particular, and offer advice tailored to your specific needs.

If you know an expert is acting in your best interests and considering your unique wishes and circumstances, you can live your life with confidence, safe in the knowledge that you’re taking the right steps to enjoy a fulfilling retirement.

Get into Good Financial Habits
This is something that any financial planner will tell you early on, as getting to grips with how much you’re earning, spending and saving will put you in a better position to achieve your goals, both in the long and short term.

When it comes to funding your retirement, paying a regular amount into a pension scheme as early as possible will pay off further down the line, particularly as it’s a tax-efficient way to save for the future.

Our finances are coming under unprecedented pressure right now, with rising inflation, energy prices and tax hikes coming together to create a cost of living crisis for many.

But knowing that you’re taking care of your future will help to give you vital peace of mind during these tough times.

Pension Planning Doesn’t Have to Be All-Consuming
As we said earlier, getting your finances in order can seem overwhelming, and even with the best will in the world, you might prefer simply putting it off rather than spending your precious free time going through complex documents.

But it’s actually less of a chore and a drain on your time if you deal with it early, and made much easier if you have a financial planner taking care of all the complicated aspects.

So once you’ve got your plans for retirement in place, you can spend the coming years and decades concentrating on those things that actually make you happy.

The short message to take away from this is that putting off retirement planning isn’t good for you, and planning for the future doesn’t have to be complicated if you work with a financial planner.


Do You Know When the Pension Age Moves from 55 to 57?

The minimum pension age for accessing workplace and personal retirement savings is set to go up from 55 to 57 in 2028 – a change that could have a big impact on people’s retirement planning decisions.

But a new study has found that less than one in five people in their 40s are actually aware of this upcoming change.

Figures from the Pensions Management Institute (PMI) also show that just four per cent of people in their 40s actually know that the current minimum age for accessing private pensions is 55.

So what does this mean? Firstly, the findings suggest that many people in their 40s lack basic knowledge about the pensions rules, and secondly, that many could be caught out when they turn 55 and find that they can’t access their private pensions.

As the PMI warns, many people seeking to draw benefits as soon as they can “may be shocked to learn that they will have to wait”.

To make the situation even more complicated is the fact that the changes won’t apply to everyone.

The PMI points out that members of some private sector schemes and those who are paying into public service pension plans will continue to have a pension age of 55 after 2028.

Responding to the PMI’s concerns, a government spokesperson said the change in the normal minimum pension age to 57 was announced in 2014.

This, they said, was 14 years in advance of the change and “gave people time to make financial plans”.

However, it is clear that a significant proportion of the general public are not aware of this major change in pensions policy, which President of the PMI Lesley Alexander believes is “particularly worrying”.

“It is vital that the general public understands clearly what their retirement choices are,” she said.

The PMI has called on the government to launch a new communication programme as a matter of urgency, so the situation is clearly explained to the wider public.

Ms Alexander added that this needs to happen before the pensions dashboard, giving people the facility to view all their pension savings in one place, is introduced in 2023.

Otherwise, she believes there will be widespread confusion “when people learn that they will become eligible to draw benefits at different ages”.

The government has described the introduction of the pensions dashboard as a step that will revolutionise how consumers keep track of their pension information, as it will put the saver “more in control” and transform “how they think and plan for their retirement”.

However, the widespread lack of awareness of upcoming changes to pension policy suggests a problem is looming, and points to why it’s so important to get financial advice from an experienced, qualified specialist who is closely following regulatory and policy changes.


Will you keep working after turning 65?

Many of us dream of retiring early and spending our post-working life indulging in our hobbies and passions. But since the state pension age went up from 65 to 66 between late 2018 and late 2020, employment rates among 65-year-olds have reached record highs.

According to a report from the Institute for Fiscal Studies (IFS), the increase in employment among this age group since the change was implemented is as big as the one that occurred between 2005 and 2017.

Laurence O’Brien, a Research Economist at the IFS, described the increase as “striking”, so why exactly is this happening?

