How to Organise Your Pensions as You Are Approaching Your Retirement
Retirement can be a time of significant change; you will no longer be working, and you will have way more time in your diary. When your retirement is just around the corner, there are many things to consider such as reviewing your finances to know exactly how much income you will receive and what you plan on doing in your free time to help you stay active and healthy. However, organising your pension can be complicated due to the number of pension pots you may have and the different pension options available.
This blog will cover how to organise your pensions as you are approaching retirement and how the process can be made simple.
Keep on track with your pensions
One step towards keeping your pensions organised is by keeping on track. The average employee who lives in the UK works at 11 companies during their lifetime; this makes it harder to keep on top of your pension pots and to know exactly how much you have in each pot, what provider you are with or how the pension is invested. This can be unsettling as individuals will have a lack of clarity of where their hard-earned money is going to provide them with the life they always wanted.
Sometimes economic turmoil can come in the way of knowing exactly how much money you have, such as inflation or COVID-19. Therefore, one way of knowing you planned successfully is by knowing how much is in your pension pots today. This will ensure you know how much more you need to save to live a comfortable retirement.
Managing your tax
If you have multiple pension pots, keeping an eye on any potential tax traps is important, such as the lifetime allowance as you do not want to be charged with interest or penalties in the future. Staying safe when it comes to taxes is always the best option.
Having your pension pots all in one place is the first step in ensuring you are on top of any tax implications for your money. If you are approaching retirement, it is worth noting that most old schemes do not have drawdown services. As a result, you will need to combine the pots into a single pension in order to receive the income in an assembled way. This will help you know all relevant information when it comes to your savings for the future.
Although there are many benefits of consolidating your pensions, ensure to do so with caution as some workplaces have exit penalties and protected benefits that can give you a higher tax-free cash lump sum when you have retired. Before moving any of your pension, it is worth getting in touch with a financial adviser to help you fully understand the costs, benefits and risks involved.
How you plan on using your pension pots
To help make your life easier just before you retire, it is good to figure out how you intend on using each of your pension pots. Not knowing what you are doing with your pension pots can lead you to confusion and can potentially ruin your chances of using your pension to its full ability. The last thing you want is to miss out on using any of your pension pot money.
There are many elements to consider when deciding what to do with your pension, such as lifestyle, partner, family, age, long term health, future care needs and other sources of income, so thinking ahead can help you before any stress arises. The options that may be given to you regarding what you would like to do with your pension could include, leaving your money in your pension scheme, withdrawing, buying an annuity or a mix of options. Due to the various options, seeking advice from a financial adviser may be beneficial to consider all your choices and for the adviser to help you digest what each one means.