What can I do now to plan for my retirement?

In our latest blog, PM+M financial planning director, James McIntyre, explores what you can do to ensure you have sufficient funds available for the lifestyle you require when you retire.

I don’t know about you, but the weeks and months seem to be flying by!? The consequence of this being that it can be hard to find time to prioritise your own personal financial planning needs or find time to consider your future. This is where your financial adviser can step in and assist.

What do I want from retirement?

The first step, prior to implementing a plan, is to consider what you want from your retirement. If you know when you plan to retire and have a general sense of how much income will be required to fuel the desired lifestyle and necessary standard of living, you can work backwards and determine how much you need to save.

Cashflow Planning

A cashflow analysis can help give you a sense of direction i.e., to understand how much you should be investing, for how long and the required growth rate (pre and post retirement) to ensure sustainability throughout retirement.

We can also provide some “what if analysis” to test various scenarios e.g., what if I want to retire earlier, what if there was a market crash or what if I didn’t achieve the required growth rate.

This will then enable you to start saving the right amount, have a sense of when you might be able to retire and understand what growth rate is required.

Investments

As we all know, inflation is not our friend, and we are all feeling these pressures. According to the Bank of England, the cost of a loaf of bread has more than doubled over the last 30 years. Therefore, investment growth is going to be essential to maintain the value of your wealth in real terms, as well as to build it ahead of inflation.

If you invest £100,000 and achieve a net growth rate of 4% pa., it would be worth c. £148,000 after 10 years, but c. £163,000 if a growth rate of 5% pa. is achieved. Your cashflow analysis will help indicate what growth rate you need to achieve to meet the retirement needs you require.  But remember, there is a trade-off between risk and reward. Higher risk investments have great growth potential but could also be subject to greater volatility.

It’s important to ensure that your investments are also fit for purpose; your financial adviser can help ensure that they are invested in the right way.

Allowances

You can potentially contribute up to £20,000 per annum into an ISA and potentially up to £40,000 pa. into a pension. It’s important that you are making the most of your allowances and benefiting from tax efficiency wherever possible.

But it’s important to speak to your financial adviser as there are certain stipulations and pitfalls when it comes to allowances, for example:

  • The pension annual allowance tapers downwards for high earners
  • If you have already accessed your pension, you may be restricted
  • Employees need to have relevant earnings to back up any pension contribution

State Pension

It’s worthwhile using the Gov.uk online tool to see whether you are on track to receive a full state pension, click here. If you aren’t, you may be able make additional voluntary national insurance contributions to fill any gaps you may have in your record. These generally represent great value for money and the break-even point in retirement could be around 4 years.

Do you need some help?

If you want to understand what is required to ensure that you have sufficient funds to enjoy the retirement you want, and deserve, please get in touch by clicking the button below.

Important changes to your allowances and pensions in 2022

A new year means changes to pensions and allowances may be on the horizon.  Keep on top of any forthcoming adjustments by reading our latest blog as we highlight some of confirmed changes to   allowances and pensions this year.

 State Pension increase from April 2022

The 2021 Autumn Budget confirmed that the State Pension will rise by 3.1% from April 2022. This rise will affect those who are eligible for the new flat rate State Pension (introduced in April 2016) or the older basic State Pension.

State Pensions will rise as follows:

  • The full rate of new State Pension will increase to £185.15 a week, which is up from £179.60.
  • The basic State Pension will increase to £141.85 (up from £137.60)

If you are unsure of how much State Pension you are likely to receive, check your State Pension forecast on the Gov.uk website by clicking here.

Keep in mind that, received on its own, the increased State Pension may not guarantee a secure retirement because it amounts to less than a minimum wage salary. Contact our financial planning team to find out how you can boost your pension savings or read our blog here.

Your pension allowances are staying put…

The standard pension Annual Allowance (which includes money paid into your pension plans every tax year by you, your employer and any third party) is currently £40,000 – it will remain the same for the 2022/23 tax year, so you have plenty of time to take advantage. Remember, if you make pension payments over the £40,000 limit, they will be subject to income tax at the highest rate which you pay.

