As result of recent changes to pensions, people now have more choice about how & when they can access their pension pot from the age of 55.
People can take cash, a flexible income (drawdown), or a fixed income (annuity), or indeed a mix of these. Drawing from our experiences since April we can say that drawdown has become a lot more popular as a choice due to the flexibility of accessing funds for the plan holder & their family after the plan holder’s death.
So what should you be thinking about when it comes to the money in your pension?
1. Think about your pension early – this allows you choose the investments that suit what you’re planning, whether that’s buying an annuity, taking a flexible income, taking your cash as a lump sum or a mix of all three. You can find more about this in our Are you ready for the pension freedom changes? blog.
2. Once you’re retired – stay invested – for example if you’re taking a flexible income from your pension it can be tempting to leave all your money as cash – but this may not give you the best results. Obviously cash is less likely than other investments to fall in value, however on the other hand it’s growth potential is also less. Therefore careful planning is required with respect to your investments during your retirement.
3. Balance your income goals – life expectancy is rising & therefore this means you will have to fund your retirement for much longer. One of the biggest challenges is making your money last over time; taking the income you need to today as well as making your money last through your retirement. In addition the new rules that reduce tax when inheriting pensions, reducing it to zero in some cases means you may want to make sure you have enough left to pass onto your loved ones. All these different goals need to be looked at & taken into account.
4. Take care of the early retirement years – If you’re taking an income, you need to ensure you manage & analyse how much your investments move up & down in value. A pro-active management of these funds is vital as it becomes much harder for your pension to recover its value after any early falls in the stock market.
Here at Reeves Independent our service is designed to help you make the right decisions at & during retirement. Please take a look at our Retirement Options Service Proposition.
The articles are for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.
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