Posts Tagged ‘retirement income’

Retirement Planning

Thursday, September 15th, 2011

When it comes to retirement planning, time is one of the most important assets you have to save for retirement.

It takes a long time to build up the investments needed to provide a comfortable retirement income and the sooner you start retirement planning and saving, the better.  Even putting a small amount away on a regular basis, if done long term, can make a difference.  Both occupational or company pension schemes and personal pensions are tax-efficient.

Your contributions to company pension schemes are deducted from pay before tax is calculated and for contributions to personal schemes, tax you have paid before you make your contribution is reclaimed for you by your provider.  In to each type of plan you can contribute up to £3,600, 100% of your net relevant earnings or £50,000 (for tax year 2011/12), whichever is the greater and you can then use your personal income tax allowances before calculating the tax you pay when that pension finally pays out.

If you work for more than one employer, a financial adviser can help you check your previous company schemes and work out what you are entitled to.  Your retirement planning might also include individual savings accounts (ISAs) which are tax-efficient ‘wrappers’ all profits earned on investments held inside them are paid out to you free of further tax.  The amount of money you can invest in an ISA is also subject to limits (£10,680, tax year 2011/12), but it is worth getting into the habit early.

If you think you could benefit from retirement planning we’d be happy to offer our services.  But don’t delay because the longer you put off planning for your retirement the less retirement income you’ll have.  Call us now on 0141 764 0040 and let’s see if you can help.  Contact Us.

At what age do you want to retire?

Thursday, September 15th, 2011

Sooner rather than later?  But later may mean you have more money.

Age of retirement in the UK

The minimum retirement age is now 55 and the statutory age is 65 and this is increasing to 66, for men and women, by 2020.

Retiring later can increase your retirement income

As a general rule, it is better to hold off retirement for as long as possible. Deferring state, employment and/or personal pension benefits generally provides a larger income than retiring early because the older you get, the better annuity rates tend to be. Equally, if you choose to downsize your career but can still earn some income after your chosen retirement date, you may be able to ‘phase’ your retirement, using only a portion of your pension fund to begin with and leaving the remainder invested until later.

However, the most important choice you will make will be over the actual annuity, or unsecured pension product (Income Draw Down), as this will determine your ultimate retirement income. There is also the option of taking 25% as a tax-free lump sum, which could perhaps pay for a long holiday or be re-invested elsewhere to generate additional income. An annuity will provide you with an income stream for life, but this does mean you give up all right to the capital – and your descendants may not inherit anything of your investment if you die soon after retirement. You therefore need to weigh up the merits of guarantees in your annuity choice (thereby securing some of that fund value at least for the short term) against the rate being offered to you, particularly if you smoke or have certain health conditions which could lead to an increase in the amount you receive.

Alternatively, you can use an unsecured pension arrangement, which allows you to keep your fund fully invested and to draw an income directly from that. This income could be less or more than you might receive with an annuity, depending on your circumstances and requirements, but it does mean you preserve some of the value of your pension fund. This approach does, however, come with risks. Rather than consolidating your value as an annuity would, your retirement investment remains in the hands of the market so, whilst the value could go up, it could just as easily go down. Given the time it took to build that value, positioning your portfolio to minimise the risk of losing it is therefore essential.

Finally, you could do a little bit of both – take an annuity for part of your pension fund and leave the remainder invested. Such a combination could offer a decent half way house, but be sure to examine all the options before you make your move.

We’re happy to provide more information about planning for your retirement and you options will really depend on your own set of circumstances and wishes.  For professional advice tailored specifically to you why not call our financial advisers on 0141 764 0040.

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