Retirement planning: Bringing together your goals and finances

Effective retirement planning often involves weaving together lots of different threads. As you think about your retirement, you might be unsure how to bring everything together, but a bespoke financial plan could put your mind at ease.

Over the last few months, you’ve read about the importance of deciding how you’ll retire, why you should set out your goals, and your options for accessing your pension. Now, read on to discover the challenges of bringing together these different strands of retirement planning and why a tailored financial plan could provide a solution.

The challenges of retirement planning you could face

A common concern among those approaching retirement is whether they have enough money to retire. Even after the milestone, you might worry about running out of money too soon.

Understanding what a sustainable income is for your circumstances can be difficult. After all, you don’t know how long you’ll spend in retirement and you might need to factor in a range of influences outside of your control, such as the effect inflation will have on your expenses.

As a result, you might not be confident in your ability to live the lifestyle you want once you give up work.

Uncertainty could mean you spend too much too soon, which could leave you in a financially vulnerable position in your later years. Alternatively, it might lead to you being more frugal than necessary and missing out on retirement experiences.

There could be other challenges too. Perhaps you’re considering taking a lump sum out of your pension or using assets to fund a one-off expense but you’re unsure about the long-term effect it may have. Or you want to ensure you leave an inheritance behind to support loved ones after you’ve passed away.

While pensions are often the main source of income in retirement, retirees will often have other assets at their disposal too. You might be unsure how you could use your savings, property, or investments to support your retirement goals, but financial planning could help.

A financial plan will bring together your aspirations and finances

When you think about what financial planning involves, your mind might turn towards understanding your assets. However, an effective financial plan starts by understanding what you want to achieve.

At retirement, this might be the lifestyle you want to enjoy for the rest of your life. You may have other priorities too, such as lending support to your family or ensuring your partner is also financially secure.

Once you’ve set out your lifestyle goals, you can start to review your assets and how they might make these objectives achievable.

One of the benefits of working with a financial planner is that they may help you bring together these different goals. So, a retirement plan that’s tailored to you may consider what a sustainable income is, but it might also include:

  • Gifting assets to your loved ones during your lifetime
  • Putting assets aside for your family to inherit when you pass away
  • Financial protection that could provide for your partner if the worst happened
  • A safety net that may give you peace of mind
  • Provisions in case you need care in the future.

Using a tool called “cashflow modelling”, we could help you visualise how to use your wealth to reach your goals.  

By adding details about your assets, cashflow modelling could show how your wealth will change over time depending on the decisions you make. For instance, it could demonstrate how long your pension may last if it was used to provide an annual income of £35,000 or £45,000. Or how using your investments to supplement your income might provide you with greater financial freedom.

Cashflow modelling could also highlight potential risks. You can model different scenarios, including those that are outside of your control, to understand how they might affect your lifestyle and financial security.

For example, could the rising cost of living place pressure on your finances 20 years after you’ve retired? By identifying potential risks at the start of retirement, you may be able to take steps to mitigate them or create a safety net. To manage the effect of inflation on your outgoings, you may plan to increase the income from your pension each year to preserve your spending power.

As a result, working with a financial planner could help you realise your retirement goals and give you financial confidence as you start the next chapter of your life.

Contact us to talk about your retirement plans

If you’re preparing for retirement, whether it’s a milestone you hope to reach this year or it’s a decade away, we could offer you support. Please contact us to talk about your retirement aspirations and how your finances may provide you with security once you give up work.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate cashflow planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

A concerning fifth of families experience financial worries when planning a funeral

You might have considered what you’d like to happen when you pass away as part of your long-term plan. Perhaps you’ve written a will or spoken to your loved ones about your funeral wishes. Yet, you may have overlooked the costs associated with dying, and it could place financial pressure on your family.

Indeed, a worrying report from SunLife found that 20% of families experience “notable financial concerns” when paying for a funeral.

Of those who are worried about money, a third use their savings or investments to cover the costs. However, a quarter have turned to credit cards and 14% borrowed money from a loan provider. Others turned to family or friends for financial support or even sold belongings to pay for a funeral.

Worrying about how they’ll pay for a funeral at an already difficult time could harm the wellbeing of your loved ones. So, while it can be difficult to think about, considering how much your funeral will cost and how to pay for it could take a weight off your family’s mind.

The average cost of dying is nearly £10,000 in 2024

According to the SunLife report, the average cost of dying is £9,658 in 2024 after a 5% increase when compared to a year earlier.

The cost of dying figure is calculated by considering the fees of administering an estate, a basic funeral service, and some extras, such as a wake and flowers. A basic funeral alone costs more than £4,000.

Many people recognise the potential burden the associated costs of a funeral could place on their loved ones. The report found that 7 in 10 people have made some provisions specifically to pay for their funeral. However, only 54% are putting enough aside to cover the total.

It’s not just financial hardship that could affect loved ones you leave behind either. Of family members who experienced notable financial difficulties, three-quarters said it affected their mental health.

