Worrying about your finances in retirement could dampen your excitement as you start the next chapter of your life. As you’ll often be responsible for generating your own income once you give up work, it’s not surprising that a February 2025 report from Which? revealed half of over-55s are worried about running out of money.
Indeed, just 27% of those who have retired or are nearing the milestone said they weren’t concerned about draining their pension or other assets in retirement.
Some apprehension about your finances as you retire is normal.
Retirement is likely to represent a significant shift in how you create an income. No longer will you receive a regular wage for your work. Instead, you’ll often start depleting your assets, such as your pension, savings, or investments. As you can’t predict how long your assets need to last, it may be difficult to assess if the income you create is sustainable.
Here are five strategies that could give you confidence in your retirement finances, so you’re able to focus on what’s most important – enjoying this next stage of your life.
A key obstacle when planning your finances in retirement is that inflation often means your outgoings will increase.
According to the Bank of England, between 2014 and 2024, average annual inflation was 3%. So, an income of £35,000 in 2014 would need to have grown to almost £47,000 to maintain your spending power in 2024.
As a result, if you planned to take a static income throughout retirement, you could face a growing income gap in your later years or deplete assets at a faster rate than you anticipated.
As part of your retirement plan, a cashflow model could help you visualise how your income needs might change, and the effect this would have on the value of your assets. While the outcomes cannot be guaranteed, it could highlight where you might face potential shortfalls and allow you to take steps to improve your long-term financial security.
It’s not just inflation that could affect your outgoings. Lifestyle creep, where you spend more on luxuries, could have an effect too.
As you may be in control of how much you withdraw from your pension, it can be easy to slowly increase the amount so you can indulge in an exotic holiday, new car, or regular days out. Over time, these luxuries can become new necessities in your mind and part of your normal budget.
Spending more in retirement isn’t necessarily negative. However, increasing your spending without considering the long-term consequences might mean you face an unexpected shortfall in the future. Regular financial reviews during your retirement could help you keep an eye on lifestyle creep that may be harmful.
In the past, it wasn’t uncommon for retirees to take their money out of investments to reduce exposure to market volatility. However, keeping some of your money, including what’s held in your pension, invested might make financial sense for you.
Retirements are getting longer. With the average life expectancy of a 65-year-old now in the 80s for both men and women, you could spend three decades or more in retirement. So, continuing to invest with a long-term time frame during retirement could help grow your wealth and mean you’re at less risk of running out of money.
It’s important to choose investments that are appropriate for you and recognise that investment returns cannot be guaranteed. If you’d like to talk about investing in retirement, please get in touch.
While you might no longer be working, you’re very likely to still pay Income Tax in retirement. Indeed, according to the Independent, in March 2025, retired baby boomers were paying more Income Tax than working people under 30.
If your total income exceeds the Personal Allowance, which is £12,570 in 2025/26, Income Tax will usually be due. With the full new State Pension providing an income of £11,973 in 2025/26, most retirees will pay some Income Tax even if they’re only taking small sums from their personal pension.
It’s not just Income Tax you might be liable for either. You might need to pay Capital Gains Tax if you sell assets and make a profit or Dividend Tax if you hold shares in dividend-paying companies.
An effective retirement plan could identify ways to reduce your tax bill, so you have more money to spend how you wish and are less likely to run out during your lifetime.
During your working life, you may have had an emergency fund in case your income stopped or you faced an unexpected expense. In retirement, a financial safety net might still be important.
Having a fund you can fall back on in case you need to pay a large, unforeseen cost, like property repairs, could be essential for keeping your retirement finances on track.
In addition, it may be prudent to contemplate how you’d fund the cost of care if it were needed. According to an August 2024 report from the Joseph Rowntree Foundation, the number of older people unable to perform at least one instrumental activity of daily living without help will increase by 69% between 2015 and 2040.
This rise is partly linked to a growing population of elderly people and rising life expectancies leading to more people relying on informal care, such as family members, or formal care, like a nursing home.
Whether you need to pay for care will depend on a variety of factors, such as the value of your assets and where you live. However, in most cases, you’ll often need to pay for at least a portion of the costs if you require formal care.
So, considering care when you assess your emergency fund could be essential. Knowing you have the savings to pay for care could provide you with peace of mind and mean that should it be required, you have more options to explore, such as choosing a care home with facilities you’d enjoy or one that’s easily accessible for loved ones.
As your financial planner, we could work with you to build a retirement plan that reflects your circumstances and goals. Whether you’re worried about running out of money or you have other concerns, we’re here to listen and discuss your options. Please get in touch to arrange a meeting.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate Tax planning.
Geopolitical tensions have led to a bumpy start to 2025 for investors. If you’re worried about volatility and what it might mean for your long-term finances, there are reasons to remain calm despite the uncertainty.
The ongoing war in Ukraine has resulted in some anxiety in Europe, with the UK and other countries committing to increasing defence spending. In addition, the new Trump administration in the US has imposed several trade tariffs on partners and suggested more will follow.
As a result, many companies and sectors have seen share prices rise and fall more sharply than usual.
Indeed, according to the Guardian, the euro STOXX equity volatility index, which tracks market expectations of short- and long-term volatility, reached a seven-month high at the start of March 2025. The index has almost doubled since mid-December 2024, suggesting investors are feeling nervous.
