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Guide: 7 valuable behaviours for successful investing

How do you grow your wealth when you’re investing? Choosing the “right” investments is just one of the ingredients needed for success. Indeed, your mindset and behaviours could have a much larger effect on the outcomes of your investments than you might think.

Your approach to investing could influence the decisions you make when you start building your portfolio, such as how much risk you take. It could also play a role in how you respond to market movements, which may have a knock-on effect on the long-term returns of your portfolio.

So, as well as considering which investments could help you reach your goals, you might also want to review your behaviours and the impact they could have.

This useful guide explains how some behaviours, such as being patient or staying calm during market volatility, could have a positive effect on your wealth.

Download ‘7 valuable behaviours for successful investing’ now to read more about the behaviours that might lead to improved investment outcomes.

If you have any questions about your investment portfolio or how investing could fit into your wider financial plan, please contact us to arrange a meeting.

The announcement of the new UK ISA marks 25 years of tax-efficient savings

Since they were introduced in 1999, ISAs have become a finance staple for many households thanks to providing a tax-efficient way to save and invest. As ISAs turn 25, chancellor Jeremy Hunt unveiled plans to launch a new UK ISA and has previously announced changes that could provide you with more flexibility.

Read on to find out what you need to know about ISAs.

The UK ISA could increase your allowance by £5,000

The government will carry out a consultation about the introduction of the UK ISA until June 2024. So, there are currently only a few details available.

In the March 2024 Budget, the chancellor said the UK ISA would have a new £5,000 annual allowance, in addition to the existing ISA allowance, which is £20,000 in 2024/25. It will be a type of Stocks and Shares ISA that’s designed to encourage investment in UK companies.

Which assets could be held in a UK ISA or what will constitute a “UK-focused” investment hasn’t been clarified.

The UK ISA could provide a tax-efficient way to invest for those who use the current £20,000 ISA allowance each year. However, investors are likely to need to consider the effect it could have in terms of diversification. Investing heavily in the UK could lead to a portfolio that no longer suits your risk profile and isn’t as balanced.

Changes to ISA rules could help you save or invest in a way that suits your goals

Despite calls to increase the ISA allowance, it will remain at £20,000 for the 2024/25 tax year. Yet, revisions to ISA rules from 6 April 2024 could change how you use them to save and invest.

Two key adjustments mean you can:

• Open and pay into multiple ISAs of the same type during the same tax year

Under previous rules, you could only open and pay into one ISA of each type during the tax year. From 6 April 2024, this is no longer the case.

So, you could open a Cash ISA at the start of the tax year and make a deposit. If you then find a different provider offering a Cash ISA with a better interest rate later in the year, you can open another account right away, rather than having to wait for a new tax year to start.

The change means you’re in a better position to take advantage of new deals as they become available. Bear in mind that your total ISA subscription limit will apply across all ISAs you contribute to in a tax year.

• Make partial transfers between ISA providers

Previously, if you wanted to transfer money from one ISA to another in the same tax year, you had to transfer all of the funds. Now, you can make partial transfers, which could provide you with more flexibility.

Let’s say you have £20,000 invested through a Stocks and Shares ISA. You might want to transfer a portion of the money to a different Stocks and Shares ISA because it would give you access to a fund that suits a specific goal, but would also like to keep some money in the original ISA for a different purpose.

From 6 April 2024, partial transfers between ISAs are possible.

5 fantastic reasons to consider using your ISA allowance in 2024/25

With the ISA allowance resetting for the 2024/25 tax year, here are five fantastic reasons you might want to make saving or investing through them part of your financial plan.

1. Interest received on savings held in a Cash ISA isn’t liable for Income Tax

The interest you receive on cash savings held outside of a tax-efficient wrapper could be liable for Income Tax if you exceed the Personal Savings Allowance, which, in 2024/25, is:

• £1,000 for basic-rate taxpayers
• £500 for higher-rate taxpayers
• £0 for additional-rate taxpayers.