The IFS data suggests that the sharp increase in employment among 65-year-olds is being largely driven by people in less affluent areas, and those who have lower levels of education.

Indeed, figures show that since the state pension age went up, the employment rate among 65-year-old men rose by 10% in the most deprived areas of the UK, compared with 5% in the most prosperous areas.

Similarly, in the most deprived places, the women’s employment rate at age 65 went up by 13%, compared with 4% in the most well-off places.

This suggests that without a state pension, people living in less affluent parts of the country wouldn’t be able to afford to retire, or at least enjoy the kind of lifestyle in retirement that they’d wish to have.

It also points to a lack of financial education in these locations, with many lacking not only the means, but also the knowledge of how to prepare their finances for retirement in advance.

Another point to stress is that the effects of the state pension increase on men and women have not been the same.

Since the change was made, an extra 7% of 65-year-old men have stayed in paid work, compared with 9% of women in this age group.

While the report applies a broad brush to large numbers of people, it is clear that socio-economic and demographic factors are continuing to have a profound impact on the life decisions people feel able to take across the UK.

However, there was a ray of light in the IFS report, with figures showing that most people who decide to delay retirement since the increase in the state pension age are likely to be financially better off.

The report notes that these people would only need to work about 20 hours a week at the National Living Wage to compensate for losing their state pension income, and most 65-year-olds are earning more than this every week.

But crucially, it states that they also miss out on the many benefits of retirement, such as enjoying lots of leisure time, as a result of working for longer.

Figures showed that 65-year-olds are working 1.8 million hours a week extra since the state pension age was increased – a measure of just how much precious time they’re missing out on because they’re still working.


Worrying about saving for retirement is more common than you may think

Determining how much you need to save for the retirement you want can be difficult enough without actually having to save the money. Your requirements and desires will change over time in the same way that your income is likely to fluctuate.

You can’t be expected to know exactly what you’ll need in 5 years time, let alone 20 or 30, depending on where you are in your journey towards retirement 

As we’ve seen from the events of 2020, even the safest predictions can be subject to unexpected outcomes. It appears that this uncertainty is reflected in the minds of savers, according to Schroders 2020 Global Investor Study.

The study is an independent survey of over 23,000 investors from 32 different locations globally, and responses were collected between 30th April and 15th June 2020. The study suggests that 41% of investors across the world fear that they will not have enough savings to fund their retirement. The time at which the survey took place may be a factor itself as to why some respondents feared a savings shortfall. Whilst responses were being collected the Coronavirus pandemic was in full swing, subsequently upheaving previously held notions of job security and general stability. There were, however, specific answers within the survey which point to more definite reasons as to why people are worried about their retirement savings.

When asked if they believe that the state provided pension in their country was not enough to live off, 55% agreed. In fact, only 19% thought that it was sufficient. 

This view can likely be attributed in no small part to constantly shifting pension rules, which leave many expectant retirees stumped as to what they should prepare for. In fact, 41% of investors agreed that the adapting of rules by governments led them to the conclusion of not seeing the point in trying to save specifically for their retirement. 

Having a plan can be helpful. If you have any concerns about your own pension or retirement savings, you may benefit from seeking the advice of a professional. 


Minimum age for pensions freedoms rises to 57

The government has confirmed that the minimum age for drawing a personal pension is to rise to 57 in 2028.

Savers who pay into a personal pension either directly or through their workplace can currently access their money at 55. However, the government plans to raise the age as a result of increased life expectancy.

The change hasn’t yet been brought into law, but Treasury Minister John Glen has confirmed there are plans for legislation. 

In parliament, he said: “In 2014 the government announced it would increase the minimum pension age to 57 from 2028, reflecting trends in longevity and encouraging individuals to remain in work, while also helping to ensure pension savings provide for later life.”

The change will affect workers currently aged 47 and under, and was first announced by then chancellor George Osborne.

As chancellor, George Osborne significantly changed the way we can access our pensions.

He brought in rules that allowed retirees more access to their personal pensions, removing both the limit on cash withdrawals and the requirement to buy an annuity to ensure a secure retirement income.