As an investor, these external factors are likely to have affected the value of your investments over the last few months.
Uncertainty is one of the key factors that contributes to volatility in investment markets.
Unknown policies or other events can make it difficult to understand how a company will perform financially over the long term. This uncertainty can affect the emotions of investors, who may be more likely to make knee-jerk decisions as a result.
Imagine you hold investments in an electronic goods company based in China. In the news, you read the US will impose a 10% tariff on all Chinese goods. As a major export market, this decision by the US could significantly affect the profitability of the company.
After hearing the news, you might worry about your finances and whether you should still invest in the company. If enough investors act on these concerns, it may result in the value of the shares in the company falling.
With so much global uncertainty at the moment, your investments and the wider market could experience more volatility than usual in the coming months.
While it may be difficult, remaining level-headed during times of uncertainty could make financial sense. Here are four reasons to remain calm.
1. Periods of volatility have happened before
When markets are volatile, it may feel unusual or unexpected. However, market volatility is a normal part of investing.
While investment returns cannot be guaranteed, historically, markets have delivered returns over a long-term time frame. Even after downturns, markets have bounced back.
Remembering this could help put your mind at ease and allow you to focus on the bigger picture rather than short-term market movements.
2. Diversified investments could smooth out volatility
Newspaper headlines are designed to grab your attention, and they’re likely to focus on the parts of the market that are experiencing the greatest volatility. For example, you might read that “technology stocks have plunged 10%” or “markets in Japan are booming”.
While these headlines aren’t inaccurate, they don’t tell you the whole story.
In reality, a balanced investment portfolio will typically include investments across a range of assets, sectors and geographical locations.
So, while a fall in technology stocks might affect you, it may not have as large of an effect as you expect if you only read the headlines. Gains or stability in other areas of your investment portfolio could balance out the dip.
3. Market volatility may present an opportunity to buy low
If you’d previously planned to invest a lump sum or you invest regularly, market volatility may cause you to rethink. However, halting your investments might mean you miss an opportunity.
When markets fall, you might have a chance to invest when the price of stocks and shares is lower, allowing you to buy more units for your money. Over the long term, this could lead to better yields.
While investing during a low period could result in higher returns over the long term, you should ensure investments are appropriate. You may want to consider your financial risk profile and wider circumstances when deciding how to invest your money.
4. Trying to time the market can prove costly
Finally, if you’re focused on what the market is doing today, it can become tempting to try and time the market – to buy low and sell high.
However, with so many external factors affecting markets, it’s impossible to consistently time it right. Even professionals, who have a team and resources, don’t always get it right.
Rather than trying to time the market, remaining calm and sticking to your long-term investment strategy is often a better course of action.
If you have any questions about how your investments are performing or would like to review your investment strategy, please get in touch. We’re here to answer your questions and help you feel confident about your financial future.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Trade wars and fears that tariffs could spark recessions meant investment market volatility continued in March 2025. Read on to find out more about some of the factors that may have affected the value of your investments recently.
The Organisation for Economic Co-operation and Development slashed the growth forecast among advanced economies this year due to concerns about trade wars. The organisation now expects the global economy to grow by 3.1% in 2025 – down from the previous forecast of 3.3%.
As investors sought to move money into “safe” assets, the price of gold increased. On 14 March, it exceeded $3,000 (£2,324) per ounce for the first time.
While switching an asset that’s experiencing ups and downs to one that’s more stable may seem like a sensible move, remember volatility is part of investing. Historically, markets have delivered returns over long-term time frames, even after periods of downturn, and often sticking to your investment plan makes financial sense.
Chancellor Rachel Reeves delivered the Spring Statement at the end of March, setting out the government’s spending plans, against a challenging backdrop.
The UK economy contracted by 0.1% in January 2025 when compared to a month earlier following a decline in factory output. In addition, while the rate of inflation is declining, at 2.8% in the 12 months to February 2025, it’s still above the Bank of England’s (BoE) 2% target.
The news prompted the BoE to hold its base interest rate at 4.5%, which will have disappointed households and businesses that were hoping for a cut to ease the cost of borrowing.
Data from Purchasing Managers’ Indices (PMI) was pessimistic too.
According to S&P Global, the manufacturing sector continues to face tough conditions. The headline figure was 46.9 in February. It’s the fifth consecutive month that the reading has been below the 50 mark which indicates growth. There were declines in output, new orders, and employment.
The construction data was similar, with the headline figure falling to 46.6, the biggest downturn since 2009 aside from the 2020 pandemic. There were steep declines in housebuilding and civil engineering activity.
Despite speculation that Reeves would increase taxes and reduce tax thresholds or exemptions, the Spring Statement focused on cutting the welfare budget. Indeed, the announcements made in the 2024 Autumn Budget remain intact.
Investment markets were affected by US trade wars and the war in Ukraine.
On 3 March, European leaders met in London for a summit to draw up a Ukraine peace plan. The meeting led to the pound and European stock market soaring as investors hoped for a resolution. Perhaps unsurprisingly, defence stocks saw the biggest gains, including the UK’s BAE Systems, which jumped by more than 14%.