So, using an ISA for savings could reduce your overall tax bill.

2. You could reduce your Capital Gains Tax bill by investing through a Stocks and Shares ISA

An ISA could also prove tax-efficient when you’re investing as the returns your investments earn wouldn’t be liable for Capital Gains Tax (CGT). The rate of CGT depends on your other taxable income, but it can be as high as 20% (24% on residential property) in 2024/25. So, if you don’t invest through an ISA, you might face a substantial tax bill.

3. A Lifetime ISA could provide you with a government bonus

If you’re aged between 18 and 39, you could open a Lifetime ISA (LISA), which is designed to help people save a deposit for their first home.

You can add up to £4,000 to a LISA in 2024/25, and you’d receive a 25% government bonus, which might help you reach your goals sooner. You can save or invest with a LISA.

However, if you want to make a withdrawal for a purpose other than buying your first home before the age of 60, you must pay a 25% charge. This penalty means you’d lose the bonus and a portion of your own money. As a result, it is important to set out your goals and time frame when deciding if a LISA is right for you.

4. You could use a Junior ISA to save or invest for a child

A Junior ISA (JISA) could offer you a tax-efficient way to save or invest on behalf of a child. A parent or guardian can open a JISA for a child, and in the 2024/25 tax year, you can contribute up to £9,000.

Like their adult counterparts, the money held in a JISA isn’t liable for Income Tax or Capital Gains Tax.

One thing to keep in mind is that the JISA will convert into an adult ISA when the child turns 18, and they’ll be able to use the money how they wish.

5. If you don’t use your £20,000 ISA allowance, you’ll lose it

You cannot carry forward any unused ISA allowance into a new tax year. So, if you don’t use it before 6 April 2025, you’ll lose your allowance for the 2024/25 tax year. As a result, it might be worth considering your long-term financial goals and whether an ISA could play a role now.

Contact us to talk about your saving and investing goals

Please contact us if you’d like to discuss how ISAs could form part of your wider financial plan by saving or investing in a tax-efficient way.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Could you face an unexpected bill now the Capital Gains Tax allowance has halved?

The gains you can make before potentially paying Capital Gains Tax (CGT) have halved for the 2024/25 tax year. If you plan to dispose of assets, the change could affect you. Read on to find out when you could be liable for CGT and some steps you might take to manage a bill.

CGT is a tax on the profit you make when you sell certain assets that have increased in value. CGT could be due when disposing of a range of assets, including:

• Shares that aren’t held in a tax-efficient wrapper
• Property that isn’t your main home
• Personal possessions that are worth £6,000 or more, excluding your car.

The amount of profit you can make during the year before CGT is due has fallen significantly over the last couple of years.

The Annual Exempt Amount has fallen to £3,000 in 2024/25

According to research from the University of Warwick, less than 3% of UK adults paid CGT in the decade to 2020. In fact, in any given year, just 0.5% of adults were liable for CGT. Yet, the total amount paid through CGT tripled between 2010 and 2020 to £65 billion.

The government has substantially reduced the amount of profit you can make before CGT is due, so the number of people paying the tax could soar over the coming years.

In 2022/23, the amount you could make before CGT was due, known as the “Annual Exempt Amount”, was £12,300. This was reduced to £6,000 in 2023/24, and from 6 April 2024, it is reduced further to just £3,000.

If your total profits during the tax year exceed the Annual Exempt Amount, your CGT bill will depend on which tax band(s) the taxable gains fall into when added to your other income. In 2024/25, if you’re a:

• Higher- or additional-rate taxpayer, your CGT rate will be 20% (24% on gains from residential property)
• Basic-rate taxpayer, you may benefit from a lower CGT rate of 10% (18% on gains on residential property) if the taxable amount falls within the basic-rate Income Tax band.

So, if you have assets to sell, considering how to mitigate a potential bill could be valuable.

