In the UK, we are faced with the challenge of an ageing population. Many of us will live longer than we might have expected and, because of improvements in healthcare and nutrition, this figure only looks set to rise.
A demographic shift to an older population brings unprecedented change to the way the country would operate, from the healthcare system to the world of work.
In addition, a long life, and subsequently a long retirement, bring challenges of their own from a personal financial planning perspective.
(*) First, it means you have to sustain yourself from your retirement ‘nest egg’ of cash savings, investments and pensions. You need to ensure that you draw from this at a sustainable rate so you don’t run the risk of outliving your money.
(*) Second, there’s the question of funding long term care. If we live longer, the chance that we will one day need to fund some sort of care increases. Of course, there are many different types of care, ranging from full time care to occasional care at home, with a variety of cost levels. But all require some level of personal funding.
Having the income in later life to sustain your target spendable income and perhaps long term care needs, really does require detailed planning. Because of the widespread shift from annuities to drawdown, working out a sustainable rate at which to withdraw from your ‘nest egg’ is essential.
There is no ‘one-size-fits-all’ sustainable rate at which to draw from your pensions and savings. Every person has their own requirements, savings, liabilities and views on what risks are acceptable.
There are some things which you will be able to more accurately plan when working out the sustainable rate to draw from your pension. These include your portfolio asset allocation, the impact of fees and charges and the risk level of your investments. Speaking with your financial planner will help you on your way to working out the right withdrawal rate for you.
There are, however, some unknowns and the things you do know can change. Planning your income requirements in retirement is like chasing a moving target. It requires focus when making your plans, and regular reviews of those plans to check that you remain on target.
And so it is prudent to plan your capital and your income requirements, your rate of withdrawal from your pension pot, leaving plenty of room for those things that may change unexpectedly, and consequently improving your chances of having a financial cushion to cope with what life throws at you. We call it Lifetime Financial Planning …
Remember, we are here to help so please do not hesitate to contact us regarding your financial planning situation. Reviews and our Lifetime Financial Planning Service are all part of our added-value services for our clients.
We have set out above what is only a brief summary of some key points that involve quite complex considerations. Allowances, caps, levels and bases of, and reliefs from, taxation are subject to change and their value to you will depend upon your personal circumstances. Information and data may change after the date of their original promulgation in our Newsletter or this Focus article. Always seek relevant professional advice before taking, or refraining from taking, any action.
Barry Fleming & Partners has grown from a tax advisory background into a broader business that encompasses investment management. Both things matter for wealth management, retention and creation. That expertise makes the company strikingly different from others.
This capability allows Barry Fleming and Partners to use its strength in tax advice to take a 360-degree-view of a financial situation to give much broader, more comprehensive advice.
We bring together up to the minute tax, estate, investment and retirement planning advice to create individual, ‘joined up’ financial strategies. This allows our clients to understand and have confidence in how they can best control, retain, and build their assets and income to achieve their objectives with least risk.
A high level of service is key to our long-term client relationships. We work collaboratively. That means our clients can benefit at all times from having ready access to our team of financial planners.
Barry Fleming & Partners are an independent financial advisor specialising in ISA’s, Pensions, Tax, Trusts, Estate Planning, Inheritance Tax Planning (IHT) and other Financial Planning areas. Please don’t hesitate to call on 01488 608 686 and ask to talk to one of our financial advisors. Alternatively use the contact form on our home page.