Just like skydiving, drawing your pension can feel like a giant leap of faith. Learn what skydiving can teach you about managing the “free-fall” into retirement.

Skydiving: a once-in-a-lifetime leap of faith you’ll remember forever.

If you have ever been skydiving, you will know that the difficult part is not climbing miles into the air in a plane, but leaping, free-falling, pulling your parachute, and landing safely.

While the anticipation of skydiving might be a little scary, the moment at which you have to push off and fall through the air is where you need professional guidance – not to mention a lot of courage.

Although drawing your pension won’t be quite as adrenaline-inducing as jumping out of a plane, just like skydiving, starting to draw your retirement income is a pivotal moment.

The “descent” through retirement can be tricky. Just like skydivers can encounter strong winds and struggle to find a landing spot, your pension income could hit hurdles too. For example, rising inflation could dampen your pension’s spending power, or unexpected life events could knock you off course.

Read on for key tips for taking that all-important leap into retirement, and how your financial planner can act as a parachute that supports you through this crucial time.

Drawing your pension is like jumping out of a plane – you need an expert on your side to guide you through the process

When you skydive, the point of maximum concern is the time just before you jump out of the plane. It’s the same with your pension – the pivotal moment is the point at which you start drawing from your savings.

Will you have enough to last you for the rest of your life? Are you taking the money tax-efficiently? Is the amount you are taking from your pension sustainable?

Make mistakes here, and you could significantly increase your chances of depleting your pot too quickly, or paying too much tax.

Here’s an example. If you take more than 25% of your pension as a lump sum, any amount exceeding 25% will usually be added to your income in that tax year and could be subject to Income Tax. This means up to 45% of your hard-earned savings could be claimed by HMRC.

Did you also know that your pension typically won’t form part of your estate for Inheritance Tax purposes?

So, in some cases, it can make sense to draw your income in early retirement from sources other than your pension. This strategy depletes your IHT-liable assets, and could enable you to leave your pension wealth to children or grandchildren without losing 40% to IHT.

Of course, your situation is unique. That’s why working with an expert can help you to glide safely down to earth.

Working with a planner is like pulling your parachute – you have added support that can stop you from free-falling too quickly

Once you begin the free-fall, there’s no going back. The way you choose to draw your pension can affect your life for years to come, so working with a professional can help you make a positive start to your retirement journey.

According to a recent study published by FTAdviser, two-thirds of retirees run the risk of depleting their savings too quickly.

Indeed, this study of 2,000 Brits set to retire in 2021 claimed that while these retirees knew how much their desired lifestyle would cost, they had not saved enough to pay for it.

What’s more, a 2019 study by Money Marketing showed that unadvised pension withdrawers were three times more likely to deplete their pension fund than those who sought advice.

Just like skydivers need a parachute, you could benefit hugely from working with your financial planner if you want to withdraw your pension sustainably.

Your Kelland’s financial planner can provide much-needed support while you take this leap, helping you to relax during retirement, and instilling you with the peace of mind that you have enough money to retire comfortably.

If you do encounter problems during the “free-fall” of retirement, such as an unexpected illness or expense, the involvement of an experienced financial planner can help give you the confidence you need to tackle these head-on and land safely.

Get in touch

If you’re getting ready to take that heart-stopping leap out of work and into retirement, you don’t have to do it alone.

Get in touch with us today if you would like to review your retirement income options, and for guidance on forming a financial strategy for this next phase in your life.

Email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

 

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