Retirement planning can be broadly divided into two.

The accumulation phase focuses on building your retirement fund through consistent contributions and strategic investment choices. Without a strong accumulation phase, there is no foundation for retirement.

The decumulation phase, on the other hand, involves exploring the various options for drawing income from your pension and other assets during retirement.

Defined Contribution Pensions and Defined Benefit Pensions.

While we specialise in defined contribution pensions, we do not currently offer advice on defined benefit pensions. However, we would be happy to recommend a trusted expert in defined benefit pensions.

A defined contribution pension depends on how much money is contributed and the investment returns generated during the accumulation phase. However, there are no guarantees regarding the size of the pension or the income it will generate in retirement. This is where Cash Flow Modelling becomes an increasingly important tool to help ensure you are on track to meet your pension objectives.

Most private sector employees today are likely contributing to defined contribution schemes, while many public sector workers may have defined benefit schemes, which are ultimately backed by the taxpayer rather than any individual organisation.

In 2015, the Government introduced Pension Freedoms, significantly changing private pension provision by making pensions much more flexible. With this flexibility, more planning and careful consideration are required, as retirees now face a wider range of decisions than ever before.

Both employee and employer pension contributions are invested, making it essential for individuals to consider how they envision their retirement. This includes evaluating various risk factors such as longevity, inflation, investment risk, and personal risk tolerance.

The Three Key Stages of Retirement Planning.

Pre-Retirement.

In this stage, the primary focus is on determining your desired income and capital needs for retirement. This involves a realistic assessment of what is achievable, followed by making the necessary contributions and investing for capital growth. Advanced cash flow modelling can help you visualise potential outcomes based on your contribution levels, inflation, and expected investment returns, aligned with your risk profile and capacity for loss.

At Retirement.

As you approach retirement, the focus shifts to ensuring that your accumulated funds are sufficient to support your desired lifestyle. This stage involves strategic planning on how to best utilise your savings to generate both income and capital lump sums.

Post-Retirement.

In the post-retirement phase, the emphasis is on preserving your income and capital. If there is likely to be a significant capital surplus at the time of death, estate planning becomes a crucial consideration to ensure your assets are passed on according to your wishes.

Maximising Your Retirement Portfolio with a Structured, Tax-Efficient Approach.

Retirement planning involves strategically utilising your current and future resources to best achieve your retirement goals while employing a tax-efficient strategy. Though it can be complex, adopting a structured, step-by-step approach can make it significantly more manageable and straightforward.

At Spence Financial, our retirement planning process starts with an initial meeting to gather essential information and discuss your retirement goals. From there, we tailor a comprehensive and realistic strategy to fit your unique requirements. To ensure ongoing success, we conduct annual reviews and provide detailed reports to help you assess the progress of your investments and the effectiveness of your retirement strategy.

It is important to be aware of the following risks: A pension is a long-term investment, the value is not guaranteed and the value of your investment and the income from it may go down as well as up. Any advice or considerations are personal to each individual’s circumstances. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Levels and bases of, and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. Please note that the Financial Conduct Authority (FCA) does not regulate cashflow planning.