However, the boost was short-lived. On 4 March, trade wars between the US and Canada, Mexico, and China triggered a drop of 1.27% on the FTSE 100 – an index of the 100 biggest companies on the London Stock Exchange.
There was an uptick in optimism towards the end of the month.
On 24 March, investors hoped that President Donald Trump would show flexibility ahead of the unveiling of new global tariffs in April. The FTSE 100 opened 0.5% up, with mining stocks leading the rally – winners included Anglo American (3.9%), Antofagasta (3.3%), Glencore (3%), and Rio Tinto (2.5%).
Data from the European Central Bank (ECB) shows inflation is moving closer to the 2% target. It was 2.4% in the 12 months to February 2025 across the eurozone.
The news prompted the ECB to cut the base interest rate by a quarter of a percentage point to 2.25%.
Data suggests the wider European economy is facing similar challenges to the UK.
Indeed, S&P Global PMI figures show a factory downturn. In addition, the headline PMI figure fell from 45.5 in January to 42.7 in February. Worryingly, the two largest economies in the EU, Germany and France, experienced the sharpest downturns.
The Euro Stoxx Volatility index, which tracks investor uncertainty, found stock market volatility hit a seven-month high in February and has more than doubled since mid-December 2024 due to investors feeling nervous about the global outlook.
So, it’s not surprising that there have been ups and downs for investors.
The 3 March summit in London benefited wider European stock markets. Again, defence stocks saw the biggest gains – Germany’s Rheinmetall, France’s Thales, and Italy’s Leonardo all saw an increase of at least 14%.
Expectations that US tariffs will hit the automaker industry led to stocks in the sector falling on 4 March. Among the shares affected were tiremakers Continental, which saw a 9% drop, as well as Daimler Truck (-6.6%), BMW (-5.5%), and Mercedes-Benz (-4.5%).
US inflation is nearing the Federal Reserve’s 2% target after a rate of 2.8% was recorded in the 12 months to February 2025.
However, there was negative news from the labour market. According to the Bureau of Labor Statistics, the unemployment rate edged up to 4.1% in February.
PMI readings for the manufacturing sector also reflected this trend. New orders fell in February and companies continued to lay off staff, which may suggest they don’t feel confident in the future. Yet, the sector has grown for two consecutive months.
On 3 March, in contrast to Europe, Wall Street dipped slightly. The technology-focused Nasdaq index was down 0.8% and the broader market indices Dow Jones and S&P 500 both fell 0.3%.
The following day, Trump declared 25% tariffs on imports from Canada and Mexico and 10% tariffs on imports from China. The news led to the dollar weakening, and indices tumbling further – the Nasdaq fell 2.6% and S&P 500 was down 1.7% – and the declines continued into the next week.
Technology stocks in particular have been hit hard by the market volatility. AJ Bell warned since the start of 2025, $1.57 trillion (£1.21 trillion) had been wiped off the value of the Magnificent Seven – seven influential and high-performing US technology stocks – as of 4 March.
Carmaker Tesla is among the biggest losers. As of mid-March, its share price had halved since it benefited from a post-election rally at the end of 2024, which has partly been driven by sales in the EU falling by almost 50%.
As a country with a trade surplus and a large US market, tariffs are expected to hamper growth in China.
China’s GDP target is 5% for 2025, the same target it hit in 2024. However, economists believe replicating this in 2025 will be difficult. China succeeded in reaching the 2024 target thanks to an export boom at the end of the year – exports increased by 10.7%, as some businesses tried to beat the expected tariffs.
In contrast, between January and February 2025, Chinese imports fell by 8.4% year-on-year after economists had expected growth of 1%. The data might suggest that Chinese manufacturers are cutting back on buying raw materials and parts due to trade concerns.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
An interesting January 2025 report from Abrdn suggests culture could affect your financial decisions more than you think. Indeed, a lack of investing culture in the UK was linked to a relatively small portion of personal wealth being invested in equities when compared to other G7 nations, which could limit wealth potential.
The research looks at how your money decisions aren’t just affected by how much you have, but what country you grew up in.
For example, the study found:
So, what does the research tell us about the UK? A key finding is that individuals could be missing out on investment returns simply because investing isn’t part of our culture.
When compared to other members of the G7 – Canada, France, Germany, Italy, Japan, and the US – personal wealth in the UK has the lowest exposure to equity markets, outside of pensions, as a percentage of wealth.
In fact, only around 8% of personal wealth in the UK is held in equities. In contrast, the figure is 33% in the US.
The Abrdn research links the far higher figure in the US to a strong investing culture that dates back to the mid-20th century. A campaign called “Own Your Share of American Business” ran for almost 15 years.
The campaign encouraged the average American to take an interest in stocks and shares to support their long-term goals. It also associated investing in US businesses with patriotism as it was seen as supporting the economy. This helped ingrain a strong culture of long-term investing in the US.
By contrast, in the UK, investing campaigns have focused on single stocks and ran for only brief periods.
Interestingly, research carried out in 2018 by the Centre for Economic Policy Research (CEPR) that Abrdn cited in the report suggests that it isn’t investment risk that is holding back UK savers. Indeed, the CEPR said UK adults had an “above-average” risk tolerance to investing but this didn’t necessarily translate into holding investments.
