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The New Pension Freedoms Checklist

Pension planning

Four Things You Must Do Before Making Any Decision About Your Savings

The new pension freedoms are great news for savers, with more flexibility and options for retirement now available. However, the freedoms also come with a level of risk, particularly for that first wave of savers looking to exercise their new rights in the next twelve months or so.

The main recommendation for savers is to seek independent financial advice. An adviser will be able to talk you through your options and ensure you get value for money. Whilst you weigh up your decision though, here are four more things to add to your checklist and consider carefully alongside any decision you make about how you’ll receive your pension income.

Make sure you factor in, but don’t overestimate, your state pension

It is important to remember that, alongside your private pension savings, you will also probably benefit from a state pension in your retirement. Where once it might have been tempting to rely on the state pension, now it is more readily expected that your personal savings will be your main source of income in retirement and the state pension a nice ‘bonus’.

Don’t underestimate your lifespan

It is very common for retirees to underestimate their own lifespan and, by extension, the amount of money they will need throughout their entire retirement. Whilst it is, of course, a difficult factor to put any sort of prediction on, it is vital that you plan for a long and happy retirement, rather than risk trying to ‘get away’ with having less capital available to you. When planning your retirement income, make sure you’re planning for the long term!

Consider tax carefully

If you are looking at the new pension freedoms with some eagerness then don’t forget: whilst the taxation implications have been reduced, they have not been eradicated entirely.

After the first 25% tax free lump sum, withdrawals from your pension will be charged at your normal rate of income tax. If you are still earning an income, or if you make sizeable withdrawals in a tax year, then this could mean you enter the upper tax bracket.

Of course, if what you are planning for your pension income requires this level of withdrawal, then it may well be worth that level of taxation, but take care and make sure you have planned for, and are aware of, the taxation implications that your actions will create.

Work out what you want to do with your money, rather than just trying to get the highest amount

Perhaps the most important point of all! Whilst money is important to each of us, ultimately it is merely an enabler. There is no better aid to a happy retirement than clearly planning how you want to spend your money: the things you want to buy, the experiences you want to have, the family you want to help.

Once you have planned what you want to do with your retirement, money decisions become much easier. Will accessing your pension through the new pension freedom arrangements help you get to where you want to go in your retirement? More so than any monetary factors, this is arguably the most important question for retirees to attempt to answer.

Article taken from www.serenityfp.com

Bio:

Tina Weeks is the founder of Serenity Financial Planning Ltd which is based in Barnet. She has over 19 years experience as an adviser and works predominantly with families that need investment, pension and estate planning advice. She also works with business owners and those who are going through divorce or other life transitions. All suitable new clients receive a free initial consultation.

Contact details:

Serenity Financial Planning Ltd

www.serenityfp.com

0208 440 4788

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