6 practical ways you could reduce your Capital Gains Tax bill

1. Time the sale of your assets

The Annual Exempt Amount cannot be carried forward to a new tax year if you don’t use it. Timing the disposal of your assets could help you make use of the allowance to minimise your bill. For instance, you might hold off selling an asset until a new tax year starts if you’ve already exceeded the Annual Exempt Amount in the current year.

2. Pass assets to your spouse or civil partner

The Annual Exempt Amount is an individual allowance, and you can pass assets to your spouse or civil partner without tax implications. So, if you’ve used your Annual Exempt Amount, transferring an asset to your partner before you dispose of it to use their allowance might be an option you want to consider.

3. Use your ISA to invest tax-efficiently

An ISA is a tax-efficient wrapper for saving or investing. Returns and profits made on investments held in an ISA are not liable for CGT. So, if you want to invest, choosing an ISA may help you mitigate a tax bill.

If you already hold investments outside of an ISA, you could sell the investments and immediately buy them back within your ISA. This strategy of moving your investments to a tax-efficient account is known as “Bed and ISA”.

In the 2024/25 tax year, you can add up to £20,000 to ISAs.

4. Use a pension for long-term investments

Like ISAs, pensions offer a tax-efficient way to invest – investments held in a pension are not liable for CGT.

In the 2024/25 tax year, the pension Annual Allowance is £60,000 for most people. This is the maximum amount you can pay into your pension during the tax year while still benefiting from tax relief. However, you can only claim tax relief on up to 100% of your annual earnings.

If you’ve already taken an income from your pension or are a high earner, your Annual Allowance could be as low as £10,000. If you’re not sure what your Annual Allowance is, please contact us.

The Annual Allowance can be carried forward for up to three tax years. So, if you’ve used all your Annual Allowance in 2024/25, you may want to review your pension contribution in previous tax years.

Before you boost your pension, considering your investment goals and time frame might be essential. You cannot usually access the money in your pension until you’re 55, rising to 57 in 2028, so it isn’t the right option for everyone.

5. Manage your taxable income

As mentioned above, basic-rate taxpayers may benefit from a lower rate of CGT if the gains fall within the basic-rate tax band. As a result, managing your taxable income to stay below Income Tax thresholds once expected profits are included could slash a CGT bill.

6. Deduct losses from your gains

It is possible to deduct losses from the profits you make. You must report the losses to HMRC by including them on your tax return. When you report a loss, the amount is deducted from the gains you make in the same tax year.

If your total taxable gain is still above the tax-free allowance, you can deduct unused losses from previous tax years. If the losses reduce your gain to the tax-free allowance, you can carry forward the remaining losses to a future tax year.

Contact us to talk about your tax liability

Whether you’d like to understand how you could reduce a potential CGT bill or you want to review your financial plan with tax efficiency in mind, please contact us. We could help you identify ways to cut your tax bill in 2024/25 and beyond.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.

3 valuable ways business owners could extract profits

As a business owner, deciding how to extract profits from your firm could be a crucial decision. It may affect your tax liability and that of your company. Read on to understand three essential ways you could take money from your business and potential tax implications you might want to weigh up before deciding which is the right route for you.

Many business owners will use a combination of the three options below to extract profit from their business to fund their day-to-day expenses and create long-term financial security.

1. Taking a salary

An obvious way to access profit from your business is to pay yourself a salary.

Paying yourself a salary from your business could help ensure you have a regular income to cover day-to-day expenses. A reliable income source could also make some situations more straightforward, such as applying for a mortgage. So, you might want to consider your short- and medium-term plans when deciding your salary.

In addition, you may also factor in how your salary could affect your tax liability. Your salary could be liable for Income Tax in the same way as other employees.

For the 2024/25 tax year, the Income Tax bands and rates are:

Income Tax allowances and rates are different in Scotland

Being mindful of the Income Tax thresholds might help you to manage your finances and avoid an unexpected bill.

