Does your pension plan still meet your retirement goals?
There have been many changes to the pensions landscape since the “simplification” regime rolled in, back in 2006 and whilst preparing for retirement via pension remains one of the most appropriate and tax efficient ways to save, it is important that current legislation is factored into retirement planning.By Keith Pressler, senior consultant, Taylor Patterson – a Mattioli Woods plc company
Schemes established under old rules could miss out on new freedoms and flexibilities that became available in 2015.Just because the new rules and regulations are available, doesn’t mean the pension provider has to provide them, so savers could be missing out.
While the new system may seem more complex, it allows savvy savers the opportunity to review their options and adapt their retirement planning to their fit their objectives.Increasing retirement age By 2028, the state pension age will have risen to 67, and it’s likely further increases will follow. This is important even if the plan is to retire early, as the minimum private pension age is set at 10 years earlier than the state age. That’s age 57 by 2028, and then rising in line with state changes beyond that.
The age at which an individual wishes to retire is a crucial factor in setting and reviewing retirement strategy. Retiring early gives less time to save and with life expectancy increasing, many more years to fund. Are savings goals on track? When was the last time investment strategy was reviewed? Are investments being actively managed?It is vital that pension savers have a regular review undertaken of their investment strategy, as key investment factors change on a day by day basis. At the same time, it is important to evaluate life goals and financial position both in the lead up to retirement and beyond.
New options for flexible pensions The pension revamp means that individuals can now, for example, draw money out of a pension pot, whilst simultaneously continuing to work and still pay into it. The way in which pension savings can be accessed has changed significantly, allowing many more options.It should be remembered that the onus is on the pension member to make the enquiry with their provider. Those approaching retirement should ensure their provider offers the flexibility options required to meet their retirement goals.
Don’t forget old plans Today’s workers tend to accrue a handful of pension plans as they change companies and industries. Sometimes these offer great benefits worth holding onto, but in other instances they may be bettered by newer schemes. In this case, it’s possible to consolidate some or all of your plans into one, optimal plan. It’s also not unheard of for individuals to simply forget some of their older pension plans, losing their hard-earned savings!Passing wealth on to family Another key facet of the new pensions flexibility is the option to pass savings onto the next generation, on death. Not the most pleasant topic, but there’s too much at stake to avoid planning for such an eventuality.
In summary With this in mind, pension savers should ensure that their pension plan is as customised to their requirements as it can be. Savers should define their end goal - how do they want to live in retirement and what savings will they require. They should engage with a trusted advisor to ensure a strategic plan is in place to take them there. Reassess every 6 to 12 months, looking at how new rules and regulations may have affected plans. We only get one crack at retirement. Let’s make it a prosperous one.