We never know what’s around the corner, goes the old adage. And if we didn’t realise that before, this pandemic has certainly brought it home.
We’re living in a world now which few of us could even have imagined only a few short months ago, with day-to-day life transformed and plans for the future up in the air.
It has also given people plenty of time to reflect and, at Reeves, we have been talking to a number of clients who have been looking at their financial circumstances and retirement planning in light of the coronavirus. To them, where the future had once seemed assured and predictable, now new possibilities have opened up. For some, these are frightening possibilities, while for others they can be exciting.
For the purpose of the following example scenarios, we have changed the clients’ names.
One client, Robert Cameron, contacted us to tell us that his employer had had to put him on furlough and he was worried that the lockdown would hit the company so hard he was going to lose his job altogether.
Robert is 60, and doesn’t rate his chances of getting another job, particularly not at the same level of salary. He was earning £60,000 a year and, following Reeves advice, he had been making regular contributions of £10,000 a year into his pension fund, planning to retire at the age of 62. Suddenly, he was afraid that these retirement plans lay in tatters.
We talked the situation through with him, reviewing his assets and the level of income that he would realistically need and, together, we came to the conclusion that this was significantly less than he had originally thought.
Now he estimates that in retirement, he will need £24,000 a year. He has built up enough in his pension fund to be able to draw down this amount every year until he reaches the age of 67, at which point he and his wife will both receive state pensions of about £9,100 a year. This will considerably reduce the call on the private pension, which should then comfortably be able to top up his income until he reaches the age of 75. At this which point he will have much lower outgoings which the state pension will cover.
Talking him through this and pointing out that, if necessary, he could afford to retire today and still fulfil all his dreams was a huge relief to him. Now, Robert regards every month he is still in work as a bonus.
Another client, Keith Moore, is of the same age but, while he had been saving for his retirement with Reeves help, it was not something he was looking forward to. He has worked all his life in senior management positions and was convinced that he would be bored to distraction once he had finished working. Being furloughed, however, has been a revelation to him. He has found new enjoyment in his garden, has taken up long neglected old hobbies and is keen to explore some new ones.
Keith spoke to us to see whether he could adjust his plans to bring forward the date of his retirement by three years. Again, we reviewed his pension and his required income and we were able to advise him that he could comfortably afford to give up work early.
So, no, we never do know what’s around the corner, which is why it’s important to have the kind of flexibility that a drawdown pension can bring. It’s also important not to sit and brood about things, worrying alone, but to contact your Reeves adviser, so that, together, we can look at the options available.
These articles are for information only. These articles are based on specific clients and their situation may be different from yours. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.