Even those in a financially secure position might struggle to arrange a funeral. As well as dealing with grief, they may worry about making the “right” decisions and ensuring the service aligns with your wishes.

So, taking steps to set aside money for your funeral and write your wishes could ease the burden your loved ones feel. Here are four steps you may want to consider taking.

1. Plan your own funeral with a pre-paid option

Funeral directors may offer a way to plan and pay for your funeral during your lifetime. As well as handling the financial side of the funeral, a pre-paid funeral plan could mean you’re in control and that your family won’t need to make decisions.

The SunLife report found that 37% of people who made provisions for their funeral used a pre-paid funeral plan. However, you should note that pre-paid plans often won’t cover all the associated expenses. For example, the cost of a burial plot or headstone may be excluded. Make sure you understand what’s covered before you proceed.

2. Take out life insurance that will pay your family a lump sum

A life insurance policy would pay out a lump sum to a beneficiary when you pass away. This could be a useful way to ensure your loved ones have enough to cover the cost of a funeral.

The SunLife report found that a fifth of funerals that are paid for using provisions set aside by the deceased are done so through a life insurance payout.

You’ll need to pay premiums to maintain the cover. The cost of life insurance premiums will depend on a range of factors, including your age and health. If you don’t pay the premiums, the cover will lapse. It’s worth considering your life expectancy and how premiums may add up during your lifetime.

If your estate could be liable for Inheritance Tax (IHT), you may want to place a life insurance policy in trust. Otherwise, the payout could be considered part of your estate when calculating IHT.

Similarly, a further 23% of funeral provisions used an over-50s life insurance plan. You will usually need to be aged between 50 and 80 to take out an over-50s plan, which would pay out a lump sum to your family when you pass away. Again, you’d need to pay regular premiums to maintain the cover. However, unlike life insurance, you don’t usually need to answer medical questions.

3. Earmark assets to pay for your funeral

You could set aside assets for your family to use to cover funeral costs. As funerals typically happen within weeks of death, earmarking assets that are easy to access, such as cash savings, could be useful.

Funeral expenses can usually be paid from your estate after you pass away. For some expenses, it may be possible for a bank to release money directly to a funeral director if your loved ones provide them with a copy of the death certificate and funeral bill.

However, in some cases, your loved ones would have to wait until the probate process has been completed for the funds to become available. For complex estates, probate could take up to 12 months, so your family may still need to cover the expenses in the short term.

4. List your funeral wishes in your will

It’s not just bills that can make planning a funeral stressful. Your loved ones might also be unsure about your wishes and worry they’re not doing your memory justice.

You can use your will to set out your funeral wishes. For instance, you might state whether you’d prefer a burial or cremation, or list songs that you’d like played during the service. This wouldn’t be legally binding, but it could provide useful guidance to your loved ones.

Contact us to talk about your estate plan

A funeral plan is just one part of an effective estate plan. Depending on your circumstances, you might also want to consider how you’d like to distribute assets, minimise a potential Inheritance Tax bill, or pass on gifts during your lifetime.

Please contact us to talk about how we could offer guidance when you’re creating an estate plan. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

The Financial Conduct Authority does not regulate Inheritance Tax planning.

Have you overlooked speaking to your beneficiaries as part of your estate plan?

You may already have your estate in order and have written your will accordingly, but have you overlooked the value of speaking to your beneficiaries?

A new report by PIMFA suggests that 58% of people in the UK have never discussed inheritance with their family members.

Not doing so could mean that your beneficiaries may be unprepared for receiving an inheritance, or they perhaps expect to inherit a substantially different amount than you intend. It may also mean that far more of your estate may be liable for Inheritance Tax (IHT).

The research also revealed differing generational attitudes towards talking about finances. 49% of Generation X and 63% of baby boomers said they never talk about their finances with friends. Conversely, more than 80% of millennials and Generation Z said they do so at least once a year.

So, what are the benefits of speaking to your beneficiaries?

Understanding your beneficiaries’ goals

Your beneficiaries may have goals and ambitions that they have not yet shared with you or other family members. Speaking with them about your estate plan could allow you to make adjustments that better suit their goals.

Perhaps one of your beneficiaries has dreams of starting their own business, in which case you could consider investing in their business now rather than leaving them a lump sum later? Or maybe a beneficiary wants to send their children to a particular school or university and would rather the money be kept in a fund for when the children are old enough?

Your beneficiaries may also want to use their inheritance to boost their own pension fund or buy a property.

In each case, you may find that there are better ways to use your wealth and align your beneficiaries’ goals with your estate, provided you are given ample time to plan for it.

Reducing potential Inheritance Tax liabilities

In the 2023/24 tax year, individuals can usually pass up to £325,000 on their death without IHT being due. The threshold can increase by £175,000 if a direct descendant inherits your main residence. With married couples or those in a civil partnership able to transfer any unused allowance, you could leave up to £1 million before IHT is due.

