Change Of Circumstance Or Income

Keep your pension and financial planning on track

Pensions are a long-term commitment.  However, rarely do people’s financial circumstances stay the same year after year, let alone decade after decade.  Some years are good, perhaps following a pay rise, good bonus or unexpected windfall.  Other years can be tough financially – a new addition to the family kids, job loss, recession.

The ups and downs of your financial life may mean that your pension and financial planning is out of step with your current requirements.  This is particularly important following an increase in earnings as it is important that your pension contributions keep pace with increases in your earnings.

Here are a few key life stage events which warrant a meeting with your independent financial advisor (IFA) to discuss your arrangement to see if any changes need to be made to your financial planning.

  • A pay rise, promotion or new job

If you want to come close to maintaining your standard of living in retirement to that which you enjoyed while working, you need to take account of any increases to your earnings in your pension planning.  If your contributions do not rise in line with your earnings you run the risk of your standard of living plummeting once you retire.

It is recommended that you regularly review your pension contributions to make sure that any increase in earnings – be it from a pay rise, promotion or new job is reflected in your pension savings.  You may also find that you have earnings from a bonus or overtime that you can put towards your retirement fund.  A regularly review with your IFA will highlight these increases in income and help you make sure your pension planning is on track to proving a comfortable retirement.

  • A new addition to the family

If your family is expanding then you need to think about what you can do to safeguard their financial future.  Whether it saving for unexpected expenses, investing for their future or safeguarding your family’s financial future with life cover you should re-assess your financial planning if your clan is growing.  An IFA can help your examine your financial preparations and help you to achieve greater peace of by acting to safeguard your family’s finances with life assurance.

If either you or your partner decides to take a career break to look after the kids, then your IFA can explain how this will affect your retirement planning and the options available to you.

  • Job loss and redundancy

A job for life seems to be a thing of the past and many people are faced with redundancy during their career.  While the shock and uncertainty that come with losing your job will be upsetting, you also need to be practical.  If you are expecting a significant redundancy payment and you do not expect to need all of it in the short term, you may want some advice on where best to invest this money.   You may also want advice on your pension and your options are once you get a new job.    An IFA will be able to explain what will happen with your pension from your ex- employer and discuss the options available to you.  They can also offer advice about pension transfer and whether this is in your best interests.

  • Inheritance

Mourning the loss of a loved one can be devastating, and the bereavement may be further complicated by being forced to deal with complex financial matters. There will be the funeral arrangements, as well as having to sort out the bank and bills.

If you receive an inheritance you will need to carefully consider what you want to do with the money.   If it is a substantial amount you may want to get some financial planning advice on how best to invest your inheritance to meet your financial objectives – now and the future.

Another factor to consider is inheritance tax, and if there are any actions you can take to mitigate your loved one’s liability.  Of course, once a death has occurred there is nothing that can be done to lessen a liability to inheritance tax, so it is vital that you plan ahead.

Inheritance tax is currently 40% and the tax free threshold is just £325,000 for a single person.  Anything above this amount will be liable for inheritance tax.  Given the current value of most houses in Britain, many people may be liable to inheritance tax although they may not realise it.