As your retirement approaches, you might be forgiven for thinking that the hard work is done.

You’ve got a financial plan in place, you’re mentally ready for the end of your career. There are still important decisions to be made though. And proactive steps that you can take to ensure you retire from the best possible position.

Here are three ways to use your time wisely in the run-up to retirement.

1. Revisit your retirement plan

Your retirement is the culmination of years of hard work. That’s why you’ve put a long-term financial plan in place. And why you’ve been checking in with it regularly.

Be sure to revisit your plan in the run-up to retirement. Check that you’re still on track, and also that nothing has changed.

Ask yourself some simple questions:

  • When do I want to retire?
  • What do I plan to do in retirement?
  • Have my plans changed?

Your desired retirement date might be the same. If you’ve had a change in circumstances though, it’s worth checking that your chosen date still works for you.

A sudden inheritance or a decision to downsize might have freed up funds, allowing you to retire earlier than you thought. On the other hand, helping a child onto the property ladder, or the cost of divorce might have left funds tighter.

Maybe what you plan to do in retirement has changed. The coronavirus pandemic might have curtailed your travel plans, or maybe a sudden windfall means you can start working through your bucket list?

Financial planning is a long-term exercise. It has in-built contingencies able to cope with your changing needs.

Get in touch if you would like to discuss any changes to your retirement plans.

2. Think about your retirement options

Reading about, and getting to understand, your pension options is a great way to use your time in the run-up to retirement.

The pension option you choose should be tied to your answers in section one.

Different options might lend themselves to different retirement lifestyles. The option you choose might also depend on how reliant you are on your pension funds. You might have other income sources, for example, such as investments or Buy to Let properties.

Your main pension options are:

  • An Annuity

Choose this option and you will receive a regular income for the rest of your life. You might opt for a tax-free cash lump sum too. You can usually take up to 25% tax-free cash, with the remaining 75% used to buy your pension.

You select the frequency of your payments, as well as any additional benefits. These could include a spouse’s pension payable in the event of your death or an Annuity that increases each month in line with inflation.

An Annuity is inflexible, but it does offer a guaranteed income. This is great for paying fixed, known expenses and you don’t need to worry about budgeting or using up your pension fund prematurely. This could give you enormous peace of mind.

  • Uncrystallised Fund Pension Lump Sum (UFPLS)

The UFPLS was introduced as part of Pension Freedoms a few years ago.

You can take your whole pension fund in one go as a lump sum. You’ll receive 25% of your fund tax-free, with the remaining 75% taxed at your marginal rate.

An UFPLS might be a good choice if you’re planning large, one-off purchases, such as holidays. You can free up a large sum in one go but remember that you’ll be responsible for ensuring your pot lasts you for the rest of your life.

  • Flexi-Access Drawdown

Drawdown can provide a one-off lump sum of 25% of your pension pot, plus a flexible income.

Your remaining fund, after tax-free cash, remains invested. You withdraw, or ‘draw down’, funds from this invested amount as and when you need them.

This is a much more flexible approach to retirement income than an Annuity. It does, though, put the emphasis on you to budget prudently, ensuring your pension pot lasts.

  • A combination of options

You might find that a combination of retirement options is the best match for your plans.

An Annuity is great for covering fixed expenses, for example. This could give you the freedom to use Flexi-Access Drawdown to cover other, discretionary expenditures, like holidays.

Different options give you different levels of control and responsibility. Speak to us about your plans for retirement and we can help you choose the right option, or a mixture of options, for you.

3. Checking for a shortfall

As you approach retirement you might check-in with your financial plan and find that you have a shortfall.

Use the run-up to retirement to make full use of your tax-efficient savings. Make final pension top-ups, ensure you’ve used your full ISA allowance, and check in on other investments.

  • Pensions

The Annual Allowance is the amount you can pay into a pension and still receive tax relief. From April 6, 2020, it stands at £40,000 a year (or 100% of your annual income). Pensions are tax-efficient so make the most of this allowance if you can.

  • ISAs

If you have an ISA, the current ISA allowance stands at £20,000.

Interest earned from a Cash ISA is tax-free. Any gains you make on a Stocks and Shares ISA are free of both Income Tax and Capital Gains Tax (CGT). Be sure to maximise your tax-efficient savings by making full use of your allowance in the run-up to retirement if you can.

  • Other investments

Your pension income might not be coming solely from your pensions. It’s important to check in with your other investments too.

You might have fixed-term bonds, timed to pay out at retirement, or a Unit Trust or Open-ended Investment Company (OEIC).

Be sure you understand how these fit into your retirement plan and where they could be used to supplement your retirement income if needed.

Seek advice

Making the most of the run-up to retirement can help to put you in the best possible position when your retirement date arrives.

This means you can make the most of your retirement. You’ll have the confidence and peace of mind that you and your family are financially secure.

Seek professional financial advice and we can help you formulate a retirement plan that works for you. We’ll also help you to keep track of its performance, ensuring that you meet your long-term financial goals.

Get in touch

Please contact us if you’d like to discuss any aspect of your retirement planning.

Please note:

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The value of your investment 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.