If your estate is valued above the nil-rate bands, your beneficiaries could be liable to pay IHT on everything they inherit above that figure.

If you make gifts to your beneficiaries at least seven years before your passing, they may not have to pay IHT on the value of these gifts. This is known as a “potentially exempt transfer”.

So, talking to your beneficiaries about transferring wealth intergenerationally may mean you can make gifts sooner. You’re much more likely to survive for seven years after making a gift at the age of 50 than at the age of 90.

Clarifying expectations

Speaking to your beneficiaries about their potential inheritance also gives you a chance to ensure they are clear about what to expect. It can remove any shock or surprise when your loved ones receive less or more than they anticipated.

For example, if you have chosen to leave some of your estate to charity or a friend, you may want to inform your family about it before they read your will. It might also smooth over any potential misunderstandings as you can explain the decisions you have made.

Ensuring your beneficiaries are prepared

Talking openly with your beneficiaries about your estate plans may provide them with peace of mind that they’ll be in a good position to manage an inheritance.

In preparation, they may want to open new accounts, begin exploring different investment options, or start looking for properties within their budget.

Encouraging them to seek sound financial advice

Speaking to your beneficiaries is a good opportunity to encourage them to seek ongoing financial advice that may improve their long-term security.

It might be useful to ask them to consider using financial advisers you have already spoken to and who you trust. It can even be useful for the whole family to work with the same firm or adviser so they can align their interests and ensure the tax-efficient transfer of wealth.

Speaking to your beneficiaries can be an important part of planning your estate, though many families overlook the benefits. Get in touch to find out how we can help you and your family.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.

Here’s what you need to know about the “Magnificent Seven” stocks that are driving the market

The Magnificent Seven might conjure up images of the 1960s Western film or its 2016 remake, but there’s a new group in town – seven technology companies that outgained the market in 2023. Read on to find out more about these companies and the effect they’re having.

The S&P 500 is an index that tracks the stock performance of 500 of the largest companies listed on stock exchanges in the US. It’s widely regarded as a gauge for measuring the performance of large-cap US equities as it covers around 80% of the total market capitalisation of US public companies.

In January, the S&P 500 reached a new high. However, far from indicating a strong performance across the index, just a handful of companies, dubbed the “Magnificent Seven”, were largely responsible.

The 7 technology companies that are boosting the S&P 500

The Magnificent Seven has a huge market value. In fact, the seven stocks are the same size as the entire stock markets in the UK, Canada, and Japan combined. Analysis from Deutsche Bank also found the combined profits of the companies exceeded almost every G20 country in 2023.

The Magnificent Seven are all technology stocks and include:

  • Alphabet, the parent company of Google
  • Amazon
  • Apple
  • Meta, the parent company of Facebook
  • Microsoft
  • Nvidia
  • Tesla

Individually, the stocks of these companies soared between 50% and 240% in 2023. As a leader in AI, Nvidia saw the biggest gains and it may continue. In less than a year, the chipmaker doubled its market cap to reach $2 trillion (£1.58 trillion) at the start of 2024.

The Magnificent Seven could mask wider market trends

An index rising is usually viewed positively and as a sign that the market is performing well. However, the size of the Magnificent Seven could mask wider trends.

The S&P 500 is weighted by market capitalisation, so the movements of the largest companies affect the overall performance of the index more than smaller businesses. As a result, the stellar performances of the Magnificent Seven had an even larger impact on the index than you might expect.

According to the New York Times, the gains of the Magnificent Seven in the 12 months to January 2024 account for more than 60% of the return in the S&P 500. Indeed, after Tesla’s value increased by more than 64%, it led to an almost 3% rise in the S&P 500.

The impact the Magnificent Seven have on the index might lead you to think they were the best-performing companies. Yet, this isn’t the case. For example, Royal Caribbean experienced a rise of 212% in the last year. However, as the cruise line is a smaller company, it holds less weight in the index.

The weighting could mean that even if most companies included in the index experience a fall, a strong performance from the Magnificent Seven could lead to the S&P 500 rising. As a result, if investors only viewed the headline data, they could form a very different picture of how the market is performing than it is in reality. 

The effect of the Magnificent Seven could work the other way too. If they suffered a fall in value, it would have a much larger impact on the S&P 500 than if a smaller business experienced a dip.

2 important takeaways investors may want to keep in mind

1. Look beyond the headline data

The overall performance of the S&P 500 would suggest the market is strong thanks to the Magnificent Seven. Yet, once you look at the performance of the remaining 493 companies, it’s still positive but more subdued.

Headline data without context can be misleading. So, if you’re making investment decisions, it’s often wise to dig a little deeper.

2. Don’t make investment decisions based on hype

With the Magnificent Seven featuring in headlines around the world, you might be tempted to invest in them. However, one year of strong growth doesn’t automatically mean an investment is right for you. It’s important to consider whether it suits your profile and goals, and how it might fit into your wider portfolio.

