Retirement Planning Made Simple
When it comes to planning for your retirement, we’re here to help you make sense of it all. At Tailored Financial Planning, retirement’s a specialty. Whether you’re dreaming of an early retirement, aiming to live comfortably in your golden years, or thinking about what you’ll leave behind for your loved ones, we’ll work with you to create a plan that feels right for you.
We start by setting realistic, long-term goals together. From there, we make sure you’re using every tax benefit available to maximise your savings. After all, the less you give to the taxman, the more you’ll have to enjoy life or even bring forward your retirement plans!
If you’re already retired, we’ll help you make the most of your resources. By combining investment strategies with cash flow planning, we’ll ensure you can live the life you want without worrying about your financial future. We also consider inheritance planning, so you can pass on what you’ve worked hard for to the next generation in any way you choose.
No matter where you are in your retirement plans, we’ll guide you every step of the way. Our goal is to make sure you feel confident, supported, and ready to take on the future. Want to find out how we can help? Give us a call today – we’d love to chat about building a retirement plan tailored just for you.
What can you do with your pension pot?
When it comes to your pension pot, you’ve got options – 6 of them, to be exact! Here’s a simple breakdown to help you understand how you can make the most of your defined contribution pension pot.
1. Take 25% Tax-Free
You can usually take up to 25% of your pension pot as a tax-free lump sum. This can be a nice boost to kick off your retirement plans or cover any big purchases you’ve been dreaming about.
2. Don’t Touch It Just Yet
Not ready to start using your pension when you reach your planned retirement age? No problem. You can leave the money invested, which gives it a chance to keep growing, especially if you’re still working. Just keep in mind, it could go up or down in value depending on the market.
3. Take It Bit by Bit
You don’t have to take all your money out at once – you can withdraw smaller amounts as and when you need them. The first 25% of each withdrawal is tax-free, but you’ll pay tax on the rest, just like income.
4. Go For a Guaranteed Income
If you prefer steady payments, you might want to buy an annuity. This is a financial product that gives you a regular income for life – or for a fixed number of years – so you’ll always know what’s coming in.
5. Flexible Retirement Income
With flexible drawdown, you can take out what you need, when you need it, while keeping the rest invested. This gives you more control but also comes with the usual investment risks.
6. Take It All Out
You could take the whole pot in one go, but be careful! Anything above the 25% tax-free amount will get taxed as income, and it could even push you into a higher tax bracket.
Other Things to Keep in Mind
- Fees: Check with your provider – there might be extra fees if you don’t start taking your money at the age you originally planned.
- Taxes on Savings: If your total pension savings for the year go over £60,000 (the current annual allowance), you’ll pay extra tax.
- Passing It On: If you leave your pot untouched and pass away before age 75, your pension can be passed on tax-free.
- Staying Flexible: You and your employer can keep paying into your pension pot while it’s still growing, but there might be some restrictions.
When it comes to deciding what to do with your pension pot, it’s all about finding the right fit for your lifestyle and goals. If you’re unsure, it’s always a good idea to get some financial advice. Your future self will thank you!