Italians perceived investing in stocks, bonds, and funds as much riskier than UK adults. Yet, a similar number of adults in Italy and the UK are likely to hold investments.
Rather than financial risk putting off UK savers, it could be the culture that means many overlook investment opportunities.
So, if UK adults aren’t investing, what assets do they hold?
Around 15% of personal wealth is in cash
According to the Abrdn report, around 15% of the wealth held by UK adults is in cash.
While cash might seem like a “safe” option, inflation may erode the value of your money.
As the cost of goods and services rises, the value of your savings in real terms can fall over time. Let’s say you deposited £10,000 into a savings account in 2020. According to the Bank of England, to maintain your spending power in January 2025, your savings would need to have grown to more than £12,400.
If the interest rate your savings earn is less than the rate of inflation, your money could be decreasing in value in real terms.
Half of personal wealth is tied up in property
Perhaps unsurprisingly given rising property prices, around half of personal wealth in the UK is tied up in property – double the amount held in the US. As property prices have increased relatively consistently over the last few decades, it may seem like a “safe bet”.
Indeed, according to Land Registry, the average value of a UK property increased by almost £130,000 between January 2005 and January 2025. However, it isn’t guaranteed that prices will continue to rise at the same pace, and they could even fall.
One of the challenges of holding a large proportion of wealth in property is that it’s often illiquid, especially if it’s a property that you live in. If you want to access some of your property wealth it can be difficult – you might need to sell your home, take out a mortgage, or use equity release to do so.
A lack of investing culture could be holding back the wealth aspirations of UK adults.
While investment returns cannot be guaranteed, historically, markets have delivered above-inflation returns when you look at the figures over a long-term time frame. As a result, investing may deliver the opportunity to grow wealth in real terms and support long-term goals.
If the UK embraced investing to the same extent as the US, it could unlock up to £3.5 trillion for capital markets and potentially lead to greater financial security in the future for investors.
Of course, investing isn’t the right option for everyone, and it’s important to set out an investment strategy that suits your needs, circumstances, and tolerance to financial risk.
If you’d like to talk about your investment strategy and how it might help you achieve your long-term goals, please get in touch.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
How long do you leave essential tasks on your to-do list? If you’ve put off tasks because they feel overwhelming, you’re not alone, but delays could be harmful. Read on to find out how financial planning may help you overcome decision paralysis.
According to a January 2025 study from the Post Office, half of adults in the UK have delayed important tasks because they feel too overwhelmed. As well as potentially affecting your plans, procrastinating can harm your wellbeing. Indeed, 63% of survey participants said they feel “weighted down” by their to-do lists.
Commonly delayed tasks include writing a will (25%) and filling in tax returns (18%). For those under 35, managing a pension was also a common sticking point, with 87% feeling overwhelmed by the task.
For some, procrastination can be due to having too many options or worrying about making the “right” decision, leading to decision paralysis – where you know you should tackle a task but don’t know where to start or what to do next.
If it’s financial tasks you’ve been putting off, working with a financial planner could help you overcome decision paralysis.
If you have a long to-do list, one of the first challenges might be deciding where to start. Should you write your will first, or spend some time reviewing your pension options?
As your financial planner, we could help you prioritise the tasks depending on your circumstances and needs. Having a clear order could mean your list feels more manageable and give you the confidence to focus on one thing at a time, which could be more productive than trying to multitask.
Modern life often means you have a lot of options. While this can be a good thing, it may also feel overwhelming as well – how do you sift through all the different options and decide what’s right for you?
This can affect many aspects of your to-do list, including financial tasks. Perhaps you want to start investing but aren’t sure where to invest or how to create a balanced portfolio that reflects your goals. Or maybe you want to set up a trust to protect assets for your child, but you aren’t sure how to compare the different types of trust.
Working with a professional means you have someone to turn to when you have questions. It might mean your options are clearer and you feel empowered to make a decision.
With 30% of people telling the Post Office survey too much information was a barrier for them completing tasks, having someone who can simplify the details and highlight which parts might be important for you could be invaluable.
Financial decisions may be complex and could affect your long-term financial security. So, decision paralysis might occur if you’re worried about making the “right” choice.
Let’s say you’re ready to retire and access your pension. You may be concerned about withdrawing too much and running out later in life. Or you may be unsure if purchasing an annuity or taking a flexible income is right for your lifestyle.
A financial planner could help you understand the long-term effects of your decisions, so you can feel confident about the future.
This may include using cashflow modelling to visualise how your wealth might change depending on how much income you withdraw from your pension each year. You could even use it to model financial shocks to see how you might create a safety net, which may put your mind at ease and help you move forward with a decision.
43% of UK adults told the Post Office survey that they would hire a personal assistant to help them with life admin if they could.
If you want to take a hands-off approach to managing your finances, building a long-term relationship with a financial planner could be right for you. We’d take the time to understand your aspirations and how your assets might be used to support them to create a tailored plan.
With regular reviews, we can work with you to ensure your plan continues to reflect changes to your circumstances and wishes and make adjustments if necessary.
If you’d like to review your finances and how they might support long-term goals, please get in touch. We could work with you to create a tailored plan that suits your needs, offers a clear direction, and provide ongoing support should you have any questions or concerns.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate trusts or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested.