Opponents to the rise in pensions age claim that the changes restrict workers’ freedom to retire. The changes will make it more difficult for some to retire sooner.

One investment analyst has described the change as a “kick in the teeth at a time when many people are reassessing their work/life balance after a terrible year socially, emotionally and economically.”

However, others believe that the changes are a positive step because they give people two years more to pay into their pension funds. They argue that this will increase the chances that retirees will have enough saved in their pension pots to provide an adequate level of income for the remainder of their lives.

Those who were planning to access their pensions at 55 but can no longer do so could look at other options. These could include saving into an Isa to fund the two year period before turning 57. 

Most savers will agree that the government is right to give so much advance warning, unlike with the increase in state pension age for women from 60 to 65, which caused some animosity. These changes do not affect when you can claim your state pension.


5 steps to bring your dream of early retirement closer

Do you find yourself counting down to Friday each week – even when it’s only Monday morning? Do you wish you could ditch the daily commute and long hours at the office? Have you got a secret desire to drive across America or buy a second home in the South France?   


If one of your main aims is to realise your dream of retiring early, take a look at these five steps. It may not be as unattainable as you first thought.   

1. Take control 

Retiring early won’t just happen. As life expectancy increases and governments raise the age at which you can take the State Pension, you could find yourself working for much longer than you’d anticipated. So if that‘s not in your game plan, you need to take positive steps to build up a pot of your own money. The State Pension should just be seen as an added extra.              

2. Set realistic goals

Once you’ve decided you’re serious about retiring early, you need to draw up a plan with attainable goals. A yacht and a penthouse suite might sound idyllic but if such a lifestyle is not  achievable then it’s no good setting yourself up for failure.

Instead think about the net figure that will give you enough to live on each year, with a lifestyle that suits you. Everyone is different. Some people may want to eat out frequently, some may be keen to travel the world, others may prefer more time at home with the family.      

3. Crunch the numbers 

Now’s the time to get down to the nitty gritty. It obviously depends on how early you are going to retire but if you are planning on retiring in your forties, a good rule of thumb is that you need to accumulate a pot of money worth 25 times’ your annual living expenses before you give up work. As well as thinking about what level of luxury you’re going to allow yourself, don’t forget to also factor things in such as insurance and care costs.  

4. Start early 

Save as much as you can while you’re working and start investing early. Compound interest  can have a significant impact on your original investment over time. In fact, when you start saving can be even more influential than how much you save. For example, if you started saving when you were 25 you could accumulate 35% more over the length of your career than somebody who started saving the same amount at 35. It’s also important to make sure you’re investing with the right level of risk depending on what stage of life you’re at.                 

5. Don’t be led by FOMO  

The ‘fear of missing out’ or FOMO can make us do things because everyone else is doing them. But making large purchases or taking on a large mortgage could steer you off course if your real goal is to retire early and travel the world. So keep focused on your goals. Remember, it’s your retirement plan, unique to you, not a colleague, neighbour or relative.  


Retirement planning in the time of coronavirus

The COVID-19 outbreak has signalled the dawn of a worrying time for everyone. As well as anxiety about our own health and the wellbeing of our loved ones, many of us are understandably worried about the financial future. Recent stock market turbulence is concerning for all investors, but particularly for those who are in defined contribution pension schemes and looking to retire in the near future.

The important thing is not to panic. Although we are in very uncertain times, reckless actions could severely endanger our financial wellbeing in the future. Here are some things you should consider if you’re planning to retire in the next few years:

Don’t cash out suddenly

Cashing out in a panic could severely damage your financial security in retirement. Although no one knows when the markets will recover, selling now could mean that you are taking your pension at the bottom of the market. It’s likely that financial markets will regain their strength over a period of time, even if we don’t know how long this could take.

What’s more, cashing out will mean that you’re likely to end up paying lots of unnecessary tax. In most cases, only the first 25% of a defined contribution is tax free; the rest is taxed as income. Chances are you’ll end up with a gigantic tax bill.