As well as Income Tax, there could be other taxes and allowances you factor in. For instance, moving into a higher tax bracket could reduce your Personal Savings Allowance and lead to you paying tax on the interest your savings earn. In addition, high earners could be affected by the Tapered Annual Allowance, which reduces the amount you can tax-efficiently contribute to your pension.

If you would like to talk about the implications of your Income Tax bracket when setting your salary, please contact us.

2. Supplementing your income with dividends

Dividends could be a tax-efficient way to boost your salary. They provide a way to distribute company profits among its shareholders. So, when your business is doing well, dividends could supplement your other sources of income.

In 2024/25, the Dividend Allowance means you can take dividends up to £500 before tax is due. This allowance has fallen in recent years – it was £2,000 in 2022/23. So, if you’re a business owner who uses dividends to extract profits and haven’t reviewed your tax liability recently it could be a worthwhile task.

Dividends could prove valuable even if you exceed the Dividend Allowance due to the tax rate likely being lower than the rate of Income Tax.

The rate of tax you pay will depend on which Income Tax band(s) the dividends that exceed the allowance fall within once your other income is considered. For 2024/25, the Dividend Tax rates are:

• Basic rate: 8.75%
• Higher rate: 33.75%
• Additional rate: 39.35%

It’s not possible to carry forward your Dividend Allowance if you don’t use it in the current tax year. So, making dividends a regular part of your income could be useful.

3. Making pension contributions

Making pension contributions could help secure your long-term finances. This is because a pension is a tax-efficient way to save for your retirement – the investment returns held in a pension aren’t liable for Capital Gains Tax.

In addition, your contributions benefit from tax relief at the highest rate of Income Tax you pay. So, if you’re a basic-rate taxpayer who wants to top-up your pension by £1,000, you’d only need to deposit £800.

Usually, your pension provider will automatically claim tax relief at the basic rate on your behalf. However, if you’re a higher- or additional-rate taxpayer, you’ll need to complete a self-assessment tax return to claim the full amount you’re eligible for.

As well as contributions from your salary, you can set up employer contributions from your business to support your retirement goals.

In 2024/25, the pension Annual Allowance is £60,000. This is the maximum you can pay into your pension while retaining tax relief. However, you can only claim tax relief on 100% of your annual earnings. All contributions count towards your Annual Allowance, including employer contributions and those made by other third parties.

Remember, you can’t usually access your pension until you’re 55 (rising to 57 in 2028). So, if you’re using pension contributions to extract profits from your business you may want to consider when you’ll want to access the money and your long-term plans.

Extracting profits tax-efficiently could reduce your business’s Corporation Tax bill

As well as your personal finances, you may want to incorporate your business’s tax liability when deciding how to extract profits.

Corporation Tax is paid on the profits you make, and some outgoings are allowable expenses that could be deducted during your calculations. Allowable expenses may cover employee salaries, including your own, and pension contributions. In addition, employer pension contributions are deducted before employer National Insurance is calculated.

If your company makes more than £250,000 profit during a tax year, you’ll usually pay the main rate of Corporation Tax, which is 25% in 2024/25. If your company made a profit of £50,000 or less, then you’ll pay the “small profits rate”, which is 19% in 2024/25.

You may be entitled to “marginal relief” if your profits are between £50,000 and £250,000. The relief provides a gradual increase in the Corporation Tax rate between the small profits rate and the main rate.

Keeping these thresholds in mind when you’re extracting profits from your business could help you make decisions that are tax-efficient for both you and your company.

Contact us to talk about your personal finances

As a business owner, your personal finances might be more complex. We could offer support and create a tax-efficient financial plan that reflects your circumstances and long-term goals, including your business exit strategy. Please contact us to arrange a meeting to discuss how we can help you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investment market update: March 2024

While inflation continues to be a challenge for many economies, there are positive signs in the UK and around the world. Read on to find out what may have affected stock markets and your investment portfolio in March 2024.

Remember, volatility is part of investing and most people should invest with a long-term outlook. If you have any questions about your investment strategy or performance, please contact us.

