Financial planning for retirement income

Over the past ten years, investment choices have become increasingly complex for those approaching, or already enjoying retirement. For one, the UK pension market has changed significantly in this time, with the introductions of pension freedoms and auto-enrolment, meaning there is more scope to personalise pension plans.


At the same time, a recent study by the Institute for Fiscal Studies has found that the COVID-19 pandemic has led to changes in retirement plans, with 1 in 20 older workers now planning to retire earlier than they originally planned as a result.

In this complex retirement landscape, with more people living longer and wanting to thrive in retirement, coupled with greater freedom of choice when it comes to investment options, it is more important than ever to have an effective income plan in place.

Financial Planners are encouraging clients to consider:

  • How will you fund your retirement?
  • What income streams will you rely on?
  • What do you anticipate your retirement spending needs to be?

Retirement income planning for different eventualities

Paul Hamilton, Chartered Financial Planner at Smith Cooper Independent Financial Solutions (SCIFS) comments: “I would always recommend that people consider preparing for retirement as soon as possible, as a well-structured plan is the only way to ensure you can secure the level of income you need to realise your retirement ambitions”.

“The key thing when it comes to retirement planning is to plan for different eventualities, as there is no way to predict how long you will be in retirement, and in good health. My advice would be to always take a defensive approach to money in retirement, making sure you have an emergency fund should your plans or priorities change”.

“Whilst the main aim of retirement planning is to ensure that accumulated wealth can provide a sufficient level of income in retirement, individual objectives will vary, and may include estate planning, funding for care provision, or intergenerational wealth planning. Cash flow modelling, optimising your pension, and diversifying investments are all important considerations when it comes to planning for and generating retirement income”.

Cash flow modelling for retirement

Cash flow modelling is a technique used to review of your current financial situation, including income and outgoings, as well as your assets, such as property, and can be used to inform both short- and long-term decisions.

It can help alleviate concerns by building a picture of your finances now and in the future, helping you manage your accumulated wealth and assets in retirement.

During retirement you may require less income than in previous life stages, but it is still important to have a good understanding of your future cash flow requirements that considers expected living costs, as well as more ad hoc or one-off costs that may be in your retirement plan, such as travel.

As financial planners, the more comprehensive the cash flow modelling, the better understanding we have of your short, medium and long-term goals and commitments, and the more efficiently assets can be managed, by conducting regular reviews to make sure you are on track to achieve these.

An investment approach to maximise growth

In order to reduce the risk of retirement funds running out early, balancing cash flow modelling with invested assets is a sensible approach that can also maximise growth potential.

When considering your investment portfolio, it is important to consider the following:

How long do you need your investment portfolio to last?

In the UK, the population is getting older, and life expectancy is also increasing, meaning older workers may now face the possibility of spending more than 30 years in retirement. This means that your retirement income planning should work towards having assets and retirement income that will last for a long period.

Do you have enough diversification in your investment portfolio?

A diversified portfolio which allocates across a wider range of assets will be in a better position to weather any short-term market volatility and maximise return from investments.

There is no one solution for meeting your investment goals, and it is important to balance the tax implications and risk scenario of all possible outcomes in order to create an investment strategy to achieve your personal retirement objectives.

At SCIFS we recommend that you consider preparing for retirement as soon as you can. Our team of dedicated chartered financial planners can work with you to devise an individual financial plan that considers cash flow requirements, and investment opportunities.

We factor in your short, medium and long-term objectives, helping you realise your retirement ambitions. If you would like to arrange an initial discussion with one of our dedicated chartered financial planners, please do not hesitate to get in touch.

A pension is a long-term investment, the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.


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