The changes in pension rules introduced in April this year have, on the face of it, made retirement income choices a little simpler and the potential benefits of seeking financial advice even greater
Gone are the rules about maximum withdrawal rates, minimum income levels, and the dreaded 55 per cent tax charge on drawdown funds left on death. But this is superficial simplicity masks a deeper complexity that bedevils retirement decision-making. There are three broad areas in which getting independent financial advice can add real value to your retirement planning.
IFA’s Can Manage Your Investment Risk
The way you invest your assets during retirement is very different from the way you invest when you are building a pension. Withdrawing an income when your assets have performed poorly can compound your losses. This realisation might lead you towards a more conservative investment strategy but that approach, in turn, can defeat the whole purpose investing, which is to increase the value of your assets. Successful investing during retirement often means managing investment risk against sharp and sudden falls, and this is often more important for retirees than for those who are still in the saving phrase.
Effective management and effective financial advice will often involve the creation of a diversified portfolio of assets that can be expected to perform differently from each other depending on market conditions. An independent financial adviser will be able to build such a portfolio for you and then manage the mix of investments based on how market conditions are developing?
Different Assets will perform well at different stages of the economic cycle, and independent financial advisers who can offer you independent financial advice will aim to adjust your portfolio to capitalise on this while keeping a broad mix of investments.
Managing Multiple Goals
Creating a regular income is a core part of retirement planning, but even this goal will change over time. The income you’ll need to take from your retirement assets will change depending on your expenses, other income you’re generating (especially from work), and your tax position.
Added to this will be the need to fund known one-off expenses; and you will also have goals that may be less well defined, such as a desire to leave assets to the next generation or to have something set aside to meet future health and care costs.
These goals can be managed separately by earmarking certain assets for each. However, this approach doesn’t recognise the potential trade-offs between goals, and can result in an inefficient investment strategy. For example, if the assets earmarked for one goal do well, it gives you the potential to be more adventurous in relation to other goals.
An independent financial adviser may modelling techniques that can consider all these goals simultaneously and design a strategy that maximises that likelihood of them being achieved. By constantly reviewing these models in the light of experience, adjustments can be made to your portfolio to ensure you’re always doing the best you can to achieve your goals.
Tax-Efficient Investment and Withdrawal
Many people will have a range of assets they’ve accumulated to fund their retirement. Independent financial advisers can provide invaluable advice on how these assets should best be structured and accessed to minimise tax bills.
For example, a recent change to the pension rules has made it more attractive to pass assets to the next generation through pension schemes, as they are generally free from inheritance tax even if you’ve started drawing an income from them. This might lead to you prioritising the use of assets that would otherwise form part of your estate on death, such as your ISA or cash investments.
Financial Advice Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.
About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.