UK

In March, chancellor Jeremy Hunt delivered the 2024 Budget and set out the government’s spending and changes to taxation. One of the big announcements was a 2% cut to employee National Insurance, which follows a previous cut made in the 2023 Autumn Statement.

The Resolution Foundation, a thinktank, said pensioners were among the biggest losers in the Budget, as National Insurance is paid by workers but not people who are retired.

Investment bank Citigroup responded to the Budget by saying the Office for Budget Responsibility (OBR) was being too optimistic when it assumed productivity would grow by 0.9%. The organisation predicts a more modest 0.5% and said it means the UK could be “fiscally offside by around £50 – £60 billion”.

The OBR recognised that productivity has been poor since the 2008 financial crisis. In fact, growth has fallen from 2.5% a year to 0.5% – the economy would have been around 30% bigger today if the pre-2008 trend had continued.

David Miles, a member of the OBR, said the last 15 years have been so bad, that the next 5 to 10 years are likely to be a “bit better”. He particularly noted that AI could help boost productivity.

Inflation continued to fall in the 12 months to February 2024, with a rate of 3.4% – the lowest since September 2021.

Despite the positive news, the Bank of England (BoE) held its base interest rate at 5.25%. Huw Pill, chief economist at the BoE, said he believed more compelling evidence was needed before a cut would be made and it could be “some way off”.

The UK fell into a technical recession at the end of 2023, but the BoE said signs suggest it is already over.

Figures from the S&P Global Purchasing Managers’ Index (PMI) also support this. Private sector growth hit a nine-month high in February, indicating that the recession was shallow. However, the manufacturing sector continued to face challenges, with PMI data showing weak demand and supply chain disruption are contributing to a downturn.

Despite figures from the Insolvency Service indicating businesses are struggling, as insolvencies hit a 30-year high in 2023, there is some good news for investors.

The FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – hit a 10-month high on 21 March when it increased by around 1.1%. Mining stocks were among the main risers amid expectations that the US Federal Reserve will cut its base interest rate soon.

Greggs also saw its stock rise during March. The bakery chain revealed like-for-like sales increased by 13.7% in 2023, while pre-tax profits jumped 27% to £188.3 million. The firm added it expected another year of good progress in 2024.

Europe

According to data from Eurostat, inflation across the eurozone continued to fall in February 2024, when it was 2.6% compared to 2.8% a month earlier.

While many countries in Europe are battling high inflation, Turkey’s rate of inflation has consistently been in double digits since the end of 2019. In February, it hit a 15-month high of 67%. In a bid to cool the soaring cost of living, Turkey’s central bank increased its interest rate to 50%; this compares to a rate of 8.5% just a year ago.

The pan-European Stoxx 600 index reached a record high on 13 March boosted by upbeat company results from the likes of energy supplier E.ON and retailer Zalando. Buoyant company forecasts indicate that businesses are feeling optimistic about the future.

US

Inflation in the US unexpectedly increased to 3.2% in the 12 months to February 2024. The news dampened hopes that an interest rate cut would be announced soon.

A consumer sentiment index from the University of Michigan suggests Americans have a gloomy outlook about economic conditions and prospects for the future. Pessimistic consumers might be more likely to curb their spending, which could harm businesses.

Data from the US Federal Reserve also indicates that businesses are taking a more cautious approach. Average hourly earnings increased by just 0.1% in February 2024, while unemployment reached 3.9% – the highest figure since January 2022.

Technology giant Apple saw its shares fall by around 2.5%, wiping around $70 billion (£55 billion) off the value of the company, on 4 March following an EU-issued fine. The EU fined the company €1.8 billion (£1.54 billion) after it was found to have broken competition laws by imposing curbs on app developers.

Asia

Japan’s main index, the Nikkei, hit 40,000 points for the first time on 4 March after it increased by 0.5%, partly thanks to a weak Japanese Yen helping exporting businesses. The milestone follows a strong start to the year – the Nikkei has gained almost 20% since the start of 2024 thanks to booming technology firms.