Contact us to talk about your investment portfolio

If you want to review your investment portfolio, please contact us. We could help you identify investment opportunities that are right for your goals and risk profile. Please get in touch to speak to one of our team.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

More than 1 million investors are expected to pay Dividend Tax for the first time in 2024/25

More than 1 million investors will be hit with a Dividend Tax bill for the first time in the 2024/25 tax year, according to an AJ Bell report. Read on to find out if you could be affected and discover some of the steps you could take to mitigate a tax charge.

A dividend is a way of distributing a company’s earnings to shareholders. Usually, dividends are issued quarterly, but some businesses may pay dividends monthly or annually. So, if your money is invested in a dividend-paying company or fund, you could receive regular cash payments from them.

Dividends from investments are not guaranteed. Companies may reduce or cut dividends if profits fall or the business faces risks.

Some business owners also choose to use dividends as a tax-efficient way to extract money from the company. 

Dividends may play an important role in your financial plan and could supplement income from other sources. However, changes to the Dividend Allowance could mean your tax bill is higher than expected.

The Dividend Allowance will fall to £500 on 6 April 2024

In the 2022/23 tax year, you could receive up to £2,000 in dividends before Dividend Tax was due.

The Dividend Allowance fell to £1,000 for the 2023/24 tax year. The AJ Bell report suggests this meant an extra 635,000 people paid Dividend Tax. The Dividend Allowance will halve again on 6 April 2024 to just £500 – a move that is forecast to drag a further 1.15 million investors into the tax net for the first time.

The amount of tax you pay on dividends that exceed the Dividend Allowance will depend on which Income Tax band(s) the dividend falls within once your other income is considered. For the 2023/24 tax year, the tax rates on dividends are:

  • Basic-rate: 8.75%
  • Higher-rate: 33.75%
  • Additional-rate: 39.35%.

So, even though the Dividend Allowance is less generous than it once was, the tax rate you pay could still be lower than Income Tax.

5 practical ways you could lower your Dividend Tax bill

1. Review your total income

Managing the income you receive from other sources could help you avoid a Dividend Tax bill or reduce the rate of tax you pay.

If dividends fall within your Personal Allowance, which is £12,570 in 2023/24 and 2024/25, they will not be liable for tax. Similarly, ensuring your total income doesn’t push you into the higher- or additional-rate tax bracket could mean you benefit from a lower tax rate.

2. Plan as a couple to use both of your Dividend Allowances

If you’re planning with your spouse or civil partner, it’s important to note that the Dividend Allowance is per individual.

As a result, passing on some dividend-paying assets to your partner could mean you’re able to utilise both of your Dividend Allowances and collectively receive £1,000 in 2024/25 before tax is due.

3. Hold dividend-paying assets in an ISA

An ISA is a tax-efficient wrapper for your savings and investments.

Dividends that you receive from investments that are in an ISA will not be liable for Dividend Tax and won’t impact your Dividend Allowance. In addition, the profits you make when selling investments in your ISA are free from Capital Gains Tax (CGT).

In the 2023/24 tax year, you can add up to £20,000 to ISAs.

4. Use your pension to invest for your retirement

If you’re investing for your retirement, pensions may provide you with a tax-efficient way to invest. Investments held in a pension are not liable for Dividend Tax or CGT. In addition, you’ll receive tax relief on your pension contributions.

Remember, you cannot usually access your pension before the age of 55, rising to 57 in 2028. As a result, it’s important to consider your investing goals and time frame, as a pension may not be appropriate for you. 

In 2023/24, you can usually add up to £60,000 to your pension (or 100% of your earnings, if lower) without incurring an additional tax charge. If you’ve already accessed your pension flexibly or are a high earner, your pension Annual Allowance may be lower.

5. Assess alternative ways to boost your income

Dividends are a popular way to boost your income, but there are other options you might want to explore too.

For example, payouts from bonds may be classed as interest and could supplement your income. Interest may be liable for Income Tax, but the Personal Savings Allowance (PSA), the amount of interest you can earn in a tax year before tax may be due, could mean it’s a useful option for you.

Your PSA depends on the rate of Income Tax you pay. In 2023/24, the PSA is:

  • £1,000 for basic-rate taxpayers
  • £500 for higher-rate taxpayers
  • £0 for additional-rate taxpayers.

Another option is to invest in non-dividend paying stocks or funds with the long-term goal of selling the assets for profit. The money you make selling investments held outside of a tax-efficient wrapper may be liable for CGT. However, the rate you pay could be lower than Dividend Tax and the Annual Exempt Amount could help you avoid a bill.

In 2023/24, the Annual Exempt Amount means you can make up to £6,000 profit before CGT is due. This allowance will halve to £3,000 in the 2024/25 tax year.

