Retirement – Hansells Financial Planning


Advertisements often tell us that we need to get ready and start saving for our retirement.  What we hear much less about is the next stage – the time when we reach our retirement age and have to figure out how to make our savings work for us for the rest of our lives.  How, for instance, to compare the different offers for converting our retirement fund into an annual lifetime income?

Income drawdown is an option available under pension plans which have a fund value allowing an income to be paid without having to use the entire fund to purchase a lifetime annuity.

The fund, less any tax free lump sum taken, remains invested and the pensioner simply draws an income directly from the pension. This means that the fund can be managed and will benefit from any investment growth. Of course, as values can fall, investments need to be monitored to make sure that the required income will continue to be met in the future.  Advanced investment techniques are now available to manage volatility and therefore to limit falls in value.  This can be of significant benefit when income is being taken.

To avoid the fund being used up too quickly, HMRC limit the amount of income that can be taken under income drawdown.  The individual’s income limit must be regularly reviewed.  Because of the limit, this type of drawdown is referred to as ‘capped’ drawdown.  New legislation will allow unlimited access to the pension fund from 6 April 2015 which means this maximum limit is to be withdrawn.  Please note any withdrawal above any allowable tax free cash will be taxable.

The more you know about what you have and how to manage it, then the better off you will be.  Our advisers will help you make the right decisions on how best to make your savings last, no matter how long you live.