It is also important to note that your annual allowance can taper down to £4,000 and is potentially limited by some relevant earnings:

  • From 6 April 2020, individuals who have adjusted income for a tax year of greater than £240,000, will have their annual allowance for that tax year restricted.
  • For every £2 of income that exceeds £240,000, £1 of the annual allowance is lost. There will be a £36,000 cap on the reduction, so anyone with adjusted income of or above £312,000 will have a minimum annual allowance of £4,000.

NOTE: The standard annual allowance is currently £40,000 per annum. Within this allowance, tax relief on members’ gross contributions is restricted to the higher tax rate of £3,600, or 100% of relevant UK earnings (the earnings attract tax relief). Contact our team to find out more.

Work out your tapered annual allowance by clicking here.

A handy tip is to make use of any ‘carry forward’ unused allowances from the previous three years to avoid exceeding the limit.

The pension Lifetime Allowance (this is the total amount of funds you can build in your pension plans before additional tax charges) will remain frozen at £1,073,100 until April 2026, as confirmed in the 2021 March Budget.

Tax-free allowances will remain the same

  • For the 2021-2022 tax year, the standard Personal Tax allowance went up from £12,500 to £12,570 – this will remain the same until April 2026
  • Limits on the nil and residential rate bands for inheritance tax, and capitals gains tax allowances are also frozen until April 2026
  • The ISA (Individual Savings Account) allowances continue at £20,000 in 2022/23 which means that you can save up to £20,000 in a Cash or Stocks & Shares ISA (or a combination).
  • Similarly, the Junior ISA (JISA) allowance will stay put at £9,000
  • The Lifetime ISA limit of £4000 (counting towards your annual ISA limit of £20,000) will continue this tax year – the government will add a 25% bonus to your savings, up to a maximum of £1,000 per tax year.

Get in touch

Are you making the most of your allowances? It is more important than ever to seek professional and independent advice to ensure you are making the right decisions for your future.

Contact our financial planning team (financialplanning@pmm.co.uk) who will happily arrange a meeting at no cost to help you achieve more from your long-term financial plans.

New Year’s Resolutions – how we can help you achieve your financial planning goals

In our latest blog, financial planning director James McIntyre discusses new year’s resolutions and how we can help you with your financial planning goals.

Hopefully you have had a well-deserved break over the Christmas period and have enjoyed spending time with your loved ones.

Now that the festivities are over for another year, our minds start to focus on our plans for the new year. Each year passes by quickly, so it is important to spend time focussing on yourself. New year’s resolutions are a great way to give yourself some deserved attention. For example, they can help us get back to the gym, start a new hobby or they could be used to get your financial planning needs in shape.

Now may be the time to think about your pension…

Often when I meet up with clients, the first thing that they say to me is “I have been meaning to sort out my pension for a while.”

By modelling a cashflow forecast, we can make sure that you are on track to have sufficient funds in place to ensure that you can retire when you want with a suitable amount of personal funds to sustain your retirement. We can offer a sense of direction to ensure that you know what is required to reach your retirement goals.

If you don’t understand how your pension will work from a practical perspective when you retire, we are happy to offer our advice and support to ease any worries you may have and help you put a plan in action.

What would happen if?

The New Year is a great time to implement a will to ensure that assets are smoothly passed to the individuals you desire upon death. It is also important that you have nominated someone to benefit from your pension funds in the event of death. We can help you do this through an expression of wish form.

You also have a great opportunity to make sure your family is able to cope financially in the event of death or ill health. We can use our cashflow planning model to help you understand what you, and your family, would need financially in the event of the unknown.

Personal contingency planning is something which may have crossed your mind, but you haven’t been able to do anything about it because of the bustle of life. If you would like to enquire about ways you can optimise your safety net for your loved ones, please get in touch.

Henry Ford was famously quoted as saying “whether you think you can or think you can’t, you’re right.” With your finances, the best place to start is with a plan. If you have a destination in mind, we can map out your financial journey and help you get where you want to be.

Get in touch

If your new year’s resolution is to make the most out of your financial planning, please don’t hesitate to get in touch using the button below.