If CGT is due, the rate you pay will depend on which tax band(s) the taxable gains fall into when added to your other income. In 2023/24:

  • If you’re a higher- or additional-rate taxpayer your CGT rate would be 20% (28% on gains from residential property)
  • If you’re a basic-rate taxpayer, you may benefit from a lower CGT rate of 10% (18% on gains from residential property) if the taxable amount falls within the basic-rate Income Tax band.

Keep in mind that investment returns cannot be guaranteed. The value of investments can fall as well as rise.

Contact us to talk about your tax strategy for 2024/25

Using tax allowances and being aware of different options could reduce your overall tax liability. Please contact us to discuss your tax strategy for the 2024/25 tax year and beyond.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

Are you risking a pension shortfall by overlooking longevity?

A survey suggests that some retirees could risk running out of money during their lifetime because they haven’t considered how long their assets need to last. Failing to factor longevity into your retirement plan could mean your later years don’t live up to expectations or you may face financial insecurity.

The report published in IFA Magazine found a worrying 68% of Brits have not thought about how many years of retirement they need to fund.

It’s an oversight that could mean you don’t put enough away for retirement during your working life and may not spot the potential gap until it’s too late. Or that you unintentionally withdraw too much from your pension during the start of your retirement.

The average person could spend two decades in retirement

The survey found that most people expect to retire between the ages of 65 and 69. Data from the Office for National Statistics (ONS) suggests the average person could spend at least two decades in retirement.

A 65-year-old man has an average life expectancy of 85. For women of the same age, it’s 87. As life expectancy has increased, younger generations are likely to spend even longer in retirement if they plan to stop working in their late 60s.

However, creating a retirement plan based on the average life expectancy could still leave you facing a significant shortfall.

A quarter of 65-year-old men are expected to celebrate their 92nd birthday, and 1 in 10 will reach 96. If they only planned for a 20-year retirement, they could find they don’t have enough money to maintain their lifestyle in their later years.

Similarly, a quarter of 65-year-old women are expected to live to 94, and 1 in 10 could reach 98.

Retirees today often need to consider how they’d cope financially if they live to become centenarians to create long-term financial security and peace of mind. With retirements that span decades becoming the norm, it’s more important than ever that those nearing the milestone consider longevity.

A retirement plan could help you create a sustainable income

Understanding what income you can take sustainably from your pension or other assets in retirement can be difficult. After all, you don’t know exactly how long you need to create an income for.

Another key challenge is that your income needs might not stay the same throughout retirement.

Indeed, inflation alone is likely to affect your outgoings even if your lifestyle remains the same. Even when inflation is stable, the rising cost of living may compound. The Bank of England’s inflation calculator shows how your income would need to grow to maintain your lifestyle.

Between 2003 and 2023, inflation averaged 2.8% a year. That might seem relatively small, but it can have a huge effect on your essential and discretionary spending. If you retired in 2003 with an income of £30,000, to simply maintain your spending power, it would need to have grown to more than £52,000 a year in 2023.

 There are other reasons why you might want to adjust your income in retirement too, such as:

  • Changing your lifestyle
  • Paying for care
  • Financially supporting loved ones.

Working with a financial planner to create a retirement plan that’s tailored to you is a step that could ensure you’re financially secure throughout retirement and offer peace of mind.

We’ll be able to work with you to explore the different options and assess which ones are appropriate for you. For instance, if you’re worried about running out of money and would prefer a reliable income, we may offer advice about annuities, which could provide a guaranteed income for the rest of your life. Or if you want to take a flexible income that you can adjust to suit your needs, we can work with you to understand how you might manage risks.

A retirement plan may also address concerns you might have, such as how your partner would cope financially if you passed away or what would happen if your investment portfolio experienced volatility. 

Contact us to discuss how you could create financial security in retirement

The thought of running out of money in your later years could make planning your retirement seem like a daunting prospect. Luckily, we’re here to offer you guidance as you near the milestone and then settle into your new life.

As part of your retirement plan, we’ll help you consider how to create long-term financial security using your pension and other assets, as well as other areas, from how you could improve your tax efficiency to setting out your wishes in a will.

Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

Retirement planning: The 3 main ways you could access your pension

When you give up work, your pension is likely to play a key role in creating an income. So, an essential part of retirement planning is often deciding how you’ll access your retirement savings.

Last month, you read about the importance of setting out your retirement lifestyle goals and how financial planning could help. Your income will play a key role in whether you can turn many of them into a reality. So, read on to discover what your options are when you want to withdraw money from your pension.

If you have a defined contribution (DC) pension, you’ll retire with a pot of money that you can access in several ways.

While the freedom to decide how and when to withdraw money from your pension could help you create an income that suits your needs, it also means you need to understand your options. You’ll be responsible for ensuring your pension creates financial security for the rest of your life.

Your pension options explained

1. Taking a lump sum

You can withdraw lump sums from your pension as and when you choose to. 

This could be a good option if you have one-off expenses. For instance, if you’re taking on a home renovation project or want to lend financial support to a loved one.

