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    How to spend your pension savings sustainably


    For many, saving into your pension is something that has formed a huge part of your life and although it may seem like a very long time before you will be able to access your pension savings, it often comes around quicker than you think. Building up the pension fund (accumulation) is often the part of the process which comes naturally, but one area that is sometimes overlooked is thinking about the process of how you are going to extract that money (decumulation).

    Very few have the luxury of a defined benefit or final salary pension these days, where your pension income is a defined amount for life, rather than being determined by the amount of money you have actually contributed to the pension. Therefore, the majority of us have to decide when and how to withdraw funds. The last thing you would want would be to save into your pension for your entire life and then run out prematurely because you have spent too much, too quickly.


    Exactly what your plan should look like will vary dramatically based on your individual circumstances and there are many external factors that will need to be taken into account, some of which will be completely out of your control. For example, you have no way of accurately predicting your life expectancy, market performance or levels of inflation – however, you could think about how you may cope with such scenarios should they happen.


    • Where is your money?

    You may have a mix of workplace, private and state pensions which all kick in at different ages. You would also need to find out what state pension you will be entitled to. Perhaps you are lucky enough to hold some money outside of pensions, maybe in savings, the stock market or rent from property. This would all need to be considered as part of your plan.

    • When do you want to retire?

    The earlier you begin your retirement, the longer your money will need to last you. You will need to ensure that you have enough money to live the lifestyle you desire and this could have an impact on what age you are realistically able to do that. Obviously, no one can accurately predict their life expectancy so it’s difficult to know how long you will need your money to last but there are tools we can use to help you plan accordingly for different situations, along with the correct expert advice.

    • How much retirement income would you like?

    A very general guide that is often worked to is that it’s a good idea to aim for a retirement income which is two thirds of your current salary, but there are many outside factors which would also need to be considered. There are tools available to help estimate what a minimum, moderate and comfortable retirement might look like for your personal circumstances and we would be able to advise the best course of action to get you there. You could even create an expected budget further to a review of what you currently spend.

    • How much retirement income do you have?

    Although it’s wise to spend time thinking about the kind of retirement you would like, it is obviously heavily determined by the reality of the retirement income you have available and how long it needs to last. We can help demonstrate a number of different scenarios and find one that will balance your desired income with the reality of what is actually achievable, by looking closely at your individual circumstances and discussing all the possible options in detail with you.

    • How can I structure my retirement income?

    Alongside your state pension, there is the option to secure an annuity with part or all of your retirement fund. This would provide you with a guaranteed income for life, providing you with a solid income underpin. An alternative, or something that can work alongside an annuity is the option of accessing your pension flexibly via Flexi Access Drawdown. Funds remain invested, can rise and fall in value, but you have the option to elect how much you draw from your pot each year. However, you have to remain mindful the drawdown pot is exhaustible.


    As the above highlights, it is a great idea to look into your pension savings and how you plan to use them in retirement way in advance. This can help you to plan if there are any measures you may need to consider to help you achieve the retirement you desire. It will also help to give you the peace of mind that your retirement is going to be everything you want before getting there and realising it’s too late.

    At PM+M, we can help answer all of the above questions. We do this by creating a personalised cashflow plan which is based upon your current circumstances and an agreed set of assumptions. A cashflow forecast can help you to answer the following:

    • How much do I need to save?
    • How much does my fund need to grow each year?
    • When do I need to retire?
    • How much can I afford to spend during retirement?
    • What is my income underpin requirement?


    For further information or advice on your pension savings and how best to plan for your retirement, get in touch with a member of our financial planning team by emailing or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.  

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