These days, retirement is not an ending but a new beginning, and there are many decisions to make. It’s important to take advice to ensure your investments are working in the way that’s best for your needs at every stage
It’s perhaps characteristic of these unusual times that even retirement is very different to how it used to be. It wasn’t so long ago that it was typically the end of the journey, with most people retiring on reaching state-pension age and the job of saving and investing largely done.
These days it’s quite different. Retirement is much more dynamic now, and in some ways more of a new road than the end of the journey.
A number of factors have combined in recent years to transform the retirement landscape, including rising longevity, the decline of final-salary pensions, and the ‘pension freedoms’ that opened up access to pension savings and introduced new flexibility around retirement-income decisions.
“You used to get to a certain age and stop. People would retire and while they might have taken advice at that point, it wasn’t usually the case,” says Tony Clark, Senior Propositions Manager at St. James’s Place. “But there are so many choices to make now and you have to treat it as a new beginning. People are realising that the ‘set-and-forget’ approach doesn’t really exist anymore.”
Reset and review
With most people now entering drawdown on retirement and remaining invested, the option of putting your feet up and letting your pension income look after itself is off the table. While the modern approach offers greater choice and flexibility, there are more decisions to make as well.
These decisions will likely evolve over a retirement that could last for up to three decades or more. “It’s important to bear in mind that retirement isn’t a fixed line. It is completely different now and the decisions you make at 60 may not be appropriate at 65 or 70, and so on,” says Clark.
“It’s the same as your working life, with ups and downs and changing circumstances – none of that goes away. You may even end up returning to work, starting a business or embarking on a new career.”
Many people are still getting to grips with what the changing pension landscape means for them and what they need to do, according to Clark. While there’s plenty of flexibility and freedom, there’s also a huge amount of responsibility and, with that, a much greater need for pension advice.
As Clark points out, modern retirement is littered with trigger points for speaking to an adviser. “Your sources of income will be different, for example, so you need an adviser to guide where you take your income from,” he explains. “Are you taking it from the right assets? Are you taking too much income or too little? Are the underlying investments structured in the right way or do you need to reconfigure them? You need to have a plan and an adviser on your side to figure it all out.”
Changing with the times
Other factors come into play, too. Your values and priorities will continue to evolve, and there will be developments to deal with and new stages of the journey to navigate, not least when considering how to meet long-term care costs and how to manage inheritance tax.
One area that a growing number of retirees are engaging with is climate change and using their money as a force for good with responsible investing. With a sizable proportion of pension savings still invested in retirement, retired investors can make a difference by having a say in how and where their money goes. But while there are more ways than ever before to invest your pension in a way that benefits future generations, there are a lot of choices to make here too.
“The way that your investments are structured and how your money is invested can help you make an impact and a difference,” says Clark. “But again, do this with an adviser so that any decisions you make are fully informed.”
Those investment plans, and other financial arrangements you have in place, need to dovetail with short- and long-term goals that are likely to shift over time.
The choices you make before and during retirement may need updating and reviewing. The best way to ensure that happens and is done in a way that fits in with your overall plan is to ask an adviser to help steer you in the right direction.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
If you would like to discuss retirement planning with a member of the AAG Team, please leave your details below.