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Understanding Your Retirement Options

One thing retirement is not, is an age. Not anymore, anyway. Gone are the days of being told to stop working one day and pick up your State Pension the next. Today you have new pension freedoms to decide when and how you retire.

Pension freedoms in 2015 fundamentally changed the rules for cashing in your pensions. Current rules allow you far more freedom and flexibility over how to take your pension than in previous generations.

If you have saved into a defined contribution pension scheme during your working life, you will eventually need to decide what to do with the money you have saved towards your pension when you retire, or at age 55, whichever is sooner.

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Managing your retirement savings in one place

One thing retirement is not, is an age. Not any more anyway. Gone are the days of being told to stop working one day and pick up your pension the next. Today you have new pension freedoms to decide when and how you retire.

By the time we have been working for a decade or two, it is not uncommon to have accumulated multiple pension schemes. There’s no wrong time to start thinking about pension consolidation, but you might find yourself thinking about it if you’re starting a new job or nearing retirement.

Consolidating your pensions means bringing them together into a new plan, so you can manage your retirement saving in one place. It can be a complex decision to work out whether you would be better or worse off combining your pensions, but by making the most of your pensions now, this could have a significant impact on your retirement.

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Reimagine Your Tax Planning

No one likes to pay tax on their hard-earned money. But due to the complexities of the tax system, without expert professional financial advice, some individuals could be paying more tax than necessary.

Now the new tax year is under way you have the opportunity to save money on taxes and plan for the year ahead.

Now is the time to review your tax affairs to ensure that you take advantage of all reliefs and options available to you – we have listed 17 below to get your started, all readily available to reduce your bill.

This information should not be construed as advice and is applicable to the 2020/21 tax year end.

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Reviewing your needs and goals – take time to think about what you really want from your investments?

You need to consider what you really want from your investments. Knowing yourself, your needs and financial and lifestyle goals, and your appetite for risk is a good start.

Consider your reasons for investing. It is important to know why you are investing. The first step is to consider your financial situation and your reasons for investing.

For example, you might be:

• looking for a way to achieve higher returns than on your cash savings

• putting money aside to help pay for a specific goal, such as your children’s or grandchildren’s education or their future wedding

• planning for your retirement

Determining your reasons for investing now will help you work out your investment objectives and influence how your investments are managed in future.

Decide on how long to invest. If you are investing with a specific financial and lifestyle goal in mind, you have probably got a date in mind too. If you have got a few goals, some may be further away in time than others, so you’ll need to have different strategies for your different investments.

Investments rise and fall in value, so it is sensible to use cash savings for your short-term goals and invest for your longer-term goals.

Short-term. Most investments need at least a five-year commitment, but there are other options if you do not want to invest for this long, such as cash savings.

Medium-term. Committing your money for at least five years opens up a selection of investments that might suit you. Your investments make up your ‘portfolio’ and if appropriate should contain a mix of funds investing in shares, bonds and other assets, or a mixture of these, which are carefully selected and monitored for performance.

Long-term. Let us say you start investing for your retirement when you’re fairly young. You might have 25 or 35 years before you need to start drawing money from your investments. With time on your side, you might consider riskier funds that can offer the chance of bigger returns in exchange for an increased risk of losing your money.

As you approach retirement, you might sell off some of these riskier investments and move to safer options with the aim of protecting your investments and their returns.

How much time you have will make a big impact on creating your investment portfolio. As a general rule, the longer you hold investments, the better the chance they will outperform cash – but there can never be a guarantee of this.

Establish an investment plan

Once you are happy and have set your financial and lifestyle goals, the next step is to get your investment portfolio in place. We will help you identify the right type of investment options suitable for you.

Build a diversified portfolio

Holding a balanced, diversified portfolio with a mix of investments will help protect it from the ups and downs of the markets. Different types of investments perform well under different economic conditions. By diversifying your portfolio, you can aim to make these differences in performance work for you.

Diversifying your portfolio in a few different ways through funds that invest across:

• different types of investments

• different countries and markets

• different types of industries and companies

A diversified portfolio is likely to include a wide mix of investment types, markets and industries. How much you invest in each is called your ‘asset allocation’.

Make the most of tax allowances

As well as deciding what to invest in, think about how you will hold your investments. Some types of tax-efficient accounts normally allow you to keep more of the returns you make. It is always worth thinking about whether you’re making the most of your tax allowances too.

You also need to bear in mind that these tax rules can change at any time, and the value of any particular tax treatment to you will depend on your individual circumstances.

Review your portfolio periodically

Periodically checking to see if your portfolio aligns with your goals is an important aspect of investing.

These are some aspects of your portfolio you may want to check up on annually:

Changes to your financial goals.

Has something happened in your life that calls for a fundamental change to your financial life plan? Maybe a change in circumstances has changed your time horizon or the amount of risk you are willing to handle. If so, it is important to take a hard look at your portfolio to determine whether it aligns with your revised financial goals.

Asset allocation. An important part of investment planning is setting an asset allocation that you feel comfortable with. Although your portfolio may have been in line with your desired asset allocation at the beginning of the year, depending on the performance of your portfolio, your asset allocation may have changed over the period in question.

If your actual allocations are outside of your targets, then perhaps it is time to readjust your portfolio to get it back in line with your original targets.

Diversification. Along with a portfolio with a proper asset class balance, you will want to ensure that you are properly diversified inside each asset class.

Performance. Look at whether there are certain aspects of your portfolio that need rebalancing. You may also want to consider selling to help offset capital gains you might take throughout the year.

ONCE YOU’RE HAPPY AND HAVE SET YOUR FINANCIAL AND LIFESTYLE GOALS, THE NEXT STEP IS TO GET YOUR INVESTMENT PORTFOLIO IN PLACE. WE’LL HELP YOU IDENTIFY THE RIGHT TYPE OF INVESTMENT OPTIONS SUITABLE FOR YOU.

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Are you being forced to dip into your pension pot get through the pandemic?

If you are over 55 and considering accessing your pension it is essential that you receive professional financial guidance to enable you to make an informed decision. If you get it wrong, you could end up with a large tax bill.

Needing Money after a change in circumstances? Here are our top 5 things to consider before withdrawing money from your pension:

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