Successfully planning your retirement

By on 10th July 2020

How much money do you need in retirement? The UK’s population is getting richer and life expectancy is getting better. More than one third of the UK’s population is aged over 65 and the proportion is growing. Figures from The Department of Work and Pensions estimate that by 2050, there will be just two working people for every person aged over 65. This means living longer is going to get more expensive and increases the pressure to save more during our working lives.

Having enough money in retirement is a challenging question – how much is enough? Undoubtedly, this will force many people towards two extremes; either running out of money or amassing a huge fortune having been too afraid to spend it.

Many investors (& their financial adviser!) often overlook ‘free tax breaks’ by focussing on investment performance or fancy pension products. However, the best kept secret for successful retirement planning is the creative use of personal tax allowances.

HM Revenue & Customs receive vast sums of money through subtle tax mis-management, because investors unwittingly focus on ‘where’ they should invest rather than ‘what’ allowances are available, leaving their wealth exposed to unnecessary taxation.

Shrewd use of allowances and exemptions coupled with tax management provide a compounded benefit for investments. It means less reliance on growth, which reduces the need to expose assets to risky investments.

The best way to achieve security in retirement is straightforward, but many wealth managers and private banks get it wrong. St James’s Place, Barclays Wealth and Hargreaves Lansdown amongst other notable firms place too much emphasis on investment products, which often carry high charges and contain speculative investments.

It would be counterproductive to achieve superior income and growth from investments if they are lost through poor tax planning.

The starting point is to establish ‘what’ personal allowances can be exploited to maximum effect and what strategy offers greatest tax-efficiency for growth and income in your pocket.

Clients usually approach Whitehall Partnership with three things on there mind: improving income and growth, lowering investment risk and paying less tax. In many cases, this is accomplished by fully utilising personal allowances and exemptions first. It is only after maximising tax efficiency we consider the underlying investments and ways to improve performance.

  • John L Taylor DipPFS, Certs CII (MP & ER)
  • Whitehall Partnership
  • 01384 946 000
  • 07977 985 306