Retirement is about more than private pensions
Catherine Alexander
Partner at GDA
Retirement is a critical stage in your life where rather than accumulating assets, you enter a decumulation process where you will usually be living off savings. The Retirement Living Standards research suggests that the gross annual income a couple need to fund a comfortable retirement is £67,474, and so people may struggle to provide a comfortable retirement solely relying on their pension savings.
However, not all retirements are the same, and so it is important to look at all of your assets as a whole and how they work together to provide future income. A range of assets are increasingly used in retirement planning:
State pensions, defined benefits, defined contributions.
Savings, ISAs, Bonds, OEICs, etc.
Property in terms of downsizing, equity release, later life mortgages, buy to let, etc.
Earned income if you continue to carry out some sort of employment in retirement.
Benefits and allowances.
If income is the main objective, tax efficient products such as ISAs can reduce the amount required to provide a given income. Allowances for capital gains tax, dividends and personal savings are also available. If leaving an inheritance is most important to you, then the treatment of pensions, particularly on death before 75, the ability to transfer ISA wealth between spouses and civil partners and the use of business relief qualifying investments on death after two years can all potentially help.
In terms of property, downsizing, moving onto a later life mortgage product or taking out an equity release product, can provide a lump sum or tax-free income. Many people also have BTL properties as part of their retirement planning, however, the tax breaks which made these investments so popular have diluted somewhat over the years.
When it comes to retirement planning, preparation and protection are key.
This article isn’t personal advice. If you’re not sure whether a course of action is right for you, ask for financial advice.
