Managing your retirement income could help you enjoy more of your life
Retiring may give you more freedom and time to spend doing the things you love, but you’ll still need an income. Without a regular salary it can be hard to adapt to life in retirement whilst maintaining the standard of living you're used to.
Our expert financial advisers are here to help you understand what could be the most complicated phase in your life.
41% of over 55s with a pension are not on track to meet their retirement goals*
89% of over 55s have a goal of achieving financial freedom*
63% of people admit that they don’t know how much money they’ll need to retire*
76% of over 55s say that being debt free would give them peace of mind*
Helping you to achieve a smooth monthly income from your retirement pot
You’ve probably saved hard to build your retirement pot so it's important that you make the most of it. With the average life expectancy in the UK at around 80 years old, you could need to make sure that your pot will last at least 25 years if you plan to retire at 55.
Pension drawdown is a way of using your savings to provide you with a regular retirement income. But you need to make sure that you don’t run out of money. For example, drawing down as much as 10% of your retirement pot, if it was around £200,000, per year would only provide you with an income for 10 years.
Our expert advisers could help talk you through your options which aim to make your retirement pot last longer whilst providing you with a smooth monthly income.
* Source: Schroders Personal Wealth Money and Mind Report, September 2020
Managing your money in retirement is just as important as it's always been
Helping your money last as long as you need it
Throughout life, your finances can be impacted by many factors. Falling ill, losing your job, or making a bad investment can upset your financial stability. In retirement, when your income tends to be lower and your potential for earning is lessened, there are other risks you may need to consider:
Rising inflation could reduce the spending value of the savings you’re using to fund your lifestyle.
The volatility of your investments.
Increasing, often unforeseen, medical expenses.
How long you might live for – many people underestimate how long they’ll need their retirement income to last.
Tips for managing your income
Speak to one of our experienced advisers to see if they can help you:
Estimate how long your retirement savings will last.
Set up a sustainable income plan.
Decide what options could work for you.
Our expert financial advisers can help you to enjoy your retirement
Investing for income in retirement
Your goal, like that of many retirees, may be to generate as much income as possible from investments, while making sure that enough remains in your pension pot so that it lasts as long as you need it to. There are a number of income producing products you could consider for this.
An annuity could pay you a regular income for the rest of your life, no matter how long you live, giving you valuable financial security. You can choose the features of the annuity to suit your needs, including how often you receive the payments, and whether they’re fixed or increasing.
Self-invested personal pensions (SIPPs) offer a cost-effective, flexible, and simple way to save for your retirement. Once you’ve retired, SIPPs can be a great way of keeping your money invested so that you can draw down an income to fund your lifestyle.
Onshore and offshore bonds
Both onshore and offshore bonds are essentially investments in the form of insurance contracts which offer tax advantages. Onshore bonds have a different tax treatment from other UK-based investments and offshore bonds are based in locations where the investments are largely free from tax.
A long-term care annuity could protect your estate from capital erosion by capping the cost of your care in later life. This is particularly valuable if you live significantly beyond your life expectancy.
The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.
Pensions are a long-term investment. The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn't guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.
Tax treatment depends on individual circumstances and may be subject to change in the future.
Not retired, but want to plan for your next chapter?
Retiring from work doesn’t have to mean making major changes to your lifestyle. By getting your pension in order and planning your retirement now, you could spend your work-free years as you always dreamed.
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Understanding more about managing your retirement income
Help! I’m about to retire, what should I do?
The present economic and financial uncertainty may greatly complicate the outlook for those planning to retire now. Professional financial advice could help you understand the options available to you and help you decide the best route forward for your individual circumstances.
Tax efficient tactics for your retirement income
Retirees must pay tax like everyone else. Be aware of tax-free allowances and tax thresholds. Planning how you generate your future income could help reduce your tax bill.
Frequently asked questions about enjoying your retirement
What options do I have when I’m ready to access my retirement savings?
There are a number of options which you can discuss with your adviser to make certain that you make the right choices. You could choose one of the following options, or decide on a combination:
- Guaranteed regular income for the rest of your life with an annuity.
- Flexible access to income, as and when you need it with income drawdown.
- Use your pension pot to invest in income funds that look to provide you with regular returns. However, remember as with all investments, the value of your plan when you decide to take your benefits which isn't guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.
- Receive your savings as a cash lump sum – all of it, or what you need, you decide.
- And if you’re not ready to access your pension pot just yet, you can choose to leave your money invested, giving it the potential to grow further, however this is not guaranteed and the value may also fall.
What can I do if my retirement expenses are more than my income?
People often underestimate how much they’ll need to spend in retirement to enjoy a comfortable lifestyle. This can lead to overspending because they didn't plan adequately for their retirement.
If you find yourself in this position, you have several options:
Downsizing – Selling your home and moving into a smaller property can free up some much needed money to fund your lifestyle in retirement.
Equity release – If you don’t want to sell up, you can choose to release equity that’s tied up in your home. This will provide you with a lump-sum which needs to be repaid when the house is sold.
Renting out your home – Choosing to rent out your home can provide you with a regular income without the need to sell your property.
Sell your assets – If you have assets of considerable value such as cars, art or antiques, you may wish to raise funds by selling these items.
What will happen to my savings if I die before I collect my pension?
Your pension pot could be one of your most valuable financial assets so it’s important to sort out your pension legacy, sooner rather than later.
Workplace pensions – You’ll need to sign an ‘expression of wish’ form so your employer is aware who you would like to benefit from your pension. Even if you have written a will, you should still inform your employer of your wishes via the form. This is because some pension entitlements never become part of your estate so wouldn’t be covered by your will.
Personal pensions – In most cases, a payment of however much your pension is worth is paid out if you die. Similar to workplace pensions, you can complete an ‘expression of wish’ form to detail who you would like to receive the payment. You could also choose to place your pension into a trust in the event of your death. In this circumstance, your loved ones could still benefit from your pension, but with reduced inheritance tax bills.
State pensions – If you die before retirement age, it’s unlikely that your dependents would receive any of your pension. However, if you’ve paid more in National Insurance over the years than your spouse or civil partner, they could use your contributions to get an improved State pension on their retirement.
Let's start with a free initial consultation
We'll begin with a free, no obligation conversation to understand if our service is right for you. There are no hidden fees or charges, and you’ll only pay if you choose to go ahead with the recommendations in your personalised financial plan.