The Bank of Japan also made its first interest rate hike in 17 years and ended eight years of negative interest rates, which sought to encourage lending. The bank’s base rate increased from -0.1% to 0.1% after board members said they expected to achieve 2% inflation in the coming year after decades of deflation and stagflation.

China continues to face a property crisis, which is affecting consumer spending and lending, as well as economic growth.

The Chinese government previously cracked down on property speculation that sent prices soaring. However, the property market peaked in 2020 and has faced a downturn ever since.

According to the country’s National Bureau of Statistics, house prices continued to fall in major cities in February. The organisation said it expects real estate to remain the main drag on economic growth in 2024.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

What you need to know about taking your pension tax-free lump sum in 2024/25

Taking a tax-free lump sum from your pension could be a fantastic way to kickstart your retirement plans. If it’s something you’re thinking about, it’s important to consider the long-term implications and understand how much you could withdraw from your pension before facing a tax bill, as the rules have changed in 2024/25.

Previously, you could take up to 25% of your pension as a tax-free lump sum. This could be through a single withdrawal or spread across several. However, following the removal of the pension Lifetime Allowance, there is now a cap.

The “Lump Sum Allowance” is £268,275 in 2024/25

In 2023, chancellor Jeremy Hunt announced the pension Lifetime Allowance (LTA) would be scrapped in the 2024/25 tax year. The LTA limited the amount of pension benefits you could build up during your lifetime without incurring an additional tax charge.

With workers now able to save more into their pension tax-efficiently during their careers, the government has frozen the limit on tax-free withdrawals from your pension.

In 2024/25, you can still usually take up to 25% of your pension tax-free – although now there is a cap on the total tax-free cash you can take. This is the new Lump Sum Allowance (LSA) of £268,275.

Your LSA may be higher if you benefit from one of the various types of LTA “protection”, such as “individual” or “fixed” protection.

Withdrawing a tax-free lump sum could harm your long-term finances

If you want to take a lump sum from your pension, the new rules aren’t the only area you might want to consider. You may also want to weigh up the effect it could have on your long-term finances.

There are plenty of reasons why you may want to take a lump sum from your pension, and some could improve your financial position in retirement. For example, you could use the lump sum to clear your mortgage or other debt, which may significantly reduce your outgoings in retirement and lead to a more comfortable and secure lifestyle.

Alternatively, you might plan to use the money to reach aspirations, like travelling the world once you stop working.

It could be a great way to fund your early retirement plans. However, taking a lump sum from your pension could have a significant effect on your long-term financial security and income. Not only will you be reducing the size of your pension but, as your pension is usually invested, you may have a smaller pot left to invest, reducing your potential for further growth.

Understanding the potential implications of taking a lump sum at the start or during your retirement could help you make a decision that’s right for you.

You may find that after taking a lump sum from your pension you’ll still be financially secure and able to reach long-term goals. If this is the result, you might feel more confident taking a lump sum and more able to enjoy your retirement.

On the other hand, if you find taking a lump sum could harm your long-term finances, you may decide to halt your plans or make adjustments to improve your financial security throughout retirement.

As a financial planner, we can help you understand what the consequences of taking a lump sum could mean for you.

On average, over-55s spend a third of their tax-free lump sum within 6 months

A 2023 survey from Standard Life found that over-55s who have taken a tax-free lump sum, on average, spend or expect to spend a third of their withdrawal within six months.

While having some cash to fall back on in retirement could be useful, withdrawing a lump sum to hold the money outside of your pension might not be financially savvy.

The money held in your pension is usually invested, so it has the potential to deliver returns during your retirement. In addition, investments held in your pension are not liable for Capital Gains Tax, so it provides a tax-efficient way to invest. If you withdraw money from your pension to hold in cash, its value could fall in real terms and you might miss out on potential long-term growth.

Of course, investment returns cannot be guaranteed and they could experience volatility. As a result, it’s important to consider your risk profile and circumstances when deciding how to manage your pension.

