FUTURE PLANNING FOCUS
Getting ready for retirement
Make sure you’re on track to enjoy the life you want after giving up work
By Ian Cuthbertson, Chartered Financial Planner
T
he world of pensions has undergone a radical transformation in recent years; the age at which you can draw your pension, the options available at retirement and, ultimately,
who you can leave your pension to when you die have all changed. But before making these decisions you need to take stock of your current situation.
When can you retire? Pension freedoms mean you can now access your pensions at the age of 55, with no requirement to purchase an annuity and far greater flexibility. When considering your preferred
retirement date, you also need to think about the level of income you will require. Although your outgoings may go down if, for example, a mortgage has been repaid or you are no longer commuting, they could go up if, say, you hope to do a lot of travelling.
State Pension The State Pension age for men and women has been equalised this year, meaning both will now collect their
State Pension at the age of 65. By October 2020, the State Pension age will be 66. This will rise again to 67 in 2028. If you qualify, the full State Pension is worth £8,767 per annum for an individual. You should obtain a State Pension forecast to clarify exactly what you are on course to receive. This information will also allow you to top up your contributions if necessary.
What if there is a shortfall? It is never too soon, nor too late, to start saving for your retirement. Implementing strategies now to maximise your pension contributions and the tax relief available, and regularly reviewing these savings both prior to and throughout retirement, will give you a much better chance of achieving your retirement goals. If you are a UK taxpayer, you will usually get tax relief on pension contributions up to your earnings or the £40,000 annual allowance (AA), whichever is lower. For the 2019/20 tax year, basic rate tax relief of 20 per cent is usually reclaimed at source by the pension provider. In Scotland, those paying tax at the intermediate rate (21 per cent),
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higher rate (41 per cent) and additional rate (46 per cent) should claim further tax relief via their self-assessment tax return. You can also usually carry forward unused AA from the previous three years, which could provide a major boost to your pensions.
Contributions If you own your own company, you can make employer contributions to a pension of your choice and should receive corporation tax
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