We typically spend nearly two-thirds of our life working. Yet retirement is often a daunting prospect which many find hard to manage.
Retiring can mean a dramatic change in lifestyle and financial circumstances. You'll probably no longer enjoy a steady income stream, such as a salary, and you may now depend on income from other sources. Although the state pension is available to most of us, many find that this is simply not enough to support the lifestyle that they would like in retirement.
A client was approaching retirement and was referred to us as they had accumulated a number of pensions from various previous employments. Some were Final Salary Schemes (otherwise known as Defined Benefit Schemes) and others were Money Purchase Schemes (otherwise known as Defined Contribution Schemes).
The client was retiring very soon, with almost no experience of investing in financial markets. Their state pension wasn't due to start for another four years, and even when it did start, it was projected that the client would still have a shortfall in retirement. The client's main concerns were:
- Statements were arriving from all pension providers quoting income figures which seemed the only option and were becoming extremely confusing.
- The client was concerned that they had a shortfall in retirement from their state pension and their required income.
- There was a 4 year gap between retiring and the state pension starting to be paid, and this raised vital concern over how this income gap could be addressed.
- The client was also concerned because it seemed that with the Final Salary Scheme and an Annuity, nothing would actually be left for their children, should they die prematurely.
After a swift, thorough and detailed review of our client's pension plans, our experts devised a retirement strategy that would meet their needs and allay their concerns. The main benefits included:
- The projected four year funding gap was funded by tax free cash from the Guaranteed Pension and also the Final Salary Scheme, which ensured continuity of income throughout retirement.
- The Guaranteed Pension allowed a form of annuity but also had a death benefit attached which could potentially leave a fund for children on the client's death.
- The arrangements recommended allowed full flexibility so that at any point in the future, other pension alternatives could be used instead of the recommended arrangements, especially in case of future changes in legislation.