Financial wellbeing is an important factor when it comes to being able to enjoy life. While we’re earning, it’s possible to secure the living standards we want for ourselves and our families, but it’s also important to put some of that income aside to build up your pension fund. Generally speaking, and subject to investment performance and charges, the more you save and the earlier you start saving, the better shape your financial assets are likely to be in when you need to draw on them.
When work reduces, or ends, your pension fund will be an important (but not necessarily your only) financial asset. You could have money on deposit and investments in some, or all, of the following:
- collective investments
- stocks and shares
- insurance-based products
- Buy to Let property
… to name a few!
The decision on where to draw funds from when you achieve retirement will be an important and potentially complex decision and there are many factors that can influence it:
- whether, and if so, how and when to access pension savings held either in a personal or workplace pension
- how to make your pension last through retirement (given most of us are living longer)
- how to protect your retirement income against the effects of inflation
The State Pension
For many the income the State provides will form a key part of their retirement income. The amount of State Pension you’re entitled to usually depends on the National Insurance (NI) contributions you’ve paid.
If you reach your State Pension age after 6 April 2016, you may be entitled to the new state pension, the full amount of which is £164.35 a week (2018/19). The full state pension is payable with 35 years NI contributions or credits. State Pension Age for women is gradually increasing and will reach 65 by November 2018. State Pension Age for both men and women will then increase to 66 by October 2020 and then to 67 and eventually 68 by 2046.
Ensuring good decision-making
Clearly, the greater the value of your investments, the greater chances you’ll have of a financiallyrewarding retirement. But the more investments you have, the more important it will be to think very carefully about where you take money from when the time comes to take it. The various investments mentioned above will have different tax rules applying to them so having a good understanding of these rules, or seeking advice from a tax specialist, will be helpful to good decision making. You’ll also need to think about the relative importance of certainty of income, access to capital and preservation of capital for your family, as well as the degree of risk you’re prepared to take to achieve your required level of return on the investments that remain in your pension fund.
If you’d like expert advice on your retirement choices, please get in touch.
The value of your investments and any income from them can fall as well as rise and you may not get back the original amount invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.