However, you should keep in mind that pension withdrawals may be liable for Income Tax. While you can take up to 25% of your pension as a tax-free lump sum, withdrawals above this amount may be added to your income. As a result, taking a large lump sum could unexpectedly push you into a higher tax band.

2. Using flexi-access drawdown

Flexi-access drawdown allows you to take a regular income from your pension that you’re in control of. You could increase or decrease the income to suit your needs.

To ensure you don’t run out of money in your later years, you might want to consider factors like life expectancy or how inflation could affect your income needs over the long term. If you take too much from your pension, there’s a risk you could run out in the future. So, thinking about how you could create long-term financial security may be important.

3. Purchasing an annuity

You could also use the money held in your pension to purchase an annuity, which would then provide you with a regular income. Retirees often choose an annuity that will pay an income for the rest of their life, but you could also select an annuity that lasts for a defined number of years.

An annuity can be valuable if you’re worried about running out of money or don’t want the responsibility of managing your pension. However, it’s less flexible than other options.

Mixing your 3 pension options

You don’t have to choose a single way to access your pension – you can mix the options.

So, you could take a lump sum from your pension to kickstart your retirement plans. Then you might use a portion of the remaining amount to purchase an annuity to create a reliable income you’ll receive for the rest of your life. The rest of the money you could access flexibly using flexi-access drawdown.  

Leaving your money in a pension could make financial sense

In most cases, you can access your pension when you’re 55, rising to 57 in 2028. However, you don’t have to make withdrawals at any point during your retirement if you don’t want to.

In fact, leaving money that you don’t need in your pension could make financial sense.

A pension is a tax-efficient way to invest. So, leaving your money in your pension to be invested in a way that’s appropriate for you could help it grow further.

Money that’s held in your pension could also be passed on to your loved ones when you die. Usually, pension savings aren’t considered part of your estate for Inheritance Tax (IHT) purposes. Instead, beneficiaries may pay Income Tax on the money, which could be a lower rate depending on their other sources of income. So, holding money in your pension may form part of your long-term estate plan.

You should note that pensions aren’t usually covered by your will. You will need to complete an expression of wishes with your pension provider to state who you’d like to receive your pension if you pass away.

Contact us to talk about your retirement plan

If you have any questions about how to access your pension or other aspects of your retirement plan, please get in touch. As financial planners, we could work with you to create a plan that’s tailored to your goals and assets.

Next month, read our blog to discover how financial planning could help you bring together the different strands of retirement planning so you can enjoy the next chapter of your life.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

Investment market update: January 2024

While a new year started, many of the key factors affecting economies and markets in January were the same as those in 2023, namely high levels of inflation and recession fears.

The World Bank warned the global economy is set to slow for a third successive year in 2024 and is on course for the weakest half-decade of growth since the early 1990s. It added there was a risk that the 2020s would be a “wasted” decade following a series of setbacks, including the pandemic.

Tensions in the Red Sea are also affecting businesses and economies around the world. The German Economic Institute said global trade fell by 1.3% in December as a result of attacks on merchant ships. The volume of container transport in the Red Sea fell by more than half at the end of 2023 and could have implications for many businesses relying on goods.

Read on to find out what else affected markets at the start of 2024.


There was positive news when the Office for National Statistics (ONS) released the latest GDP figures at the start of the year. November posted growth of 0.3%, after a contraction in October. However, experts warned the UK was still at risk of a technical recession – defined as two consecutive quarters of negative growth.

Yet, EY Item Club said it expects UK economic growth to rebound in late 2024 as both inflation and interest rates are predicted to fall.

Data indicates that inflation in the UK is stabilising, but it’s still above the Bank of England’s (BoE) 2% target. In the 12 months to December, inflation was 4%, a slight increase on the 3.9% recorded in the previous month.

Higher interest rates to tackle inflation have been placing pressure on both households and businesses, but they’ve also presented an opportunity for investors with government bonds becoming more attractive. The sale of £2.25 billion of 20-year bonds attracted bids for 3.62 times the volume on offer.

Chancellor Jeremy Hunt is preparing to deliver the Budget on 6 March 2024. According to reports, government borrowing halved year-on-year in December, which has reportedly given Hunt the scope to make around £20 billion worth of tax cuts if he chooses. With a general election looming, it could be an opportunity to ease the tax burden.

Businesses as well as households may look to the budget to ease some of the pressure they’re facing.

Insolvency experts at Begbies Traynor warned that more than 47,000 UK businesses are on the “brink of collapse” as the number of firms in “critical” financial distress increased by 25% in the final three months of 2023 when compared to the previous quarter.

Some other businesses plan to make cuts in the coming months too. One such firm is Tata Steel, which announced plans to cut up to 2,800 jobs by the end of the year. The news was met with strong words from union Unite, which pledged to use “everything in its armoury” to defend steel workers.

