58 / 59
In the back [ PLATFORMS & PENSIONS ]
provide a great deal of knowledge,
experience and comfort at a time
when you have probably never had
more money and it has never been
more important to you. What you
do with it is critical and however
comfortable you may be when your
portfolio is growing, at retirement it
is a different game as your salary tap
will be turned off for good.
What do I do with retirement looming?
Supply and demand
So, everyone should have a financial
adviser when they are approaching
retirement, right?
Unfortunately, it is not that
simple and for the majority of the
population, it really isn’t their choice
anyway. There are two problems with
financial advisers: they are relatively
expensive and there aren’t nearly
enough of them to go round.
With all supply and demand
imbalances, the limited number of
financial advisers means those that
are available prefer to work with
clients who have the most money.
As a result – and the actual numbers
are variable and controversial – you
may find it difficult to find a financial
adviser unless you have more than
£250,000 in your portfolio.
Who’s helping people
who can’t afford advice?
There are signs that auto-enrolment
firms such as NEST, which serves
millions of people with the smallest
pension pots, are now beginning to
If you don’t have an adviser
but have managed your
own pension pot (maybe
alongside a workplace
scheme), then the decade
before retirement is a good
time to start asking the
following questions.
Have I saved enough?
Dig out the statements from
your individual pensions and
tot up the valuations. Then,
consider consolidating them
into one pot (a SIPP on a
platform).
As a rule of thumb, you
should aim for a pot of
money that will last from 65
to 90 years old. Check if you
are in some sort of lifestyle or
target-date fund. These funds
de-risk your investments as
you get closer to retirement
and aim to generate income
post-retirement. At this
moment in particular –
near the bottom of a crash
– low-risk and income
investments will not recover
anywhere near as quickly as
a well-diversified higher-risk
portfolio. Remember, now we
are living for longer, we have
a correspondingly greater
period of time where higherrisk
investments can be
carried – well into retirement.
This allows your money to
grow, stretching out your
retirement pot to last for
longer.
How much do I need?
Many people forget to ask
this question early enough
in their retirement strategy.
It may well be you plan to
downsize, move off-grid and
grow your own vegetables.
Consequently your income
requirements will be low.
If, however, you intend to
keep the yacht and second
home in Cap Ferrat, you will
require a colossal pension to
maintain these assets.
The chances are you will
be somewhere in between
these points. Try to cost your
desired lifestyle using an
online retirement planner to
see if you will be able to hit
your target amount.
Typically, a £250,000 pot
at retirement funds a modest
existence, £500,000 offers
a little more comfort and
occasional exuberance and
£1m or more is needed to
maintain a carefree “preretirement”
lifestyle.
What other assets do I have?
Take a holistic view of your
wealth and imagine what you
will need in retirement. Do
you have a large house, cars,
land, art and so on you could
sell if needed? But beware.
The current circumstances
serve as a reminder these
types of assets can be highly
illiquid. Try selling a classic
car or a house during the
lockdown at anywhere near
its real value. In addition, we
have no idea if our assets
will ever command the same
value as they did prior to the
pandemic.
What would happen if I lost
my job tomorrow?
Many people use the last
few years of their working
lives to pile money into their
pension. But what if you
stopped working tomorrow?
The pandemic could radically
reshape the economy and
many people have already
lost their jobs. How secure
is yours given the economy
may be so badly damaged it
requires a total reboot?
It is worth running a Plan
B, considering what kind of
lifestyle you could construct
and what compromises you
would need to make if you
retired tomorrow.
Do I go crazy at 55?
At age 55, you can access
your pension and no doubt
you are aware that you can
withdraw 25 per cent taxfree.
Don’t! Well don’t unless
there’s a pressing need to
use that cash for something
important. That 25 per cent
can continue to grow for
another 12 years to the point
you retire and then even after
that, funding years of extra
income.
TRUSTNET
trustnet.com