Retirement planning and pension for optimizing returns

Plan, start early for a comfortable retirement

It goes without saying. If you want to enjoy your retirement, begin early. It is only early planning during your working lifetime that will see you through a retirement time comfortably. So, the best way ahead is to have knowledge regarding the way the pension plans work. Here, the most important aspect is that a pension plan is unique to everybody.

A pension plan which is perfect for one person may not be so for another. To avail the best for retirement, you should begin as soon as you start work. This will maximize your gains when you retire. And, all that is necessary since the state pension you receive at the time of retirement is very modest and may not meet your lifestyle requirements which you may have when working. Therefore, having a good pension plan does not merely remain an option, but a necessity.

You can save for your retirement in a number of ways which include ISAs, properties or other investments. Advice of a professional is needed to know the charges you are required to pay on various retirement plans, know what happens to your pension fund if you die before spending your pension pot, the proportion of your savings can you avail in the short, medium and long terms and the time when you can access your pension (and the amount of tax you are required to pay).

Once you know these, your next goal is to find out what do you do with the pension amount which you have saved over a working lifetime. For this, the first step is to know the very purpose of saving. That, why did you save at all? Pension is basically about financing your post-retirement expenses and paying off your bills. The amount you receive under your pension plan is supposed to be your only source of income (other than investments you make in property etc.). To make a pension plan work, you must invest in a way that it works in the long term.

For availing the best of pension plans, you have a number of options. You can opt for a tax-free lump sum of 25 per cent (the remaining amount is taxed at your current income tax rate) or make a number of small withdrawals with 25 per cent of each withdrawal tax-free or withdraw the whole amount at once (this would mean tax 75 per cent tax on the amount). This means you have the option to keep the amount invested and withdraw as required, purchase an annuity, have a drawdown scheme, or combine the benefits of annuity and drawdown.

You should plan for your retirement keeping in mind a few scenarios. For example, you can plan your future keeping in mind the case if you die without spending your pension pot. In this case, the unspent money is passed on to your beneficiaries free of inheritance tax. Another scenario is if you have a final salary pension. Under this, there are no hassles as the amount is automatically paid to you once you retire. And, if you want to phase your retirement, then you can draw on your pension pot once you reach the age of 55. This option allows you to work less and avail the pension amount to add to your income.

You can also avail free guidance from the government’s Pension Wise service if you have a defined contribution pension scheme. This advice is provided by HM Treasury through independent and impartial product providers such as the Pensions Advisory Service and Citizens Advice via face-to-face or telephonic consultations. But they will only educate you regarding the various options available to you and make the process simpler but finally it is you who will have to decide the course of action. But, at this stage, you can approach a financial advisor as you are better equipped with knowledge and know what exactly to ask or discuss with a professional.

Finally, to have a good pension plan in place, you will require the assistance of a professional. Such a financial advisor will go through your specific conditions and post-retirement requirements and suggest a plan which works the best for you. Such a professional will guide you through the process to maximize the benefits of pension plans that suit your individual requirements.

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