Setting out how you plan to use your tax-free lump sum and making it part of your wider financial plan could help you assess if withdrawing it now or in the future is right for you.

Contact us to talk about your pension withdrawals

When you’re accessing your pension, whether to take a lump sum or a regular income, you might worry about what’s right for you. Working with a financial planner could give you confidence in retirement. Please contact us to talk to one of our team about how to access your pension in a way that’s tax-efficient and aligns with your goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Retirement planning: Bringing together your goals and finances

Effective retirement planning often involves weaving together lots of different threads. As you think about your retirement, you might be unsure how to bring everything together, but a bespoke financial plan could put your mind at ease.

Over the last few months, you’ve read about the importance of deciding how you’ll retire, why you should set out your goals, and your options for accessing your pension. Now, read on to discover the challenges of bringing together these different strands of retirement planning and why a tailored financial plan could provide a solution.

The challenges of retirement planning you could face

A common concern among those approaching retirement is whether they have enough money to retire. Even after the milestone, you might worry about running out of money too soon.

Understanding what a sustainable income is for your circumstances can be difficult. After all, you don’t know how long you’ll spend in retirement and you might need to factor in a range of influences outside of your control, such as the effect inflation will have on your expenses.

As a result, you might not be confident in your ability to live the lifestyle you want once you give up work.

Uncertainty could mean you spend too much too soon, which could leave you in a financially vulnerable position in your later years. Alternatively, it might lead to you being more frugal than necessary and missing out on retirement experiences.

There could be other challenges too. Perhaps you’re considering taking a lump sum out of your pension or using assets to fund a one-off expense but you’re unsure about the long-term effect it may have. Or you want to ensure you leave an inheritance behind to support loved ones after you’ve passed away.

While pensions are often the main source of income in retirement, retirees will often have other assets at their disposal too. You might be unsure how you could use your savings, property, or investments to support your retirement goals, but financial planning could help.

A financial plan will bring together your aspirations and finances

When you think about what financial planning involves, your mind might turn towards understanding your assets. However, an effective financial plan starts by understanding what you want to achieve.

At retirement, this might be the lifestyle you want to enjoy for the rest of your life. You may have other priorities too, such as lending support to your family or ensuring your partner is also financially secure.

Once you’ve set out your lifestyle goals, you can start to review your assets and how they might make these objectives achievable.

One of the benefits of working with a financial planner is that they may help you bring together these different goals. So, a retirement plan that’s tailored to you may consider what a sustainable income is, but it might also include:

• Gifting assets to your loved ones during your lifetime
• Putting assets aside for your family to inherit when you pass away
• Financial protection that could provide for your partner if the worst happened
• A safety net that may give you peace of mind
• Provisions in case you need care in the future.

Using a tool called “cashflow modelling”, we could help you visualise how to use your wealth to reach your goals.

By adding details about your assets, cashflow modelling could show how your wealth will change over time depending on the decisions you make. For instance, it could demonstrate how long your pension may last if it was used to provide an annual income of £35,000 or £45,000. Or how using your investments to supplement your income might provide you with greater financial freedom.

Cashflow modelling could also highlight potential risks. You can model different scenarios, including those that are outside of your control, to understand how they might affect your lifestyle and financial security.

For example, could the rising cost of living place pressure on your finances 20 years after you’ve retired? By identifying potential risks at the start of retirement, you may be able to take steps to mitigate them or create a safety net. To manage the effect of inflation on your outgoings, you may plan to increase the income from your pension each year to preserve your spending power.

As a result, working with a financial planner could help you realise your retirement goals and give you financial confidence as you start the next chapter of your life.

Contact us to talk about your retirement plans

If you’re preparing for retirement, whether it’s a milestone you hope to reach this year or it’s a decade away, we could offer you support. Please contact us to talk about your retirement aspirations and how your finances may provide you with security once you give up work.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate cashflow planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

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