5 steps to simplifying your retirement plan

Step 1: Set clear retirement goals

Actionable steps

• Reflect on what you want to do during retirement—consider your desired retirement age, where you’d like to live, and the activities you want to enjoy.
• Estimate your monthly living expenses in retirement. According to the Retirement Living Standards from the Pensions and Lifetime Savings Association (PLSA), a couple needs £59,000 a year for a ‘comfortable retirement’ retirement, while a single person needs £43,000.
• Factor in other expenses, like medical costs, long-term care, or support for children or grandchildren, which can all impact your savings goals.

Why it matters:

Setting specific, realistic retirement goals ensures your plan is tailored to your unique circumstances, allowing you to track your progress and adjust as needed.

Step 2: Review and consolidate your pensions

Actionable steps

• A sensible place to start is to review all your pension schemes to determine their value and performance. If some have high charges, perform poorly or lack flexibility, you may consider consolidating them into a single pot.
• Speak with your pension provider or a financial adviser to understand the benefits and potential drawbacks of consolidating your pensions. Consider factors like fees, investment options, income flexibility and any employer contributions you may lose.
• If you have a workplace pension, check if your employer matches contributions and maximise this benefit to grow your retirement fund.
• BONUS STEP – more tips to maximise your pension pot.

Why it matters:

Step 3: Create a clear investment strategy

Actionable steps

• Assess your risk tolerance. Are you comfortable with higher-risk investments that offer potential for greater returns, or do you prefer a more conservative approach?
• Calculate how much you need for your retirement savings to grow by each year to live comfortably. This guides how much higher growth assets your pension should hold.
• Diversify your investments. Don’t put all your eggs in one basket. A well-balanced portfolio should include a mix of growth assets (e.g., stocks) and more stable, income-generating assets (e.g., bonds, cash)
• Work with a financial adviser to set up an investment strategy that matches your retirement goals and risk profile. They can help you adjust your strategy over time to ensure it stays on track.

Why it matters:

Step 4: Plan for tax efficiency

Actionable steps

• Maximise contributions to tax-efficient accounts like pensions and ISAs. Pensions provide tax relief on contributions, and ISAs allow your savings to grow free from income tax and capital gains tax. The 2024/25 pension annual allowance allows you to contribute up to £60,000 and earn tax-relief.
• Consider the timing of withdrawals. For example, withdrawing from your pension pot early can result in higher taxes, whereas spreading withdrawals over several years could reduce your overall tax burden.
• For those who have more than enough to live comfortably, you might consider how best to mitigate Inheritance Tax (IHT). IHT accounts for £5.4 billion in the UK every year, according to the Treasury, with this figure likely to rise given the changes announced in the Budget. Strategic estate planning can reduce this burden significantly.

Why it matters:

Step 5: Prepare for the unexpected with estate planning

Actionable steps

• Create a will to ensure your assets are distributed according to your wishes. Review it regularly, particularly after significant life events (e.g., marriage, children, retirement).
• Set up a Lasting Power of Attorney (LPA) to designate someone you trust to make decisions on your behalf if you become unable to do so. A survey by Lloyds Bank found that 80% of adults over-55 don’t have an LPA in place, despite its importance in ensuring your affairs are managed if you lose mental capacity.
• Seek Inheritance Tax advice from a financial adviser in Cirencester to ensure to ensure your estate is efficiently structured to minimise any potential Inheritance Tax liability.

Why it matters:

Conclusion: Take action today

If you’re feeling unsure about where to start or need help simplifying your retirement strategy, contact Abode Financial Planning today. Our team of independent financial advisers in Cirencester can guide you through each step, ensuring your retirement plan is built to last.