What are the main options available to me, to help fund my retirement?
The good news is that you have a number of options to choose from, however, choosing the right solution depends primarily on your financial needs.
For example, you could choose a combination of the following options based on what’s right for you:
• Buy a guaranteed income for life with a pension annuity:
If you know you want the security of a regular income for as long as you live, then this could be a suitable option for you. You can buy an annuity with some or all of your pension savings.
• Invest your pension savings and use some of your money as and when you need to:
You can benefit from regular withdrawals or lump sums with income drawdown, leaving the remainder of your pension invested, in the hope it continues to grow. It’s important to regularly review the performance of your invested money to ensure your pension income does not run out or fails to meet your needs.
• Release equity from your home:
Your home is probably your biggest asset. Use some of its equity to make retirement easier by releasing a tax-free lump sum or provide an additional income.
See also: Retirement Living
At what age do I become eligible to take advantage of these options?
The idea of a traditional retirement is changing. Therefore, it’s no longer a one-off decision that you make when you reach age 65.
In fact, a forced ‘default retirement age’ of 65, no longer exists. Retirement is now about a series of financial choices to make, as you move through later life.
From the age of 55, you can generally take 25% of your pension savings as tax-free cash, if you want to. Then depending on your personal circumstances, you can decide what other options are best for you.
If you qualify for the State Pension as well, then that should help provide a little extra income too. Your State Pension age (when you would start to receive the State Pension, if applicable) is worked out based on your gender and date of birth. You can work this out by visiting the GOV.UK website at gov.uk/state-pension-age
If you are entitled to some State Pension in addition to any personal pension savings you have, then this is certainly a good thing. When you consider that people are generally living longer, you could be retired for many years, so your pension income may have to stretch an incredibly long way.
For more information and guidance:
The Money Advice Service website is a good place to start if you want to understand more about your options at retirement, or Pension Wise, the free and impartial government guidance website, regarding your pension options.
moneyadviceservice.org.uk/en/categories/pensions-and-retirement
What alternative retirement income sources could I consider?
Depending on your personal circumstances, you may be able to use your property to help provide an income (see Q4 below). You may also have other savings or investments that you could use, as an alternative to just relying on your personal pension savings, or the State Pension (if you qualify).
You could sell personal possessions such as jewellery or antiques if you have any of significant value, or even consider selling your car if this is no longer needed.
For more help visit moneyadviceservice.org.uk/en/retirement-income-options/retirement-options
See also: Searching for Retirement Property
What is equity release and how does it work?
Depending on the value of your home, equity release could allow you to release some of its value in the form of a tax-free lump sum. It gives you the ability to remain in your home, and use the money for almost any purpose.
You are eligible for an equity release plan if you are aged 55 or over, and a UK homeowner with a property that’s worth more than £70,000.
You decide whether you want to make regular monthly interest payments, however, unlike a standard mortgage you don’t have to make any monthly repayments. The plan is usually repaid from the proceeds of the sale of your home when you die, or move permanently into long-term care.
You could use the money for a number of things to help improve your life in retirement, including making home improvements or perhaps buying a
new car.
Like all major financial decisions, equity release should be carefully considered. It’s important to be aware that it could affect your entitlement to state benefits, and will reduce the value of your estate.
I’m getting close to my retirement, what things should I be considering?
Because you could be on your retirement journey for a number of years, it’s important to have the right plans in place that meet your needs.
Working out how much income you’ll have, and what you think you’ll need, is certainly a good place to start. You may find you have more income to help support your retirement than you think.
It could be that you will benefit from a mix of products and services to provide you with a combination of secure and/or flexible income that will last for the rest of your life. So it’s worth researching your options as soon
as possible.
It’s also sensible to review your plans from time to time as you move through the various stages of retirement, to ensure your retirement income needs are still on track.
What online tools are available to help me?
Many financial companies and organisations offer various online tools, guides and calculators, to help you get the information you need and give you an idea of how much money you may require in retirement. A general internet search should bring up a number of options, i.e. ‘retirement planning calculators’.
Visit the Money Advice Service for general help and support:
moneyadviceservice.org.uk/en/categories/pensions-and-retirement
A lot of information is available online but I’m not very tech-savvy, are there ways around this?
Yes, there are plenty of advice and guidance services available at the end of the phone, and quite a few advisers that will even come and see you face to face, although they are likely to charge you a fee.
Many people do not feel confident using the internet so a lot of companies advertise their numbers in the local or national press, and may write to you directly from time to time, to offer their services.
However, although you may find it a bit daunting, the quickest way to find these services is ideally a quick internet search which will help you get the information you need before a telephone call or face to face visit (which could cost you money).
Assuming I qualify and carry on working past my State Pension age, will this affect my pension allowance?
Many people choose to continue working after they reach their State Pension age. By continuing to work, you are likely to take home a bit more money. This is because you don’t pay any National Insurance when you are over your State Pension age (unless you are self-employed and paying Class 4 contributions).
However, you could still pay tax, and the amount you pay depends on the size of your total taxable income, and whether or not it is higher than your tax-free allowances. This includes any private pension and State Pension income.
You may decide to continue working but reduce your hours. If you have a workplace pension then it is best to check with your employer, as this could affect how much you get.
If you feel you don’t need the money straight away then you could continue working and delay taking your State Pension allowance. By doing so, you might get more money when you come to claim it. Any increased amount will depend on how long you decide to defer.
For further information visit gov.uk/working-retirement-pension-age
What are the telltale signs that I’m not getting the best advice from my advisor?
There is no simple answer to this question. If you don’t hear from your adviser from one year to the next, or if you don’t understand what they are telling you, it doesn’t necessarily mean they haven’t got your best interests at heart.
Perhaps get them to clarify how often they will contact you and always ask them to go over something again if it is not clear the first time. However, ultimately only you can tell whether you are happy with the advice being given and whether it’s time to move on to another adviser or not.
You may feel you no longer need full advice, in which case there are other options you may want to explore such as getting partial advice, which will cost you less in advisory fees. Or, if you are completely confident in your own financial planning, then you may be happier making your own decisions.
Where can I go to get support or discuss my retirement plans?
Pension Wise, an impartial guidance service, is a great place to start. Visit pensionwise.gov.uk/en or call them on 0800 138 3944 to book a free appointment.
They will help you understand your options and any choices you have. There are plenty of other online services that might be able to help you, although very few can assist you with all aspects of retirement planning, which can be quite specialist.
You could also talk to an Independent Financial Adviser who would be happy to help you, and will advise you of how much they will charge you before starting any work for you. Some advisers will give you a free first consultation to help you decide whether you would benefit from their advice on an ongoing basis.
For a list of financial advisers in your local area, visit thepfs.org/yourmoney
Details for guidance and support or getting advice:
Call the Money Advice Service on 0800 138 7777 or go to: moneyadviceservice.org.uk/en/categories/pensions-and-retirement
Or call Pension Wise on 0800 138 3944 or go to:
For a list of financial advisers in your local area, go to: thepfs.org/yourmoney
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