Over 50? – Need a Pension Review? – “The world of Pension Freedom”

Over 50? – Need a Pension Review? – “The world of Pension Freedom”

Turning 55 is a milestone in pension planning. Knowing all about Income Drawdown, Flexible Drawdown and Tax free Lump sums is key.

Pensions tend to only get interesting when its too late.

When people hit their 50s, they have a crisis of confidence with their finances, with the seemingly scary decisions that need to be made with retirement.

The best way to tackle this, is to start planning early and build confidence for when you need to access your pension as you reduce your hours or completely stop working.

  1. Work out what you have got

You should start off by ringing all your pension providers and get an up to date statement of what they have got. They should work out which pensions are defined benefit, and which are defined contribution.

  1. Think about where you’ll want to live.

It’s important to think about where you plan to live early, think about if you would like to downsize or move abroad.

  1. Think about when you want to finish work.

People aged 50 now will not receive their state pension till the age of 67. Meaning people will have to work longer, as people nowadays haven’t saved enough into their pension. Many 60 years old tend to work part time and gradually reduce hours till they get to retirement.

The government have introduced “fuller working lives” initiative, with the aim to increase retention and recruitment of older workers.

  1. Work out what you’ll need.

The annual income of the state pension is £8,767.20 or £168.60/WK in 2019/20. This won’t be enough for most people.

You need to start by adding up all the money you spend now, e.g. Bills. Also don’t forget to include the treats you may have e.g. meals out, Holidays.

Next you need to work out how much you will spend when you have stopped working and add this to the calculation.

  1. Pay in more

Paying a small amount more into our pension now can make a huge difference to how much you will receive back. If you are employed and have increased the amount you put into your pension each month, speak to your boss as many companies will increase what they pay into your pension.

  1. Remember your family

Make sure you have let your pension schemes know who you would like to benefit in the event of your death.

  1. Stay on track.

Checking your pension, a couple of times a year, is a good habit to get into. Also, it may be easier if you were to consolidate your pensions and by getting online to view your pensions. Particularly in some older plans make sure you are not giving up any valuable guarantees.

  1. Do you want Security, flexibility or both?

Pensions are far more flexible nowadays.

Annuity– this will provide you a secure income for the rest of your life, you can also keep the pension invested and drawn an income from the investments, as well as encashing your pension entirely.

Secure income – use the pension pot to buy a secure income. This is the best choice for most people as they don’t have the worry of their income lowering or completely stopping.

Invest – for those who don’t require an income, they may want the flexibility of keeping their money invested. You can do a bit of both by buying an annuity to cover the essentials and get an income drawdown for the treats.

  1. Have you chosen the right investments?

You may want to go from growing your pension to protecting what you have got. You could have another 15-20 years before you draw your pension, so you have plenty of time to invest and to get rid of any rising/decreasing in the stock market. Usually paying for a financial advice at this point is very worthwhile.

  1. Don’t ignore your other finances.

As retirement is just around the corner, this doesn’t mean you should forget about your other financial goals. Make sure you balance out your goals.