PROVIDING INCOME AND CAPITAL IN RETIREMENT
We all look forward to having a comfortable retirement with sufficient income and capital to enjoy a desired lifestyle and have no financial worries. This does not come about without careful planning and preparation. When you reach your retirement there are different options available for you to draw your retirement income and capital.
At Pure Financial Advice, we will discuss your requirements and identify whether you are on target for your planned retirement. We will examine your current arrangements and, if required, recommend proposals to increase your retirement benefits. If you are nearing retirement then we will discuss the options available to you with the arrangements you have in place and advise on the most suitable course of action.
- State Pension
- Personal & Stakeholder Pension Plan
- Self Invested Pension Plan (SIPP)
- Income Drawdown
The State Pension is designed to give you a regular income for life and is made up of two parts, Basic State Pension and Additional State Pension. It is based on how many qualifying years of National Insurance contributions you have made. When you reach state pension age the Basis State Pension only provides a basic income and will probably not be sufficient to meet your income needs in retirement. Additional planning is therefore essential.
THE RIGHT PENSION PRODUCT FOR YOU
Personal and Stakeholder Pension arrangements can be set up as a individual arrangement or a group arrangement. They are also popular for those who are self employed. The individual (and possible the employer) contributes to the plan with valuable tax relief on the contributions, and the fund at retirement is used to buy a pension and provide a lump sum. The Plans are flexible in respect they can be moved with you from employer to another employer and you can choose when to retire and draw the benefits.
Stakeholder Pension Plans are low cost offering a limited range of pension funds to invest in. Personal Pension Plans tend to be more expensive offering a wider range of pension funds to invest in.
A SIPP is a pension that allows you to include a wider variety of investments than other pension schemes offer. You can invest in many different areas including pension funds, shares, cash, and commercial property. Contributions into the plan will receive tax relief and the fund at retirement is used to buy a pension and provide a lump sum. A SIPP tends to be the most expensive pension plan to set up.
YOUR CHOICES IN RETIREMENT:
An Annuity is an insurance contract which provides a regular (level or increasing) income in exchange for a lump sum investment. An Annuity is usually purchased with the funds of a pension investment. There are several different types of annuities available and your individual circumstances will again decide which type, if any, are suitable for you. The main types of Annuity are Lifetime, Fixed Term, and Investment Annuity.
Annuity rates vary considerably from provider to provider and you do not have to take an Annuity from the pension company you have your pension plan with. Shopping round is essential to make sure you are not missing out on a higher level of income this is called exercising the Open Market Option on your pension plan.
Some companies offer higher annuity rates to smokers and those in ill health. At Pure Financial Advice we can guide you through your annuity options.
You may not wish to purchase an Annuity immediately, this could be because they do not feel that Annuity rates are good value at that time or maybe you want a more flexible way of drawing your retirement income and lump sum.
Income Drawdown allows you to take an income and lump sum or no income and just lump sum initially from your pension fund whilst the fund remains invested and hopefully continues to grow. There are risks to this type of scheme as the income level is not guaranteed for life and you are still at risk of poor investment performance which could substantially reduce the value of your pension.
The benefit of Income Drawdown is that you keep control of your pension fund, you have the ability to alter your income as your circumstances change, you may achieve good investment performance and the fund remains in a tax efficient environment.
At Pure Financial Advice we can guide you through your retirement options.
Pension Advice Reading
Pure Financial Advice are pension and retirement experts in the Reading area. If you would like retirement advice in Reading and the surrounding towns, please call us on: 0118 943 1789 to speak to an advisor and to arrange a no obligation appointment. We will be able to guide you through your pension and retirement options.