Remember that pensions aren’t the only form of retirement income

Retirees frequently use other assets such as cash ISAs, cash savings and rental income to provide for their life in retirement. If you have any other assets, you could use these to fund the first few years of your retirement in order to give your pension time to recover. The benefit of this would be that you wouldn’t be drawing from your pension pot when the markets are low.

If you don’t have any other assets to fund your retirement, you could consider delaying your retirement or working part time for a period. Hopefully, this would allow the markets time to recover, giving you more confidence when you finally do leave the workforce. 

Watch out for scams

Unfortunately, some unscrupulous people see times where people feel financially vulnerable as an opportunity to exploit them. There has been a lot of fraud since the start of lockdown and it has been reported that people are being scammed through being sold non-existent pension plans. 

Whatever you’re planning to do with your pension savings, it’s vital to check that the company you’re planning to use is registered with the FCA. Keep on your toes and if you see anything that looks too good to be true, it probably is.


Rethinking what’s important

The time in lockdown has given people the opportunity to reflect on what’s really important to them. It’s been a time to re-evaluate priorities and think about resetting goals for the future.

What about you? 

What have you missed?     

  • Has it made you want to spend more time with family and friends? 
  • Are there places you’ve decided you really want to visit when you can? 
  • Have you realised how much you appreciate being able to get out in the fresh air?  
  • Have you missed eating out? Or have you quite enjoyed doing more cooking at home? 
  • Have you rekindled a passion for an old hobby or taken up a new one?
  • Have you enjoyed the slower pace of life?  

In some respects, the lockdown may have given you a taste of what retirement might be like. Admittedly, the “stay at home” policy has been a mandate whereas retirement is a choice but nonetheless there will have been distinct similarities:

  • You’ll suddenly have had more free time on your hands (even if you’ve still been working from home, you’ll have gained back your commuting time) 
  • You’ll have been spending more time at home than ever before
  • You’ll have had to think creatively how to fill that time
  • You’ll have had to work out how to replace the social buzz of being at work  

The way you have decided to fill the time in lockdown may have revealed something about yourself and your priorities. It may be that the break from routine and going into work each day has been quite liberating. Or you may have realised that staying at home every day is definitely not for you.

Whichever camp you’re in, it may have got you thinking about your options regarding work in the future – working from home more, part-time hours, consultancy? If you’d always thought you might be bored in retirement but have actually managed to entertain yourself quite easily in isolation, the thought of early retirement might be starting to seem quite attractive. 

Many people fear retiring early because they think they won’t have enough money to live off without a salary. The lockdown experience, however, may have shown you just how much less you spend when you stay at home for a few weeks. You may have realised you don’t actually need as much financially as you thought you did. You may have got used to budgeting carefully and limiting your activities. You may have realised that you could live quite comfortably off a fixed income, just as if you were living off a pension, and your savings. 

Whatever your long-term decisions, treat this time of lockdown as a mini trial run for retirement. Use it to contemplate how your priorities might have shifted.Think about which goals you might want to re-set.


What questions should you be asking before you access your pension?

According to HMRC, record numbers of people have been taking money out of their pensions since the beginning of the year. 348,000 people made a withdrawal between January and March, a 23% increase from 284,000 in the same quarter in 2019. The value of the payments was £2.46bn, the highest amount recorded for that period since pension freedoms began in 2015. 

Given these uncertain times, you too may be considering accessing your pension to increase your disposable income and ease any financial pressures. The rules allow you to take out as much as you want from your pot, once you reach the age of 55. The first 25% withdrawal is tax-free while the remaining 75% is subject to your marginal rate of income tax.  

However, just because the freedoms are there doesn’t mean taking them is the right course of action. Here are some key considerations: 

Are there any other savings you can use before you tap into your pension?    

Accessing your pension is a major step. Make sure you’ve explored all your other options first. Have you accessed any government grants that you may be eligible for first? Have you got any other cash savings that could tide you over?   

