Develop a robust retirement plan

Having a good idea of the lifestyle you want is key

People planning for retirement should think hard about what they want to do when they eventually stop work. It is helpful to have a good idea of the lifestyle you want, how much it will cost and how you are going to pay for it.

With so much going on in your life – from family and work to pursuing your passions – retirement planning may not have been your priority. But now you want to make sure your pension and overall financial situation will allow you to keep up your current lifestyle and enjoy your golden years. The more enthusiastic you are about retiring, the more likely you are to develop a robust retirement plan.

DIY approach to retirement
Obtaining professional financial advice is key to ensuring you achieve the retirement you want. But 8 million people are planning a DIY approach to retirement and many don’t know how to avoid running out of money, avoiding a big tax bill or leaving an inheritance, new research has highlighted[1].

Millions of people don’t understand their retirement options when they stop work. More than a third (35%) of pension holders admit they know nothing about the product options at retirement and the pros and cons of each option.

Product options at retirement
And more than one in five (22%) of those planning to retire in the next five years know nothing about the product options at retirement. And they don’t understand some of the big risks in retirement. Worryingly, 35% of pension holders know nothing about how stock market falls can affect retirement savings.

Of those surveyed, 34% commented they don’t know how to ensure they will not run out of money in retirement. Half of people with a pension over £100,000 didn’t know a good amount about how to take money from their pension in a tax-efficient way.

Taking professional financial advice
Only 34% of married people understand how to ensure their spouse will be left with enough pension if they die. Although people are unclear about their options, worryingly many are not considering taking professional financial advice.

Only 39% of pension holders are planning on taking financial advice when they retire, with 31% planning to DIY their retirement. Only half (52%) of mass affluent people – those with assets of between £100,000 and £500,000 excluding property – are planning to take professional financial advice.

Series of big decisions to make
The top occasions where mass affluent consumers feel that people should seek professional financial advice are: choosing to invest a large lump sum (43%), Inheritance Tax planning (44%) and deciding how to access a pension (40%).

People have a series of big decisions to make as they approach the end of their working life and each one can make a huge difference to their retirement. For example, should you draw down your pension in one go or over a period of time? Should you take your 25% tax-free cash or leave the money in your pension fund to grow? Should you buy an annuity to guarantee an income for the rest of your life or go for drawdown? These are questions your professional financial adviser will help answer.

Making big financial decisions
Obtaining advice compensates for the emotional biases people have when they make big financial decisions. A DIY approach to managing large pension funds at retirement is fraught with risk.

People can easily buy the wrong products, incur unnecessary tax bills or simply exhaust their retirement funds too quickly, whereas an adviser will provide an impartial, cool-headed approach to their client’s finances and offer solutions that the client will not even have considered.

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