Reaching the minimum pension age and being able to access your retirement savings might mean new possibilities opening up. You may start thinking about giving up work, withdrawing a lump sum to pursue a goal, or using your pension to boost your regular income.
It’s an exciting time, but it’s also important to evaluate your decisions and consider how they could affect your long-term plans. Indeed, spending too much too soon could lead to a shortfall later in life.
Usually, you can access your pension from age 55 (rising to 57 in 2028). For many people, this milestone will come before their planned retirement date.
Yet, January 2025 research from Legal & General suggests 1 in 5 people access their pension at 55.
32% of those withdrawing from their pension at 55 said it was to cover essential expenses. However, 46% simply said they did so “because they could”.
Worryingly, 27% of UK adults aged over 50 make decisions about their pension without seeking any advice or guidance. It could mean a significant proportion of those accessing their pension as soon as possible don’t fully understand the long-term implications it could have.
If you’re thinking about withdrawing money from your pension, here are three potential risks to consider first.
Pensions are often among the largest assets people own. So, it’s not surprising that some look at the value and believe they have enough to splurge.
Yet, it’s important to consider why you’ve saved into a pension – to create financial security once you give up work.
If you start accessing your pension at 55, you could be at greater risk of facing a shortfall later in life as it’s likely to need to last several decades. Indeed, according to the Office for National Statistics, the average 55-year-old woman will live until they’re 87. For a man of the same age, life expectancy is 85.
Even if you don’t plan to take a regular income from your pension straightaway, withdrawing a lump sum can have a significant effect on the value of your retirement savings.
Your pension is normally invested with the aim of delivering long-term growth. Taking a lump sum could mean investment returns are lower than expected, which, in turn, may lead to a lower income when you retire.
That’s not to say you shouldn’t access your pension at 55, whether you want to use the money to travel or start reducing your working hours. However, understanding the potential long-term implications of doing so and how it might affect your retirement lifestyle is important.
You can usually withdraw up to 25% of your pension without facing a tax bill, either as a lump sum or spread across multiple withdrawals.
However, if you exceed the 25% tax-free portion, your pension withdrawals may become liable for Income Tax. According to the Legal & General study, around a third of those accessing their pension at 55 are withdrawing more than 25%.
The withdrawal above the tax-free amount would be added to your other sources of income when calculating your Income Tax liability. So, you might want to consider whether it would push you into a higher tax bracket and increase your overall tax bill.
It’s also worth noting that if you receive means-tested benefits, taking a lump sum or income from your pension could affect your entitlement – something a quarter of people didn’t realise.
Accessing your pension might reduce how much you can tax-efficiently contribute to your pension each tax year.
In 2024/25, the pension Annual Allowance is £60,000. This is remaining the same for tax year 2025/26. This is the amount you can personally contribute while retaining tax relief benefits. However, you can only claim tax relief on up to 100% of your annual earnings.
You can normally withdraw your tax-free lump sum from your pension without affecting the Annual Allowance, but if you take a flexible income, you might trigger the Money Purchase Annual Allowance (MPAA).
The MPAA is just £10,000 in 2024/25 and for the tax year 2025/26. As a result, it can significantly reduce how much you’re able to tax-efficiently add to your pension and it might negatively affect your retirement income.
One of the challenges of understanding whether accessing your pension sooner is the right decision for you is that you often need to consider the long-term effects.
Financial planning could help you see how accessing your pension at 55 might affect your long-term finances and review other options as part of a wider financial plan. If you withdraw some of your pension now, it could help you feel more confident, or you might decide an alternative option makes more sense for you.
If you’d like to access your pension, we’re here to help you calculate the potential long-term consequences and more. Please get in touch to arrange a meeting.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
Those who have retired or are nearing the milestone are consistently overlooking the risk of financial shocks when compared to other generations, a survey published in PensionsAge in December 2024 suggests.
According to the report, 43% of over-50s had thought about financial shocks but not included the risks in their retirement plan. A further 32% haven’t considered risks at all.
Later in life, you might feel more financially secure than you did when you were younger, and if you no longer work, you don’t need to consider the risk of losing your job or being unable to carry out your role due to illness. So, it’s easy to see why weighing up financial shocks may become less of a priority in your later years.
However, financial shocks still have the potential to have a significant effect on your financial security and lifestyle. Read on to discover three shocks you may want to consider when you review your retirement plan.
During your working life, illness may have been a financial shock you incorporated into your financial plan as it could limit your ability to work. While an illness may not affect your income in retirement, it could still derail your finances.
For example, your outgoings could rise significantly. If you’re ill, you might need to factor in the cost of travelling to appointments and increased heating bills, or you might even choose to pay for private medical care. In some cases, a long-term diagnosis could lead to other large costs, such as needing to adapt your home or pay for a carer to provide support in your daily life.
If you haven’t budgeted for these outgoings or don’t have an emergency fund you can use, the cost of being ill could mean you deplete your pension and other assets quicker than you expect. This might leave you in a financially vulnerable position later in life.
Despite this, illness is something only 19% of over-50s considered when setting out their retirement plan. Similarly, just 17% had thought about the possibility of going into care.
The death of your partner can be difficult to think about. Indeed, it’s something only 18% of over-50s have fully planned for and almost a third have avoided the topic completely.