Remember that if you have a defined contribution pension, a significant proportion of it will probably have been invested in stocks and shares, which will have taken a hit in recent months. So if you access cash from your pension during the current downfall, that money won’t have the opportunity to regain its value once the stock markets recover.     

How much do you really need? 

The purpose of a pension is to give you enough money to live off throughout your retirement. Whatever you take out now will influence what you have to live off in later life. That’s why it’s a good idea to try and leave as much as you can in your pension so that it has the opportunity to benefit from future market rises.  

Most people take the whole of their 25% tax-free lump sum when they first access their pension. But you can take out money from your pension in stages, in line with what you actually need. This way you have a smaller tax-free lump sum at the outset but further tax-free entitlements throughout your retirement. It’s important to seek advice as to what is best for your personal circumstances.     

How much tax will you pay?

It’s worth being aware that by taking a large amount of your pension in a particular tax year     you could be tipping yourself into a higher tax bracket, meaning you will pay more tax than you would have done if you’d taken smaller amounts over a longer time.  

Another consideration is that HMRC will ask your pension provider to deduct income tax when you take an income from your pension pot for the first time (not counting your tax-free lump sum). They will assume that what you take the first month is what you will take every month, which could again push you into the higher bracket. If you haven’t been taking that every month and are a basic rate taxpayer, you can claim the extra tax back.        

Want to continue to pay into your pension in the future?

You may just be focused on accessing some funds for your current circumstances. It’s important to realise, however, that if what you take now is above the tax-free limit, you could be restricting how much you and your employer will be able to contribute to your pension fund in the future. According to the Money Purchase Annual Allowance, your joint contributions cannot exceed £4,000 a year without incurring penalties.           

If you’re considering accessing your pension, do get in touch with us to discuss the implications.    


What’s a Rio Mortgage?

Sadly, this type of mortgage won’t help you jet off and buy a pad in Rio de Janeiro. It can, however, be a useful option to provide you with more flexibility in later years.      

A RIO mortgage stands for ‘retirement interest-only’. It’s valid for people over 60 who are keen to release some equity from their home. With this type of mortgage, the borrower only makes  monthly interest payments until they die or go into long term care, at which point the lender will get their loan repaid by the house being sold.

It allows the homeowner to remortgage their existing loan under similar terms to their current agreement. So if you’re on a pension income, the fact that you’d only have to repay the interest can make it an attractive proposition. If there’s any value left in the house once the property is sold and the mortgage repaid, that would become part of your estate.

RIO mortgages are relatively new on the market. They came about in March 2018 when the FCA relaxed their rules and separated them from equity release, by re-classifying them as standard mortgages rather than lifetime mortgages. 

The FCA wanted to make ‘affordable borrowing’ more widely available to an older population as long as they had a steady income.Take up of the new mortgage was initially slow but it has been growing in popularity. It’s simpler than equity release, offers an attractive alternative to downsizing and also means the interest isn’t racking up.  

Despite being called RIO or interest-only, some lenders are also offering an option where the borrower can repay part of the capital as well, which means they can leave more of an inheritance to their loved ones. Other providers are offering set repayment dates.

When are RIO mortgages suitable? 

A RIO mortgage can be worth considering if you are reaching the end of a standard interest-only mortgage in retirement and are concerned about how to repay the loan due to a shortfall in your savings. Rather than having to consider a house sale or expensive loan repayments, it offers flexibility and stability.            

This type of mortgage also provides an effective way of managing intergenerational wealth as it can enable you to help younger members of the family buy their first home. In addition, it can act as a means of reducing any inheritance tax burden.   

Points to consider

On the plus side, the monthly repayments on a RIO mortgage are likely to be cheaper than with   alternative repayment mortgages. It also provides a way you can stay in your own home without the worry of repaying the capital sum during your retirement. 

However, you will have to pass an affordability check to show you can afford the interest-only repayments. Bear in mind that it may be difficult to subsequently change mortgage provider or move house. You would also not be protected from short-term dips in the housing market.

It’s important to make a will and let your beneficiaries know about the mortgage so they will be aware of the reduction in the proceeds of your estate on death.