Retirement Planning Advice

How Retirement Planning Can Help

Many people accumulate pensions through several employers without having a clear view of the income those arrangements may provide. Others approach retirement with substantial assets but are uncertain about when to access them or how much can be withdrawn sustainably.

A structured retirement plan can help you:

• Bring together details of your pensions and other assets
• Estimate your likely expenditure in retirement
• Understand the income your current arrangements may provide
• Consider whether existing pension contributions remain appropriate
• Examine the effect of retiring earlier or later
• Understand different pension and retirement-income options
• Consider investment risk and the potential effect of inflation
• Plan how income may need to change during retirement
• Identify matters that may require further action

The purpose is not to predict the future with certainty. It is to make reasonable assumptions, understand the available choices and establish a plan that can be reviewed as circumstances change.

When Should You Start Planning for Retirement?

Retirement planning can be useful at any stage. Starting earlier generally provides more time to adjust pension contributions, investment arrangements and the intended retirement date if a potential shortfall is identified.

As retirement approaches, the focus normally shifts from building pension savings to deciding how those savings may provide an income. The investment approach that was suitable while accumulating a pension may need to be reconsidered when regular withdrawals are due to begin.

Advice may be particularly valuable when:

• You do not know what pensions you hold or what they may provide
• You are considering increasing or changing pension contributions
• You would like to understand when retirement may be affordable
• You are thinking about reducing your working hours
• You are approaching the point at which pension benefits can be accessed
• You are considering pension drawdown, an annuity or a lump-sum withdrawal
• You have received several retirement quotations and are unsure how to compare them
• Your circumstances or retirement priorities have changed

How Much Income Will You Need in Retirement?

There is no single income figure that will be suitable for every retirement. The amount required will depend on housing costs, household expenditure, lifestyle, health, family responsibilities and the activities you hope to pursue.

A retirement budget should distinguish between essential expenditure and discretionary spending. It may include:

• Mortgage, rent and household costs
• Food, transport and regular bills
• Insurance and property maintenance
• Travel, hobbies and leisure
• Financial support for family members
• Healthcare and care-related costs
• One-off purchases and unexpected expenditure

Spending may not remain constant throughout retirement. Some clients expect higher discretionary expenditure during the earlier years, while later life may bring different healthcare, housing or support needs.

Inflation must also be considered. An income that appears sufficient at retirement may buy less over time if it does not increase.

Understanding Your Retirement Income Sources

Retirement income may come from several sources rather than one pension. Building a clear picture involves identifying what is available, when it can be accessed and whether the income is guaranteed or dependent on investment performance.

Potential income sources may include:

• The State Pension
• Defined benefit or final salary pensions
• Workplace and personal defined contribution pensions
• Individual Savings Accounts and other investments
• Cash savings
• Property or rental income
• Part-time employment or consultancy income
• Business interests and other assets

Each source may have different tax, investment and access considerations. We examine how they could be coordinated to support your expected expenditure and longer-term objectives.

Reviewing Your Existing Pensions

A pension review begins by establishing what arrangements you hold and what benefits they provide. This may include pensions from current and previous employers as well as personal pension plans.

Depending on the type of pension, we may examine:

• Current values and projected retirement benefits
• Employer and personal contributions
• Investment funds and associated risks
• Product, fund and advice charges
• Available retirement-income options
• Guaranteed annuity rates or other safeguarded benefits
• Protected pension ages or tax-free cash entitlements
• Death benefits and beneficiary nominations
• Transfer restrictions or penalties

A review does not automatically mean that a pension should be transferred or consolidated. Existing pensions can contain valuable benefits or guarantees that would be lost following a transfer.

Further information is available on our company and private pension advice page.

Understanding Your Retirement Income Options

The options available will depend on the type of pension you hold. Defined contribution pensions can generally provide greater flexibility, while defined benefit pensions usually provide an income calculated under the rules of the scheme.

Pension Drawdown

Pension drawdown allows eligible pension savings to remain invested while income or lump sums are withdrawn. This can provide flexibility over the timing and amount of withdrawals.

The value remains exposed to investment risk. Taking excessive withdrawals, experiencing poor returns or living longer than anticipated can increase the risk of the fund becoming insufficient.

Annuities

An annuity converts part or all of a pension fund into an income. Depending on the options selected, that income may be payable for life, increase over time or continue to a spouse or dependant after death.

Annuity decisions can be difficult or impossible to reverse once established. Health, lifestyle, inflation protection and dependant benefits should be considered before proceeding.

Pension Lump Sums

It may be possible to take some or all of a defined contribution pension as one or more lump sums. Withdrawals can create an Income Tax liability and reduce the funds available to provide future retirement income.

Accessing pension benefits can also affect the tax-relieved contributions that may be made in the future. The implications should be understood before a withdrawal is requested.

Combining Different Options

It is not always necessary to use one option for an entire pension fund. Some clients may combine guaranteed and flexible income, or use different arrangements at different stages of retirement.

The appropriate approach depends on required expenditure, other income, health, dependants, investment risk and the importance placed on flexibility or certainty.

Tax and Retirement Income

Pension withdrawals can affect the amount of tax paid in a particular year. The tax treatment will depend on how benefits are taken, other taxable income and the pension allowances available at the time.

Taking a large withdrawal in one tax year may result in more tax being payable than spreading withdrawals over a longer period. It may also reduce the amount left invested for future income.