Yet, it may be an important part of creating long-term financial security for both you and your loved one. If one of you passed away, how would it affect the surviving partner’s finances in the short- and long-term?
For instance, if just one of you has an annuity that pays a regular income throughout retirement, this would stop when the person passes away, potentially leaving an income gap for the surviving partner. To mitigate this risk, you might select a joint annuity instead, which would continue to pay an income to the surviving partner for the rest of their life.
So, while these types of conversations can be emotional and challenging, having them and adjusting your retirement plan, if necessary, could offer peace of mind that you or your partner will be financially secure if the other passes away.
If your child, grandchild, or other loved ones faced a financial emergency, would you want to offer them support?
Many people will answer “yes” to this question. Yet, only a small proportion of over-50s have considered how they’d lend a helping hand in retirement. As part of their retirement plan, 16% of parents have included a provision in case their children need urgent financial support and 7% have thought about how they may need to support their parents.
If you haven’t thought about how you’d lend support, it could mean you’re unsure how to respond if a loved one approaches you for help. It may lead to a decision that’s not right for you and could affect your long-term finances.
For instance, if you were to withdraw a lump sum from your pension to gift to your child, you could be faced with a larger tax bill than you expect, and it might have an impact on the long-term investment returns of your pension. Instead, depending on your circumstances, depleting other assets, like savings, could be more efficient.
Making this type of financial shock part of your retirement plan could mean you’re able to feel confident in the support you provide.
While you’re weighing up how to support your loved ones, you may want to review your wider estate plan, which includes setting out how you’d like your assets to be distributed. For some, this will involve writing a will that will state how assets are to be divided when you die. You may also consider gifting during your lifetime.
If you’d like support when reviewing your estate plan, please get in touch.
While weighing up the risk of financial shocks might seem like a daunting task, it may lead to you feeling more confident about your retirement. Knowing you’ve taken steps to improve your financial security, even if something unexpected happens, could allow you to focus on enjoying the next chapter of your life.
Get in touch with our team to talk about which steps may mitigate the effect of financial shocks during your retirement.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances.
The Financial Conduct Authority does not regulate wills, tax planning or estate planning.
Handling finances is a part of life and something that most people do, but that doesn’t mean it isn’t stressful. Indeed, many people don’t feel confident making financial decisions, and financial advice could ease their mental load.
Even when you’re relatively comfortable, managing your finances can be a cause of concern. Indeed, you might find it even more stressful as you may be considering how to reduce tax liability or how to make use of allowances to pass on wealth to your loved ones.
Worries about the future are common too. You may feel confident in your ability to handle your finances now, but what would happen if you faced a financial shock? Or how will you manage your finances when you retire, and you may no longer receive a reliable income?
Fears about the future could harm your mental wellbeing and mean you don’t enjoy the things that are important to you.
While you might think of financial planning as a way to grow your wealth, the non-financial benefits are often just as valuable. Establishing a relationship with a financial planner could reduce your mental load. Read on to find out how.
A survey published in IFA Magazine in January 2025 found more than half of over-55s – the equivalent of 10.5 million people – are worried their retirement savings won’t last their lifetime. Only 27% of those surveyed said they weren’t concerned about running out of money.
It’s not just retirement that can cause money worries either.
As a worker, you might worry about how you’d meet essential costs if you became too ill to work, or as a parent, you might want to set aside a financial safety net for your family in case the worst should happen.
As life is unpredictable, effectively managing your finances to ensure you’ll be secure in the future can be difficult. We can work with you to help you understand how the decisions you make now could affect your security in the future.
A cashflow model provides a way to visualise how your wealth will change over time.
You start by inputting the details of your assets now, and the actions you’re taking, such as how much you’re adding to your pension each month or the amount you plan to add to a Stocks and Shares ISA each year. In addition, you can estimate factors like investment returns.
With this data, a cashflow model can predict how the value of assets may change during your lifetime.
If you’re worried about your finances, a cashflow model can be particularly useful for calculating how financial shocks would affect you.
For example, you might use it to see how needing to retire five years earlier than expected due to ill health would affect your retirement income. Or, if you stopped non-essential outgoings, such as money into a savings account, because you’re unable to work, how that could affect long-term plans.
Understanding how your finances might be affected by these shocks could mean you’re able to take steps to secure your long-term finances. You might decide to take out appropriate financial protection or increase your pension contributions now to create a safety net and offer you peace of mind.
The outcomes of a cashflow model cannot be guaranteed, but it can provide a useful overview of how your finances might change and highlight potential gaps, which provides an opportunity to close them.
As a cashflow model relies on accurate information, regularly updating the data is important.
According to a February 2025 survey from Moneybox, just a third of UK adults said they feel very confident in managing their personal finances. In fact, 64% believe they’ve missed out on financial opportunities in life due to a lack of financial knowledge and low confidence.
The financial world can seem like it’s filled with jargon, acronyms, and complexities to wrap your head around. So, it’s not surprising that many people don’t feel confident making decisions.
By working with a financial planner, you have someone to turn to when you don’t understand something or aren’t sure what the right choice for you is. The reassurance of knowing someone is there for you could ease financial stress.
The cognitive and emotional effort to plan, anticipate, prepare, and organise your finances may create a mental load that you struggle to manage, even when you’re confident about financial matters.
