The New Pension Freedoms Checklist: Four Things You Must Do Before Making Any Decision About Your Savings
The new pension freedoms are great news for savers, with more flexibility and options for retirement now available. However, the freedoms also come with a level of risk, particularly for that first wave of savers looking to exercise their new rights in the next twelve months or so.
The main recommendation for savers is to seek independent financial advice or guidance from Pensions Wise www.pensionwise.gov.uk An adviser will be able to talk you through your options and ensure you get value for money. Whilst you weigh up your decision though, here are four more things to add to your checklist and consider carefully alongside any decision you make about how you’ll receive your pension income.
Make sure you factor in, but don’t overestimate, your state pension
It is important to remember that, alongside your private pension savings, you will also probably benefit from a state pension in your retirement. Where once it might have been tempting to rely on the state pension, now it is more readily expected that your personal savings will be your main source of income in retirement and the state pension a nice ‘bonus’.
With this as your model, it’s important to remember the income the state pension will give you when planning for your retirement, but at least equally important to not overestimate the contribution the state will make. Factor a realistic figure into your plans, alongside the income your personal pension will generate. To find out the amount of State Pension you will obtain go to www.gov.uk/calculate-state-pension
Don’t underestimate your lifespan
It is very common for retirees to underestimate their own lifespan and, by extension, the amount of money they will need throughout their entire retirement. Whilst it is, of course, a difficult factor to put any sort of prediction on, it is vital that you plan for a long and happy retirement, rather than risk trying to ‘get away’ with having less capital available to you. When planning your retirement income, make sure you’re planning for the long term!
Consider tax carefully
If you are looking at the new pension freedoms with some eagerness then don’t forget: whilst the taxation implications have been reduced, they have not been eradicated entirely.
After the first 25% tax free lump sum, withdrawals from your pension will be charged at your normal rate of income tax. If you are still earning an income, or if you make sizeable withdrawals in a tax year, then this could mean you enter the upper tax bracket.
Of course, if what you are planning for your pension income requires this level of withdrawal, then it may well be worth that level of taxation, but take care and make sure you have planned for, and are aware of, the taxation implications that your actions will create.
Work out what you want to do with your money, rather than just trying to get the highest amount
Perhaps the most important point of all! Whilst money is important to each of us, ultimately it is merely an enabler. There is no better aid to a happy retirement than clearly planning how you want to spend your money: the things you want to buy, the experiences you want to have, the family you want to help.
Once you have planned what you want to do with your retirement, money decisions become much easier. Will accessing your pension through the new pension freedom arrangements help you get to where you want to go in your retirement?
More so than any monetary factors, this is arguably the most important question for retirees to attempt to answer.
Planning a business exit: Seven tips for attracting the right buyer
Selling your business is a challenge in itself but making sure you sell to the right buyer, at the best price, is even more of a challenge. Here are our seven tips for ensuring you sell to the right people:
- Search for a ‘strategic’ buyer who will pay more for your business simply because they stand to benefit more than most other buyers, because, for example, they are buying into complementary products and services.
- Prepare a comprehensive Information Document that will attract and convince the right buyer.
- Tax plan – every exit has several different elements of taxation; nearly always CGT, often stamp duty and sometimes other taxes as well. Inadequate planning in this area can cost you a large percentage of the sale price in taxation.
- Ensure that due diligence and relevant documentation is complete, accurate, up-to-date and demonstrates a well-managed business. This will support your value proposition, not detract from it. Many transactions fall over at this point but this can actually be used to assist in improving the value of the business.
- Planning to be in a position to create some competitive tension by attracting several of the right buyers is a good start, but the conduct of the negotiations and discussions leading to the actual sale are a very important aspect of the process.
- The legal agreements need to be structured to protect you after the sale – particularly around the key issues of any warranties, assurances provided, and also any event or finance included as part of the sale terms.
- Business owners should not try to sell without the best advice. Well represented businesses are generally taken far more seriously and are perceived to be far more valuable than those without representation. A corporate adviser who has a reputation for selling good-quality businesses automatically positions your business in that category.
Importantly, post-exit you also need assistance with asset protection, estate planning and ongoing investment planning. The change from business owner to self-funded retiree is substantial and we would like to help you with that journey.
Sources: www.insurancebusinessonline.com.au (Article: February 2015)
For more information, you can contact Jill and the team at www.wealthmanagement.uk.com/