Some businesses are posting positive news though. Retailer Next saw a 10% jump in sales in the two weeks before Christmas, which led to its shares hitting an all-time high of more than £85.30 at the start of January.


As the European Central Bank (ECB) predicted, inflation across the eurozone increased in January. In the 12 months to December 2023, the rate of inflation was 2.9%, official statistics show. The ECB said it expects inflation to remain between 2.5% and 3% throughout 2024.

ECB vice president Luis de Guindos went on to warn that the eurozone may have already fallen into a technical recession and prospects remain weak.

Data from Germany’s national statistics office, Destatis, paints a pessimistic outlook. The country is on track for its first two-year recession since the early 2000s as the economy shrank by 0.3% in 2023. The decline was linked to higher energy costs and weaker industrial demand.

Low demand looks set to plague the eurozone’s largest economy into 2024 too. In November, industrial output was weaker than expected and fell by 0.7% month-on-month.

While many economies have battled double-digit inflation over the last couple of years, in many cases, they’ve now started to fall. One outlier is Turkey, which saw an inflation rate of almost 65% in the year to December 2023.

The huge rise is partly attributed to an almost 50% increase in the nation’s minimum wage. Demand from tourists is also having an effect. For example, hotel prices jumped 93% year-on-year.


US inflation also increased in the 12 months to December 2023 to 3.4%, compared to 3.1% recorded a month earlier. The rise was linked to higher housing and energy costs.

Similar to economies in Europe, some sectors in the US are struggling due to weak demand. The Institute for Supply Management found that US factories contracted in December for the 14th consecutive month. Yet, job data indicates that businesses are feeling optimistic, as they added 216,000 new jobs at the end of 2023.

On 22 January, the US stock market reached a record high. The S&P 500 index, which tracks the 500 largest companies listed on stock exchanges in the US, increased by 0.5% as technology stocks rallied.

US company Microsoft also started the year strong when it overtook Apple to become the world’s  most valuable company on 11 January. The firm’s share price increased by 1.5% to boost its market valuation to $2,888 trillion (£2,272 trillion).

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

A Lasting Power of Attorney could offer protection at every life stage

Naming a Lasting Power of Attorney (LPA) is often associated with the elderly. But it could provide vital protection and peace of mind at every life stage.

An LPA gives someone you trust the ability to make decisions on your behalf if you’re unable to do so. When you think about the scenarios that might happen, it may be something you think you don’t need until your later years. However, ill health and accidents can occur at any stage of your life.

Without an LPA in place, it can be difficult for loved ones to act on your behalf. So, whether you’re in your 20s or 80s, naming an attorney could be a valuable way to create protection should something happen.

Your next of kin cannot automatically make decisions on your behalf

It’s a common misconception that your next of kin would be able to make decisions for you if you cannot. However, no one has the automatic right to do so, including your spouse or civil partner.

Without an LPA there may be no one to make health decisions if you’re ill or manage your financial affairs if you cannot.

Overlooking an LPA could also lead to complications if you have joint assets. For example, joint bank accounts could be frozen until your partner gains control through the courts.

If you haven’t completed an LPA, your loved ones would have to apply to the Court of Protection for a Deputyship Order. This process can be time-consuming and more costly than naming an attorney. In addition, the Court of Protection might name someone to act on your behalf that you would not choose.

A Lasting Power of Attorney can be used to cover health and financial affairs

There are two different types of LPA. Ideally, you should have both types in place – you can choose the same person or people to act on your behalf in both cases.

A health and welfare LPA will give someone you trust the ability to make decisions related to your daily routine, medical treatment, or moving into a care home. A property and financial affairs LPA will cover areas like managing your bank account or other assets, and selling your home.

An LPA is often associated with long-term illness in old age. However, they could be used to give someone the ability to make decisions for you temporarily. For example, if you were involved in an accident, your attorney might handle your affairs while you receive treatment until you’ve recovered enough to take back responsibility.

You can name more than one attorney and specify whether they must make decisions together or if they can do so separately.

Deciding who to name as your attorney may be an important decision – who do you trust to act in your best interests, and would they be willing to take on the role of attorney?

Having a conversation with your loved ones about what being an attorney would involve and your wishes could be valuable. It may give you peace of mind and provide some guidance to your attorney should you ever lose mental capacity.

If family or friends cannot fulfil the role of attorney, you could choose a professional attorney, such as a solicitor.

You cannot register an LPA if you’ve already lost mental capacity. So, if it’s a task you’ve been putting off, you may want to make it a priority.

You must register a Lasting Power of Attorney with the Office of Public Guardian

You can download the necessary forms, along with an information pack, from the Office of Public Guardian, or use the online service to start the process of naming an LPA.

Read the forms carefully. A mistake could mean your LPA is rejected and you’ll need to pay a fee to reapply.

You’ll need to sign the forms, along with your attorney, and a “certificate provider” (this is someone who confirms you understand what you’re signing and haven’t been placed under pressure to do so). Your certificate provider must be someone you’ve known well for at least two years or a professional person, like a solicitor or doctor. Some people cannot be your certificate provider, including your partner or family members.