So, you might choose to work with a financial planner in a way that allows you to take a hands-off approach, with them reviewing assets like your investments or pension on your behalf, with regular reviews.
Handing over these tasks might mean you’re able to focus on what’s most important to you, whether that’s spending time with your family, working your way up the career ladder, or pursuing a passion.
If you’d like to learn more about the benefits of financial planning and find out how we could support you, please get in touch.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
After reading headlines throughout February, you might be expecting a gloomy investment outlook. Yet, despite threats of trade wars and uncertainty around the world, there were market highs. Read on to find out more about some of the factors that influenced investment markets.
As investment markets are experiencing volatility, it’s perhaps unsurprising that some investors sought the “safe haven” of gold. On 10 February, the price of gold hit a record high of $2,900 (£2,288) an ounce.
While you might be tempted to follow suit and change your investment strategy, remember to focus on long-term performance. While returns cannot be guaranteed, volatility is part of investing and, historically, markets have delivered returns over long-term time frames.
The Bank of England (BoE) started the month by cutting the base interest rate from 4.75% to 4.5%, which may provide some relief to borrowers. However, higher than expected inflation could mean the Bank is less likely to make a further cut in March.
Office for National Statistics (ONS) data shows UK inflation was 3% in the 12 months to January 2025 – an increase of 0.5% when compared to a month earlier.
Additional data from the ONS was a mixed bag.
The chancellor will no doubt welcome news that the UK returned to growth in the final quarter of 2024 after the economy grew by 0.1% between October and December. However, GDP per head fell for the second quarter running and the manufacturing sector shrank for the fifth consecutive quarter.
The BoE also slashed its growth forecast. It halved its prediction made in November 2024, and now expects GDP to increase by just 0.75% in 2025.
In addition, a report from S&P suggests businesses are shedding jobs at the fastest pace in the last 15 years (excluding the pandemic). The trend was linked to higher payroll costs following increases to minimum wage and employer National Insurance contributions unveiled in the Autumn Budget.
Markets in the UK were rocky at the start of February. On 3 February, the FTSE 100 fell 1.25% when markets opened following talks of trade tariffs from the US and almost every share on the index was down.
Yet, just days later, on 6 February, the FTSE 100 hit a new closing high on the back of the BoE cutting interest rates. Then, on 10 February, the index hit another high, this time led by BP, which saw a 7% increase after activist investor Elliott Investment Management took a stake in the company.
Amid growing geopolitical tensions, on 25 February, prime minister Keir Starmer announced the government will increase defence spending to 2.5% of GDP by 2027. The news led to UK defence stocks rising, including BAE Systems, which lifted 4.2%.
Official figures from Eurostat show the eurozone narrowly avoided stagnation at the end of 2024 after posting growth of 0.1% in the final quarter. Growth varied across the bloc, both France and Germany contracted, while Spain grew 0.8%.
Figures from S&P Global’s Purchasing Managers’ Index (PMI) indicate the eurozone may have turned a corner. Indeed, the output index was above 50, which indicates growth, for the first time since August 2024. Spain was the main growth engine, but Germany, the largest economy in the bloc, posted its best monthly performance since May 2024.
Goldman Sachs warned the eurozone faced a “sizeable” hit from trade tensions.
Indeed, tariff threats are already affecting the business decisions of some companies. Beauty firm Estee Lauder announced plans to cut 7,000 jobs as it significantly expanded its restructuring programme to allow it to manage “external volatility, such as potential tariff increases globally”.
Similar to the UK, European markets opened in the red on 3 February. Germany’s Dax (-2%), France’s CAC 40 (-1.9%), Spain’s IBEX (-1.7%) and Italy’s FTSE MIB (-1.4%) were all affected by investor anxiety about the effect tariffs will have.
Again, the market didn’t experience a downturn for long.
European shares hit a record high on 12 February. The pan-European Stoxx 600 increased by 0.2% led by Amsterdam-based brewer Heineken, which saw a 12% jump after it revealed better than expected profits.
Following the US side-lining Ukraine during peace talks with Russia, investors anticipated a rise in military spending. On 17 February, more than €18 billion (£14.9 billion) was added to the value of European defensive stocks.
The headline figure for inflation was 3% in the 12 months to January 2025 after a slight increase when compared to a month earlier. The data may mean the Federal Reserve holds off cutting interest rates in the coming months.
Since taking office in January, President Donald Trump has implemented several trade tariffs and made threats to impose more. Trump has said tariffs will protect the US economy, but early signs might indicate it’s backfired.
The US trade deficit widened by around $19.5 billion (£15.3 billion) to $98.4 billion (£77.5 billion) as imports increased at the end of 2024. The jump may be driven by US companies trying to beat potential tariffs by shipping goods in larger quantities.
In contrast to initial speculation suggesting the Trump administration would boost US businesses, JP Morgan analysts said it was now leaning towards a “business unfriendly stance” due to tariffs.
Trump has also spoken about plans to cut immigration and deport those who are not authorised to live in the US. Global investment bank Goldman Sachs has warned these policies could harm economic growth. Indeed, the bank said in a baseline scenario, lowering immigration would result in losing 0.1% of GDP every quarter.
