Retirement Planning

One particular area of confusion usually arises when trying to understand what is currently held within your pensions and what kind of income you are likely to receive on an annual basis from these pots.

Commonly, we find that an individual can accumulate a number of pension pots during their working life. Whilst the accumulation of funds in pensions will help with saving for retirement, trying to make sense of multiple annual statements from various providers can become confusing.

By receiving financial planning advice in the lead up to retirement, this will give you a clear idea of what your retirement will look like in simple terms (e.g. your current pension pots will provide a projected income of £X per year), which will help to plan and provide clarity around your position. One particular exercise which can help to provide clarity, is to run through a cash flow modelling session. Cash flow modelling has various forms, however the main idea is that it combines all sources of income in retirement (e.g. pensions, sale of business, property, savings) and projects the amount of income these sources will help to provide in real terms, adjusting the figures over the longer term to account for growth in value and annual increases.

Your expenditure will form a key part of your retirement planning. The cash flow modelling tool adjusts your outgoings to account for inflation.

Further to this, commonly the expenses you are likely to face in retirement can cause worry, especially with the increases in the cost of living we have experienced in the last 12 to 18 months. Whilst everyone’s situation is different, there are several common expenses that retirees tend to encounter. Here are some of the most common expenses in retirement for people based in the UK:

• Housing: Many retirees own their homes outright, but they may still have to pay for maintenance and repairs. Some retirees may also choose to downsize or move to a retirement community, which can come with its own expenses.

• Healthcare: As people age, they may require more medical care, which can be expensive. Even with the National Health Service (NHS), retirees may still have to pay for medications (out with Scotland), dental care, and other health-related expenses, often to avoid lengthy waiting lists.

• Travel: Many retirees look forward to traveling during their retirement years, whether it’s exploring new parts of the UK or going abroad. However, travel expenses can add up quickly, especially if retirees have to pay for transportation, lodging, and food.

• Leisure activities: Retirees often have more time to pursue hobbies and other leisure activities, but these can come with expenses as well. For example, golfing, fishing, and other outdoor activities may require equipment and membership fees.

• Utility bills: Even though retirees may spend more time at home, they still have to pay for utilities like electricity, gas, and water. In some cases, they may even see an increase in their bills due to medical equipment or other special needs.

• Taxes: Retirees may still have to pay taxes on their pensions, investments, and other sources of income. In addition, they may also have to pay council tax and other local taxes.

Overall, retirees in the UK can expect to encounter a range of expenses during their retirement years however by planning ahead and budgeting carefully, retirees can ensure that they have enough money to cover these costs and enjoy their retirement to the fullest.