Quick guide to pensions…
LIFETIME ANNUITY
| Regular and secure income for life |
| Tax free cash provided at outset and fund used to purchase an annuity paid for life. |
| Your annuity income is paid at least annually and can increase, decrease or remain level in payment. |
| Additional options can be selected at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. |
| Once you have bought your annuity, you usually cannot change your mind or change benefits. On death there may also be the option of a capital payment less tax. |
SCHEME PENSION
| Regular and secure income for life |
| Tax free cash paid at outset and fund used to provide income for life. |
| Your annuity income is paid at least annually and can increase or remain level in payment. |
| Additional options may be offered at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. |
| Pension income paid directly by scheme. Once in payment you cannot change your mind or change the benefits. |
PHASED RETIREMENT
| Part of your fund and part of your tax free cash are used in segments to provide annuity income. |
| The balance of the fund not used for income / tax free cash remains invested with a view to providing higher future benefits. |
| Your starting annuity is smaller, but is supplemented by a portion of your tax-free cash sum. |
| Each year you decide how much fund to use for annuity purchase and how much tax free cash is used to supplement your income. |
| Because you don’t commit all your funds to buy an annuity immediately, you keep your options open. |
EXISTING DRAWDOWN PENSION – CAPPED
| Tax free cash lump sum paid at outset and fund remains invested. Income can also be selected if required. |
| The balance of the fund not used for income remains invested with a view to providing higher future benefits. |
| You can choose the income you want, and when you want it, between nil and 150% of an equivalent single life annuity. |
| If investments do well, you may benefit from higher future income payments, and vice versa. |
| On death, the remaining fund is available to pay benefits to your beneficiaries. |
FLEXI-ACCESS DRAWDOWN
| Tax free cash lump sum paid at outset and residual fund (subject to income tax) can be accessed immediately. |
| Immediate access to the entire fund to provide income with no limits. 25% Tax Free Cash the rest subject to income tax. |
| You can choose the income you want, and when you want it. |
| On death, if there is any fund remaining then it is available to pay benefits to your beneficiaries. |
| Policyholder must advise all other ‘active’ pension plan providers that they have flexibly accessed their benefits within 91 days, or face possible HMRC fines. |
UFPLS
| A lump sum is paid up to the full value of the plan. No regular income. |
| Immediate access to as much of the fund as required. Of the amount paid out, 25% is paid free of tax with the rest subject to income tax. |
| There is no regular income but you can choose when and how much of a lump sum you require. |
| As long some funds are left in the plan, if investments do well you may benefit from higher future lump sum payments. |
| Policyholder must advise all other ‘active’ pension plan providers that they have flexibly accessed their benefits within 91 days, or face possible HMRC fines. |
| LIFETIME ANNUITY | SCHEME PENSION | PHASED RETIREMENT | EXISTING DRAWDOWN PENSION – CAPPED | FLEXI-ACCESS DRAWDOWN | UFPLS |
| Regular and secure income for life | Regular and secure income for life | Part of your fund and part of your tax free cash are used in segments to provide annuity income. | Tax free cash lump sum paid at outset and fund remains invested. Income can also be selected if required. | Tax free cash lump sum paid at outset and residual fund (subject to income tax) can be accessed immediately. | A lump sum is paid up to the full value of the plan. No regular income. |
| Tax free cash provided at outset and fund used to purchase an annuity paid for life. | Tax free cash paid at outset and fund used to provide income for life. | The balance of the fund not used for income / tax free cash remains invested with a view to providing higher future benefits. | The balance of the fund not used for income remains invested with a view to providing higher future benefits. | Immediate access to the entire fund to provide income with no limits. 25% Tax Free Cash the rest subject to income tax. | Immediate access to as much of the fund as required. Of the amount paid out, 25% is paid free of tax with the rest subject to income tax. |
| Your annuity income is paid at least annually and can increase, decrease or remain level in payment. | Your annuity income is paid at least annually and can increase or remain level in payment. | Your starting annuity is smaller, but is supplemented by a portion of your tax-free cash sum. | You can choose the income you want, and when you want it, between nil and 150% of an equivalent single life annuity. | You can choose the income you want, and when you want it. | There is no regular income but you can choose when and how much of a lump sum you require. |
| Additional options can be selected at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. | Additional options may be offered at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. | Each year you decide how much fund to use for annuity purchase and how much tax free cash is used to supplement your income. | If investments do well, you may benefit from higher future income payments, and vice versa. | On death, if there is any fund remaining then it is available to pay benefits to your beneficiaries. | As long some funds are left in the plan, if investments do well you may benefit from higher future lump sum payments. |
| Once you have bought your annuity, you usually cannot change your mind or change benefits. On death there may also be the option of a capital payment less tax. | Pension income paid directly by scheme. Once in payment you cannot change your mind or change the benefits. | Because you don’t commit all your funds to buy an annuity immediately, you keep your options open. | On death, the remaining fund is available to pay benefits to your beneficiaries. | Policyholder must advise all other ‘active’ pension plan providers that they have flexibly accessed their benefits within 91 days, or face possible HMRC fines. | Policyholder must advise all other ‘active’ pension plan providers that they have flexibly accessed their benefits within 91 days, or face possible HMRC fines. |
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