As each person’s financial situation is unique, with our own expectations of what a desired retirement lifestyle would look like, there is no universal solution that would work for all of us. However, there are always options worth considering that will help improve individual retirement income. Here we outline some that may be suitable.
While you might want to fully retire, if funds make this challenging, cutting down to a part-time position may be a more suitable option. This way you can still collect your pension and earn at the same time.
Another approach to retirement is to delay your ‘official’ retirement. If you continue to work, then you may not need to draw your pension as soon as you planned. The delay will enable you to have more income later as the ‘pot’ can increase in the meantime.
Increasingly retirement is about bringing together various streams of income. Individually they may not be enough on their own but collectively they can make a big difference. It’s worth considering what additional streams of income may be available, for example via:-
Some investors reach retirement age and find themselves asset rich and cash poor.
Commonly these assets include:
The issue with all this is that you really need to realise capital by selling some of your assets, then reinvest the money in income-producing investments.
What you sell and when is a complex decision and whilst prospective retirees have substantial assets that could provide a very healthy retirement income, there is frequently a reluctance to make any changes at all. As with all retirement strategies, and especially so here, it’s worth carefully planning ahead to avoid a low income at the point of retirement.
If you want to continue living in your own property and have significant equity, then there are many equity release schemes available. These provide a capital sum, on which notional interest is charged but not paid each year. The interest, hence your debt builds up over time with both capital and interest being repaid to the lender on your death or move into long term care.
This is a specialist product with many elements that need careful consideration, and we strongly recommend that you consult with a regulated financial advisor.
In general, equity release schemes work best the older you are, with a substantial equity element and preferably with no existing mortgage.
No matter the type of pension scheme you have, it is always worth checking to see if you can make additional contributions in the years before retirement.
You can also check with the Government to ensure that your National Insurance contributions cover sufficient years to pay the full state pension. This can be done by visiting: https://www.gov.uk/check-national-insurance-record
The most generous company schemes may offer additional company contributions which are over and above automatic enrolment contributions required by law but this is increasingly rare.
Getting the right kind of advice is absolutely crucial. For example, simply adding additional contributions to a fund which isn’t performing or is delivering derisory returns may be no more lucrative.
If you are a company director, you may have a SSAS pension (Small Self-Administered Scheme) which has maximum investment flexibility and many advantages. If you don’t have one and your current schemes have not yet reached the lifetime allowance cap, then it is certainly worth exploring.
A SSAS scheme can serve as a tax-efficient wrapper for the broadest range of investments, including unquoted bonds and loan notes. Taken together, this could provide a route for getting higher investment returns.