The pandemic has impacted many people’s pensions, savings, and jobs. 13% of people have changed their retirement plans due to the pandemic*.
This has meant many people have had to rethink their financial planning and has resulted in some people being forced to delay their retirement plans.
The importance of flexible retirement plans
This data shows that flexibility is essential when it comes to retirement planning in case your plans do need to change. For example, you may be planning to retire at the age of 65 but you could have to retire earlier due to illness or a change in family situation. If this happens you need to ensure that you have enough flexibility to cover your income for this additional period.
A financial adviser at Four Wealth Management can help you to plan for retirement. The sooner you start planning, the more options and flexibility that you will have.
Why should you take financial advice when planning your retirement?
You can currently access a private pension at the age of 55. Since the pension freedoms were introduced in 2015, people can now withdraw their pension assets once they reach the age of 55.
Many people are uneducated on their pension options and therefore choose to encash their pension pot when they reach retirement age. The Financial Conduct Authority found that 375,500 pension pots were fully withdrawn from April 2019 to March 2020**.
However, there are many downsides to fully encashing your pension immediately when you retire. For example, it could mean that you are pushed into a higher income bracket in that tax year.
Another risk of fully encashing your pension at retirement is that you could run out of money too early as you may not be monitoring how much you are spending from this fund.
A financial adviser at Four Wealth Management can help you to navigate the tax pitfalls when accessing funds from your pension.
One option that you could consider if you do not need the full value of your pension immediately is withdrawing income over a few years so that you can stay in a lower tax bracket.
Let your pension continue to grow
If you choose to only make small monthly withdrawals of income from your pension to cover your living expenses then you could choose to leave the remainder of your pension pot invested. This means your pension has the potential for further tax efficient growth to help provide you with more assets over time.
Start planning your retirement now
A financial adviser at Four Wealth Management can help you to review your existing pensions and see if they are on track to help you meet your retirement goals.
Alternatively they can help you to start planning your retirement from scratch.
Book a meeting now or call us on 0117 973 0500.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
*English Longitudinal Study of Ageing, Covid-19 study, June-July 2020, 6000 participants over the age of 50