The report also noted that deportation could severely disrupt some industries. In the US, unauthorised immigrants account for around 4–5% of the workforce, but in some sectors, it is as high as 15–20%. The bank added losing these workers may lead to higher inflation.
The market volatility experienced in Europe on 3 February, affected the US too. Indeed, the Dow Jones – an index of 30 prominent companies listed on stock exchanges in the US – was down 1.26% at the start of trading. The broader S&P 500 index also fell by more than 1.6%.
After an initial post-election bounce, Elon Musk’s Tesla saw stocks tumble by 1.5% on 25 February after data showed European sales were plunging.
Markets in Asia started poorly in September as concerns about sweeping tariffs from the US weighed on exports across the region. Indeed, on 3 February, Japanese and South Korean automakers saw dips, including Honda, which fell by around 7%, and Toyota and Nissan, both of which slipped by more than 5%.
When China’s market reopened on 5 February following Lunar New Year celebrations, the CSI 300 index fell by 0.6% on opening.
The threat of tariffs is expected to affect economic performance too.
South Korean think tank Korea Development Institute now projects the country will grow by 1.6% in 2025 – 0.4 percentage points lower than it estimated in November 2024. The organisation said the lower pace of growth was due to a “deterioration of the trade environment”.
However, it wasn’t all negative.
In fact, Chinese technology stocks continued to perform well after receiving a boost in January following the launch of the AI app DeepSeek. The Hang Seng TECH index in Hong Kong was up 2.7% on 12 February and had increased by around 25% in the month to mid-February.
Among the companies that benefited from the boost was internet giant Alibaba and carmaker BYD, which boasted gains of 25% and 30% respectively for the month to mid-February.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
We’re only weeks into 2025, and it’s already been one filled with market volatility and uncertainty. At times like this, being part of a crowd might feel comforting, but following the investment decisions of others could lead to choices that aren’t right for you.
Political and economic uncertainty means investors may already have experienced the value of their investments falling this year. In fact, towards the end of January, you might have been affected by the value of US technology stocks falling sharply.
The sudden emergence of Chinese AI app DeepSeek, which rivals US AI technology at a fraction of the cost, led to some investors questioning whether the US’s dominance in the sector would continue.
According to the BBC, following the release, Nvidia, which makes chips for AI, saw share prices fall 17% on 27 January – the biggest single-day loss in US market history. The next day, the share price began to recover but remained significantly below where it had been the previous week.
It wasn’t only Nvidia that was affected either, many other US technology businesses experienced a fall in share prices. Indeed, the Nasdaq – a technology-focused US index – was down 3.5% when markets opened on 27 January.
With other investors seemingly selling off their US technology stocks, you might have been tempted to follow the crowd and do the same.
Herd instinct is a type of financial bias where people join groups to follow the actions of other people. When investing, it might mean you make similar investments to others or that you sell your investments when share prices fall. In fact, herd instinct at a large scale could lead to market crashes or create asset bubbles.
It’s easy to see why this happens. Being part of a crowd can offer a sense of comfort, especially during periods of uncertainty. In contrast, standing out from the crowd could mean you feel vulnerable or that you’re making a mistake by going against the grain.
So, following the crowd may feel like the sensible option. After all, if everyone else is doing it, it must be the right decision.
Yet, it’s not as straightforward as that. In fact, herd mentality could harm your long-term plans and wealth.
When following the lead of others, you might assume they’ve already carried out research, so you skip analysing the decision. The other investors could also be acting based on herd instinct or making a decision that’s right for them, but that doesn’t automatically mean it’s the right option for you.
While it can be difficult to not compare your investment decisions with those of others, remember, with different goals and circumstances a great investment for one investor isn’t right for another.
So, here are three useful strategies that could help you focus on following your own investment path.
1. Develop a clear investment plan
One of the key steps to reducing the effect of herd mentality on your decisions is to have a developed investment plan. By outlining your objectives, you’re in a better position to understand the types of opportunities that are right for you.
If you have confidence in your investment strategy, you’re also less likely to be tempted to make changes. For example, if you know your investments are on track to provide “enough” to reach your long-term goals, taking additional risk for a chance to secure higher returns might not be as appealing.
As a financial planner, we can help you create an investment plan that provides you with a clear direction.
2. Diversify your investments in a way that reflects your plan
One of the challenges of investing is keeping emotions in check. You’re more likely to follow the crowd when the market or your investments face a sharp fall or rise. It might mean you feel uncertain about the investments you’ve chosen, so you start to look at what others are doing.
Diversifying won’t shield you from all market movements, but it could mean you’re less exposed to volatility. By investing in different asset classes, sectors, and geographical areas, when one part of your portfolio experiences a dip, it could be balanced by gains in another. As a result, it may mean the value of your investments is less likely to experience large fluctuations and limit knee-jerk decisions.
3. Be aware of your investment risk profile
All investments involve some risk. However, the level of risk can vary significantly.
So, understanding risk could mean you’re able to confidently pass by opportunities that you know involve more risk than is appropriate for you even if it seems like everyone else is investing in it.
If you’d like to talk about how to invest in a way that aligns with your goals and circumstances, please get in touch. We can work with you to create a tailored investment strategy that may give you confidence in the steps you’re taking.
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
