Is your retirement income sustainable?

It is more than likely that any expenditure you had planned for 2020, to make the most of your retirement, will have been affected by lockdown and travel restrictions, possibly meaning that you don’t need to take as much from your pension pot as you had originally thought. Now is an ideal time to review your pension withdrawals, taking into account your current circumstances and plans for the future.  

A secure and sustainable future

Pension freedoms have proved to be extremely popular, but the freedom and choice come with personal responsibility to ensure that you are not living beyond your means and depleting your pension pot for the future.

The Financial Conduct Authority (FCA) has recently warned that retirees could face trouble in the future if income is taken at unsustainable levels. The FCA research found that 42% of people are currently taking more than 8% from their pensions each year and those with smaller pension pots, (typically around £10,000 to £100,000) are particularly susceptible to high withdrawal rates.

Take time to review

It makes sense to reassess your spending patterns and habits, be realistic about how much you really need to withdraw and consider other savings or investments before accessing your pension pot.  For example, if you had planned to spend £10,000 on a cruise, which has now been cancelled, you probably shouldn’t take that £10,000 from your pension pot, just to ‘stash the cash’ in a savings account, which is likely to be paying a low rate of interest.

Tax implications

Although you are normally able to take 25% of your pension pot as a tax-free cash sum, it needs to make financial sense to do so and it isn’t the best course of action for everyone. Unless you need the cash for immediate expenditure, it could simply end up in sitting in a taxable deposit account and you will have lost the benefits of a tax-efficient pension to boot.

Inheritance rules also mean that most people would be better off leaving money in a pension until they need the cash for income or specific spending requirements.

Seek advice

It’s essential to take professional advice if your circumstances have changed and before making any pension-related decisions, particularly in the current economic climate. The right option will depend on your own individual circumstances.

Your Sandringham Advising Partner can review your current circumstances, assess your options and tailor make plans specifically to your individual needs. We aim to give you peace on mind in knowing that your pension pot will last as long as you do, keeping your plans on track, so you can enjoy the rest of your retirement. Please do get in touch.

Sandringham Advising Partners is an award winning independent financial advice firm offering cutting edge technology driven advice solutions, currently recognised by Vouched For as their largest top-rated firm.

Related Blogs

View all Blogs

Do you know what your State Pension will be when you retire?

For Pension Awareness Week (13-17 September), a survey conducted by the Pensions and Lifetime Savings Association (PLSA)1 has found that almost half of non-retirees (46%) don’t know how much they will receive when they retire. The research also found that a majority of the public (78%) don’t know that the full State Pension is currently […]

Read more

Economic Review – February 2021

UK economy poised for recovery Although the latest gross domestic product (GDP) statistics revealed the UK suffered a record slump in 2020, there are now growing hopes the economy is on the cusp of recovery. Figures published by the Office for National Statistics (ONS), showed the UK endured a record fall in output last year […]

Read more

First-time buyer deposits rise after Covid-19 property boom

The average deposit paid by first-time homebuyers jumped by £10,000 in 2020. When the pandemic took hold in the first half of last year, it looked as if the housing market was headed for a fall, if not something more dramatic. There were problems about viewing properties, arranging surveys, organising removals – you name it, […]

Read more