Tax is an important consideration, but it should not be considered separately from sustainability, investment risk and access requirements. Pension and tax rules can change, and their effect depends on individual circumstances.

Where specialist tax or legal advice is required, this should be obtained from an appropriately qualified professional.

Managing Investment Risk in Retirement

Investment risk remains important when pension funds stay invested during retirement. The portfolio may need to support regular withdrawals while retaining the potential for longer-term growth.

Market falls can have a greater effect when withdrawals are being taken because investments may need to be sold at reduced values. This can make it harder for the remaining fund to recover.

When considering an investment strategy, we assess:

• The income required from the pension
• Essential and discretionary expenditure
• Other secure or guaranteed income
• Attitude to risk and capacity for loss
• The need for accessible cash
• Expected investment timescale
• The potential effect of inflation
• How withdrawals may affect future fund values

Diversification and regular review can help manage risk, but they cannot guarantee returns or prevent losses.

Planning a Gradual Transition into Retirement

Retirement does not always involve stopping work on a single date. Some clients reduce their hours, undertake consultancy work or use pension income to supplement earnings during a gradual transition.

A phased approach can affect pension contributions, taxation and the point at which different benefits are accessed. It may also allow pension funds to remain invested for longer, although investment risk continues during that period.

We can help assess how employment income, pension withdrawals and other assets may work together during the transition.

Our Retirement Planning Process

Understanding Your Priorities

We begin by discussing when and how you would like to retire, the lifestyle you hope to maintain and any concerns you have about your current arrangements.

Gathering Financial Information

We review your pensions, savings, investments, income, expenditure, liabilities and other relevant assets. We also consider family responsibilities and expected changes in your circumstances.

Assessing Your Retirement Position

We compare your expected income and resources with your anticipated retirement expenditure. Where appropriate, we can explore how changing contributions, expenditure or retirement timing may affect the position.

Research and Recommendation

Where financial products or changes are appropriate, we research suitable options and explain why a recommendation has been made. Risks, charges, taxation and relevant alternatives will be discussed.

Implementation and Review

If you accept the recommendation, we can help implement the agreed arrangements. Where ongoing advice is appropriate, the service, review frequency and cost will be explained before it begins.

Reviewing Your Retirement Plan

A retirement plan is based on assumptions about expenditure, investment returns, inflation, taxation and longevity. Actual experience will differ, so plans may need to be adjusted.

A review may consider:

• Changes to your income needs and expenditure
• Pension and investment performance
• Whether withdrawals remain sustainable
• Changes to tax and pension legislation
• Health, family or housing changes
• Updates to beneficiary nominations and estate planning
• Whether your attitude to risk or capacity for loss has changed

Reviews do not guarantee that a pension will provide a particular level of income. They provide an opportunity to identify changes and make considered adjustments where appropriate.

Free Pension Guidance

Pension Wise is a government-backed service provided through MoneyHelper. It offers free, impartial guidance to eligible people with UK defined contribution pensions who want to understand their options.

Pension Wise provides guidance rather than a personal recommendation. It does not assess which option is suitable for your individual circumstances.

You can learn more or arrange an appointment through the Pension Wise service on MoneyHelper .

Retirement Advice from Sturdy Edwards

Sturdy Edwards Financial Services provides established, independent financial advice from its office in East Grinstead. Our retirement planning is based on understanding your priorities, explaining your options and helping you make informed decisions.

Our approach includes:

• A detailed assessment of your finances and retirement objectives
• A review of existing pensions and investments
• Clear explanations of retirement-income options
• Consideration of investment risk, taxation and sustainability
• Independent research across the relevant market
• Ongoing reviews where an ongoing service is appropriate

You can also meet our financial adviser team or explore our wider financial advice services.

Sturdy Edwards (Financial Services) Limited is authorised and regulated by the Financial Conduct Authority. Our FCA reference number is 190659.

View Sturdy Edwards on the Financial Services Register .

Frequently Asked Questions

When Should I Start Planning for Retirement?

Retirement planning can be useful at any stage. Starting earlier generally provides more time to review pension contributions, investments, expected expenditure and the effect of different retirement dates.

How Much Income Will I Need?

The amount will depend on your expected household costs, housing, lifestyle, family commitments, taxation and provision for unexpected expenditure. A personal retirement budget provides a more useful starting point than relying on a general percentage of current income.

Should I Combine My Pensions?

Not automatically. Consolidation may make pensions easier to manage, but transferring can involve charges or the loss of guarantees and other valuable benefits. Each pension should be reviewed before a transfer is considered.

Can I Continue Working While Taking a Pension?

It may be possible to work while drawing pension benefits. However, withdrawals can affect your tax position, future pension contribution allowances and the amount available to support later retirement.

Can I Take My Entire Pension as Cash?

This may be possible with some defined contribution pensions, but a large withdrawal can create a significant tax liability and leave less money available for future income. The implications should be understood before proceeding.

Will My Retirement Income Last for Life?

Some pensions or annuities can provide guaranteed income, while income taken from an invested pension is not guaranteed. Its sustainability depends on withdrawals, investment performance, charges, inflation and how long the income is required.

Arrange a Retirement Planning Review

Whether retirement is several years away or you are preparing to access your pensions, a review can help you understand your present position and the decisions that may require attention.

Please contact Sturdy Edwards Financial Services to arrange an initial discussion about your retirement plans.