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It’s just over two years since the pension reforms were introduced to give people more choice in accessing their pensions. One of the benefits it’s brought is that it is encouraging people to think more about their pensions when they’re younger.

According to research by Aegon, 15% of people have realised they need to plan more for their retirement.  The number of people talking to a financial advisor has almost doubled in the last 12 months.

What is particularly good to hear is that since the reforms, 14% of working age people are saving more in their pension pot. As a result, there has been a big jump up since April 2015 in the average amount that people have saved, from £29,000 to £50,000.

Just as it’s important for people to seek qualified advice on how to grow their pensions, the new freedoms mean that people should equally take advice to manage when and how much they take out at retirement.

There may be a temptation to withdraw a large sum and leave yourself with too little to enjoy in a long retirement.  Before splashing out on a long, exotic holiday (or that Lamborghini!), it pays to take a moment to think about some of the costs you may need to prepare for now.

When planning for your future, you may need to consider funeral and possible future care costs, as well as any outstanding debts. If you have built up a large pot and plan to invest it, you will need solid financial advice to ensure you get the best return.

Figures from HMRC show that many people are taking advantage of the freedom to withdraw money from their pension pot after the age of 55. During the last year, an average of 164,000 people withdrew money each quarter. The average withdrawal per individual was nearly £9,900.

The beauty of the pension reforms is that people have more choice to decide what to do with their pension pot. There are 6 options once you get to age 55:

  1. Leave the pot until a later date
  2. Buy an annuity
  3. Invest the pot to produce an income
  4. Withdraw cash in chunks
  5. Withdraw the whole pot in one go
  6. A mix of the above

Many people are still following the traditional route of buying an annuity, but as the figures show, many are also enjoying their new-found freedom.  But the choices you make at retirement may have a big implication on the inheritance tax your dependents will need to pay.

It is worth discussing your specific situation now, with both your Financial Advisor and your Will Writer.  It’s a complex area, and can involve such solutions as prepaid funeral plans, investing in ‘inheritance tax exempt’ assets, and setting up Trusts in your lifetime to remove assets from your estate during your lifetime and after your death for inheritance tax purposes…

Heir Tight Wills helps clients put in place robust provisions and valid documents, to protect their loved ones and their assets both during their lifetime and after their death.  We also work with an array of high quality Financial Advisors, to assist their clients who don’t currently work with one.  For a FREE Consultation to discuss your estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.

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