Once you’ve completed the forms, you must register the LPA with the Office of Public Guardian, and the process can take several weeks.

Most people will need to pay a fee of £82 for registering one LPA. So, if you need to register both a financial and health LPA, the cost will be £164.

While you don’t need to engage the services of a solicitor to register an LPA, it could prevent delays and issues, particularly if your affairs are complex.

Setting up a Lasting Power of Attorney is just one way to improve your security

An LPA could protect you if you ever become too ill or injured to make decisions for yourself, but it’s just one step you can take to create security in case the unexpected happens. Depending on your life and concerns, you might want to consider taking out income protection, creating a care fund, or building a financial safety net.

A tailored financial plan could help you assess which steps could provide you with peace of mind. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

How to protect financial gifts to your children from relationship breakdowns

As younger generations face challenges reaching milestones as the cost of living soars, you might be thinking about gifting assets to improve their finances. If your beneficiary is in a relationship, you may want to consider what would happen if they split up with their partner.

A well-timed gift could have a hugely positive effect on the long-term financial security of your loved ones.

In recent years, more people are considering gifts rather than leaving all their assets as an inheritance. There are many reasons for doing so, from reducing a potential Inheritance Tax bill to helping your child get on the property ladder.

Indeed, the Great British Retirement Survey 2023 found that a tenth of Brits aged 40 and over said they’d given what they consider to be a living inheritance in the last three years. A further 16% expect to gift money during the next three years.

Whatever your reason for passing on wealth, you likely want to ensure the assets remain within your family if a relationship breaks down. There may be steps you could take to protect the gift if there is a dispute.

Loans and gifts are treated differently in family courts

First, it’s important to understand how your gift could be treated if your beneficiary divorced. The family courts define gifts and loans differently, which could affect how assets are distributed.

Gifts, where there is no expectation that you will be repaid, are usually treated as joint assets and could be divided between both parties. As a result, it could mean the gift, or a portion of it, goes to your beneficiary’s ex-partner.

A loan may be treated differently as there is an expectation that it’ll be repaid in the future. However, that doesn’t mean it’ll stay within your family. The court is likely to consider needs. For example, if you loaned your child a deposit to buy a home and they have children that will remain with their ex-partner, the court may still award the property as housing for dependent children will often take priority.

If you’ll be giving a loan to your child, it’s often a good idea to use a solicitor to make the agreement formal, rather than relying on a verbal agreement. This could protect you and be useful in the event of a relationship breakdown.

It’s not only gifts to married family members that could be affected by a relationship breakdown either. A gift to an unmarried child to act as a property deposit if they’ll be buying with a partner could also be complicated if they break up.

4 potential options to consider if you’re passing on assets to your family

1. Ask your beneficiary to consider a pre- and post-nuptial agreement

If your beneficiary is married, or planning to get married, a pre- or post-nuptial agreement could be useful. These agreements aim to make it clear what happens to assets if the couple separates.

It’s important to note that pre- or post-nuptial agreements are not automatically enforceable in the UK. However, courts should consider the arrangements, so it can be an influential document.

2. Use a declaration of trust if the gift is being used to purchase a property

When one partner is contributing more when buying a property, a declaration of trust could provide security.

The declaration of trust will make it clear how much each party is to receive if the relationship fails. For example, if you gifted your child a deposit to purchase their home, they could use the declaration of trust to ensure they’d receive a larger portion of the sale proceeds if the house is sold to reflect this.

It’s also possible to use a deed of trust to name yourself as a “tenant in common” and entitled to a share of the property.

3. Attach conditions to the gift

As mentioned above, gifts and loans are treated differently in the courts. So, attaching conditions to a gift may be useful. For instance, you may say the money is a gift but in the event of separation, it will be repaid by one or both parties.

This should be recorded in writing and it may be useful to engage the services of a solicitor.

4. Use a trust to pass on assets

Trusts may be used as a way to protect assets and ensure they stay in the family. Assets held in a trust are managed by a trustee on behalf of the beneficiary rather than simply handing over assets. In some cases, a trust could ensure assets remain with your family.

However, it’s a common misconception that a trust cannot be taken into account when assessing how to divide assets. The court might consider when the trust was set up and its purpose when assessing the couple’s assets.

You might benefit from taking both financial and legal advice if you think a trust could be the right option for you. Doing so could help you to understand the complexities and how they relate to your situation.

It may be impossible to take assets out of a trust once they’ve been transferred. So, it’s important to make sure this is the right decision for you.

Get in touch to talk about passing on assets to your loved ones

If you’re considering passing on assets to loved ones during your lifetime, we can help.

Not only could we assess your options to ensure assets stay within your family, but we could also help calculate the short- and long-term impact passing on wealth now could have on your finances to provide peace of mind.

Please get in touch to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate trusts or estate planning.