Many of us look forward to retirement; the time in our lives when we can pursue some of the things we haven’t been able to so far, because we’ve been too busy working.

The truth is, though, that this period in our lives can be drastically different to anything we’ve ever experienced, so it’s worth participating in some careful planning and particularly when it comes to your finances.

Planning in itself can be extremely challenging, with a perplexing array of options on the table. However, at a time when life expectancy is on the rise, making adequate preparations should be a priority.

Know what your income will be and where it is coming from

You cannot put a price on being confident in the knowledge that you are able to comfortably fund your retirement, which is why it’s important to know what your income will be and where it will be coming from.

You should consider each income stream in isolation; whether that is a pension provided by the state, your employer or other provider, rental income from a property, an Individual Savings Account (ISA) or dividends.

Different types of investment come with different tax and financial implications which you should be sure you are aware of, before putting all your eggs in one basket.

Aligning your investments with the level of return that you would like to see, later in life, can often be a good move; perhaps striking a balance between those that are reliable and those that are a little riskier.

If you are nearing retirement and you already know where your money is invested, compute how much each source of income will contribute to the total ‘pot’.

Seek professional advice where appropriate to ensure that, when the time comes, you are drawing on your money in the most tax-efficient way possible.

Careful tax planning

No one likes paying more tax than is necessary, and particularly when this impacts upon the money that you’ve worked hard to save throughout your working life.

Understanding how tax works, as well as how to take advantage of the allowances and reliefs that are available to you, is key to minimising your tax bill and retaining more of your wealth.

When it comes to making decisions about where to invest your money, be clear on the tax implications before you jump in feet first.

This doesn’t mean being aware only of any immediate or short-term liabilities, but also of those that might await you further down the line.

It’s worth remembering that you can invest up to £20,000 tax-free in an ISA; there is no upper age limit to be eligible for a Cash ISA or Stocks & Shares ISA, and you can make tax-free withdrawals whenever you need to.

When it comes to drawing on your money in retirement, you should look to make the most of your tax-free allowances, as well as your tax-free pension entitlement and any personal savings you might have built up.

If you have a defined benefit or defined contribution pension scheme, you should bear in mind that you will be taxed on any withdrawals exceeding your tax-free entitlement.

Retiring from your business?

If you’re thinking about using your business as a vehicle for retirement, you will undoubtedly benefit from formulating a thorough plan and identifying your options well in advance of your exit.

It may be the case that you already have a suitable successor in mind but, alternatively, you might want to sell your business to a third party or secure a merger with another company.

For more on selling your business, read our article ‘What happens if… I want to sell my business?’ here.

If you are a business owner, it’s also important to consider the pension options available to you as these will differ slightly from those available to others and what is right for you will depend upon your circumstances. Options include:

  • Personal pension policies;
  • Small Self-Administered Schemes (SSAS);
  • Self-Invested Personal Pensions (SIPPs); and
  • Stakeholder pension schemes.

There are also different options when it comes to funding your pension and to taking your retirement income later.

Ultimately, whatever your wishes, careful planning and specialist advice could help you to avoid any unfavourable tax consequences in the long-run.

Planning should go beyond your retirement

When planning for your retirement, it may also pay to think about the legacy you would like to pass on beyond that.

A good place to start is drafting a Will, if you haven’t done so already, to ensure your estate is handled in line with your wishes. You will also need to think about the Inheritance Tax (IHT) implications of passing on your legacy and plan ahead accordingly.

In England and Wales, each individual is entitled to a tax-free allowance of £325,000, above which estates will attract IHT at a rate of 40 per cent.

Fortunately, there are various ways you can mitigate your IHT liability, such as by leaving money to a charity, contributing to a pension, or passing property down to direct lineal descendants, using the residence nil rate band (RNRB).

How can we help?

We have a wealth of experience in assisting with acquisitions and disposals and we work not only with you, but also with your solicitors and bankers to ensure that any deal is completed in a timely, efficient and financially beneficial manner.

We can also assist with thorough tax planning ahead of your retirement; from ensuring you understand the tax implications of any business decisions, to helping you compliantly minimise your IHT liabilities and everything in between.

To find out more about how we can support you from day one, until the day you close the doors, all the while offering objective and professional advice to help you realise your retirement dreams, contact us today.