What options do I have for drawing my pension at retirement?
There are various options available including generating an income from an annuity or investing in a fund that allows you to draw income or lump sums as required. But the option that is right for you will very much depend on your retirement needs and objectives.
How much money do I need for the rest of my life?
This really depends on your retirement objectives. The starting point is to determine how much you need to cover your day to day mandatory expenditure, such as household bills etc. But you will also need to consider your discretionary expenditure on top of this.
- Do you plan to spend more on holidays?
- Would you like to travel more?
- Perhaps take up a new hobby?
- Do you need to support children or grandchildren?
This expenditure should also be accounted for.
What is Flexi-Access Drawdown?
It is a flexible way to access your pension in retirement and can be utilised from your 55th birthday (rising to 57 from 2028). You can access your savings when you need to whilst at the same time reinvesting your remaining funds in a way that provides you a regular income if required.
We help many clients with this type of pension approach, however the right approach will depend on your own personal requirements.
What risks do I face with my pension and how can these be managed?
There are a number of risks associated with any pension arrangement and you should always consider these. For example, your fund value can go up and down, you may not be able to access your money as quickly as you’d like and inflation could erode your returns. How you decide to drawdown your pension can also bring it’s own risks.
Is my pension fund secure?
The type of pension and how you decide to take your retirement benefits can impact how secure your pension fund is.
Contact us to arrange a call back to discuss how we can help.
What happens to my pension when I die?
It depends on how you decide to take your retirement benefits and can therefore be a complex area to understand. Most pension options allow anyone to inherit your pension which doesn’t always have to be your spouse or civil partner. There are tax implications - so it’s important to understand your options.
Ascot Lloyd can help you understand all of these options and put a robust plan in place.
How much should and can I contribute annually to a pension?
This depends on your earnings and how much you can afford to contribute, within the available allowances. Tax relief is also available on contributions made, subject to various limits.
We can help you work out the best approach for you based on your individual circumstances.
How much should I be saving towards my pension?
Research shows that we put ambitious targets on our retirement income and then underestimate how much we need to save to get there.
Before we delve into how much you should be saving, here’s a quick overview of the two main types of pension schemes:
In a defined benefit scheme (commonly known as final salary schemes) your employer promises to deliver you an income in retirement based upon the number of years you have worked for them and your salary. It may be a non-contributory scheme, or you may be required to contribute each month into the scheme. These ‘gold-plated’ schemes are increasingly rare.
The other type of scheme is a defined contribution scheme. If you have this type of scheme, you will be expected to contribute a percentage of your salary as will your employer. The money is invested to build a pot which will then fund your retirement.
If you have a defined benefit scheme, you just need to save as much as your employer says. But with a defined contribution scheme, things are a little more complicated…
The onus is on you to deliver the money you need in retirement – the more you save, potentially the more you get.
How much will I need in retirement?
In retirement, your outgoings are likely to be lower.
For instance, most people will be mortgage free and not supporting children.
The general rule of thumb is that someone currently aged 40 would need around 50% of their current net income to maintain their standard of living in retirement.
You should also factor in the state pension. Under the new rules this could be worth £175.20 per week (£9,110 per year) but the actual amount you receive will depend on your national insurance record. So, someone targeting a retirement income of £23,000 per annum would need to contribute £14,000 pa. from their own pensions.
You can check what you qualify for online via https://www.gov.uk/check-state-pension.
Please note that figures mentioned above can and do change, but were correct at time of writing.