Member Article

Is equality in pension planning getting closer?

As 2020 continues to present financial pressures and uncertainties around the future, PSG Wealth Management MD, Paul Gilsenan, look at the toll poor financial planning can take, why women can be particularly impacted, and looks at the schemes put in place to help.

From traditionally lower earnings to taking on the role as primary care-giver for children and elderly relatives, women can find when it comes to pensions they are dealing with a smaller pot than they envisaged. Couple this with the life expectancy of women across the UK, continuing to be longer than men, and it is easy to see why solid financial planning is a must.

While it may seem the odds are distinctly stacked against a solid financial future, the inequalities are beginning to be rectified. Equalisation of annuities and insurance rates, as well as aligning state pension ages, are all playing a part. One of the biggest change has been the ability to make a ‘drawdown’. Having previously been the sole domain of wealthier investors, the drawdown allows people to take money directly from a pension, with no limit on withdrawals, as soon as they reach 55.

Of the fund, 25% can be taken as a tax-free lump sum. The remaining 75% continues to be invested and can be drawn down in any amount, at any time. Any money drawn out beyond the 25% tax-free lump sum is liable to income tax. An alternative to annuities, this can be a path into investors, particularly for the 86% of non-investing women who believe ‘women like them don’t invest’, according to a survey by the Yes She Can project – a cross-industry initiative which aims to engage women to increase their understanding of and participation in financial matters.

A lack of confidence can often be a barrier to putting in place a retirement plan that delivers a solid financial future. Taking the right financial advice can be crucial understand the goals and challenges, and put in place realistic solutions tailored to individuals circumstances.

It is important to note that the value of an investment will be directly linked to the performance of the funds selected and the value 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 generally dependent on individual circumstances.

“Income drawdown” will reduce the size of your pension fund and the investment growth may not be sufficient to maintain the level of income you wish to draw. If you withdraw money at a rate greater than the growth achieved by your investments, your remaining fund will reduce in value. The level of income you take will need to be reviewed if the fund becomes too small - this is more likely the higher the level of income you take.

This was posted in Bdaily's Members' News section by PSG Wealth Management Ltd .