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Your 12 Step Guide to Pension Investment – Part 2

In the second part of this two part guide, we share six things to consider when planning for your retirement. For the first six steps, read part one.


This does not constitute advice and advice should be sought in all instances before acting on it.


When planning your pension fund, we recommend working with a financial advisor so they can help you make key decisions about your retirement strategy. We’ve already looked at your investment options, talked about deciding on your income and thinking about tax.


Here are the second six steps for your guide to pension investment.


7. Don’t fall for pension scams

You might think it would never happen to you, but pension scams succeed more often than you might think. Pension freedoms seem to have flushed out many of the con artists as the new rules allow for unbridled access to your savings. Don’t fall for any of these scams and always consult a professional for any offer that seems too good to be true.


8. Final salary pensions

If you have a final salary pension, which guarantees a set income after retirement, the new changes from the pension freedoms don’t apply, but you still need to factor it into your plan.

You can either use this set income to cover your basic living expenses while the rest of your pot remains invested, or you could transfer it into a drawdown plan.

This might not be the way to go, according to experts, and in fact, the government has even set up safeguards to prevent people from letting valuable pension benefits go by choosing this option.


9. Get ahead of your state pension

State pensions are often the lifeblood of so many in retirement. But some people may not get the full amount of the new pay out of £155.65/week.

As it turns out, many opted out of paying the supplemental state pension top up and underpaid National Insurance when they were working, so that money was invested in private pension instead.

Well ahead of retirement, you should confirm the exact amount of state pension you’re eligible for by getting an official forecast so you can plan to bridge any potential gap.


10. Plan for the deterioration of health

It’s unfortunate, but later in life your health is more likely to decline than in your younger years. You can use your pension to alleviate some of the burdens if your physical or mental health declines.

If you have chosen an income drawdown scheme, consider appointing a trusted loved one as a lasting power of attorney so they can help manage your finances if you are no longer capable of doing so.


11. No more death tax

There used to be a 55% tax applied to drawdown pensions pots that were left as an inheritance, but this is now no longer the case. Instead, if the owner dies before age 75, beneficiaries need not worry about the tax.

If the owner dies after 75, the normal rate of tax applied. In most annuities and final salary pensions, your money is usually lost after you and your spouse both die. It can be tough to decide how much of an inheritance you can leave for your family so the matter is best tackled with an expert.


12. Pay a professional

Many of the matters listed here are quite complex and necessitate the help of a financial expert. In fact, in some cases, you’re required to enlist the help of a professional.

For instance, you want access to a defined contribution pot with guarantees like death benefits or more favourable annuity rates (worth more than £30,000), or if you want to transfer or cash in on a final salary pension over £30,000. But paying a nominal fee for peace of mind that your retirement savings are working hard for you is well worth it in the end.


Read the first part of our two part guide to pension investment to make sure you are considering all your options. Talk to one of our experts for tailored financial advice.


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