Pension provision should be only part of a person’s retirement provision. They offer generous tax concessions but have restrictions built in as to how and when benefits are drawn.

Other investment/savings vehicles should also be considered to ensure flexibility, tax efficiency and control in relation to retirement spending needs.

There are two aspects to pension provision:

  1. Pre Retirement when benefits, whether by way of accrued pension in Final Salary arrangements or fund value in Money Purchase Pensions, are built up. Even at this point one eye should be on the exit strategy at retirement, e.g. after age 65 a higher income can be earned before tax is paid but this excess is lost when total income exceeds a certain amount. For many there is no tax advantage in providing income which suffers a higher tax charge, other sources of income e.g. Isa may be better suited.

  2. At retirement when the accumulated provision needs to be drawn upon. This process should start at least 12-18 months before retirement. All available options should be considered to ensure the most appropriate benefits are secured, e.g. Why pay for a Spouse’s pension if no spouse exists?

Final Salary Pensions may appear to be “Take it or leave it” type but alternatives at retirement are available. These alternatives are not normally offered by the Pension Scheme. The priorities change at retirement when flexibility of how benefits are paid, tax planning and protection of capital on death are often the main concerns.

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