5 financial decisions and considerations that your clients need to make before retirement

Retiring is a big change, and your clients will have a lot to think about and deal with during the transition.

So, if you have clients approaching retirement, they should give some thought to these five financial decisions and considerations that will allow them to live the kind of lifestyle they want.


  1. Can your clients afford to retire?

First and foremost, your clients need to consider whether they can afford to retire – or rather, can they afford to live their dream lifestyle in retirement?

To answer this question, your clients should first sit down alongside their partner and decide on their goals for the future.

There are two elements they should consider here:

  1. What do they want to do? Do they want to stop working immediately and reach big life goals such as travelling the world? Or would they prefer a “flexi-retirement”, reducing their work hours and gently transitioning into retirement?
  2. When do they want to do it? There’s no set “retirement age” in the UK, but do your clients want to retire in their 60s, or even earlier? Obviously the longer they want to spend retired, the more money they’ll need.

Having a rough idea of what they want to do in later life and when they want to get there will allow your clients to then figure out how much these things will cost. In doing so, they’ll be able to see whether they have enough to live the kind of lifestyle they want.

This is an area where financial planning can add immense value. A financial planner will be able to use cashflow modelling to project different outcomes for your clients’ wealth, showing them the impact of their decisions.

If the numbers don’t quite add up, a planner will also be able to suggest solutions that will allow your clients to reach their goals, no matter what they are.


2. When should your clients draw their pension?

Many of your clients will have chosen to build a pension pot over their working lives. So, a key decision they’ll need to make is in when to finally take money out of it.

Typically, clients will be able to start accessing their defined contribution pension from age 55 (rising to 57 in 2028).

From that threshold, your clients are entitled to draw up to 25% of their pension tax-free. They can then take the rest how they see fit, with this money being taxable as income.

However, just because your clients can access their pension at 55 (or 57 in 2028) doesn’t necessarily mean that they should. It may be more valuable for them to continue living on other non-pension assets for the time being, leaving their pension funds invested and potentially growing in the market.

In fact, if your clients continue to work in some capacity in retirement, nothing stops them from paying into their pension even in retirement, continuing to benefit from tax relief and those potential investment returns.

Your clients should use their goals as the basis for this decision. By knowing how much they need to retire, they can make an informed decision over when and how to access their pension.


3. Should your clients replace their workplace benefits?

Workplace benefits are commonplace incentives for retaining talent these days, and any clients you have who are employed may have some of these valuable perks.

For example, they might have:

  • A company car
  • Private medical cover or insurance
  • A death in service arrangement or other life cover.

However, when they retire, they’ll likely lose these benefits, some of which they may have relied heavily on.

So, a key consideration is whether to replace them on retirement, taking out their own medical or life cover and potentially even buying the company car.

Again, this underlines the importance of good financial planning: your clients need to know how much value they gain from any lost benefits, and whether it’s financially worthwhile seeking them out on their own.

For example, while they could stick with the employer’s medical care and pay for it themselves, it might be more cost-efficient to shop around and find a cheaper provider that still offers what they need.

These decisions will come down to personal preference, and there’s no one solution for everyone. The key is to factor the choice in before it’s too late.


4. How can your clients pay less tax in retirement?

As high earners, your clients may have become accustomed to paying large amounts of tax throughout their careers as higher- or additional-rate taxpayers. As a result, retirement may present an opportunity for them to reduce their tax bill.

Although your clients will continue to pay tax in retirement, there may also be opportunities to reduce how much tax they pay, depending on how much income they draw.

In the 2022/23 tax year, Income Tax bands are as follows:

  • 0% for income under the Personal Allowance of £12,570
  • 20% for basic-rate taxpayers with income between £12,571 and £50,270
  • 40% for higher-rate taxpayers with income between £50,271 and £150,000
  • 45% for additional-rate taxpayers with income exceeding £150,000.

With careful planning and knowing exactly how much they need, your clients may be able to move down into a lower tax band by taking their income more tax-efficiently.


5. Should your clients gift their money to their family?

Supporting children and grandchildren with financial gifts is a common goal for many retirees, and so your clients may be considering gifting money or assets to their family.

Of course, your clients must take great care here. The funds they’ve built up will need to last them for the rest of their lives, and so it’s important for them not to give away more than they can afford.

Cashflow planning can once again be useful here, providing a detailed breakdown of exactly how much they can safely afford to gift. This offers the reassurance that they’ll be able to make gifts while living their desired lifestyle.

Gifting money or assets can also come with valuable Inheritance Tax (IHT) benefits. Each tax year, your clients can give away up to £3,000 (or £6,000 if they’re married) to whoever they’d like, with that amount falling outside of their estate for IHT purposes.

In fact, they can theoretically give away as much as they’d like and have it fall outside the value of their estate, provided they survive the gift by seven years or more.

Make sure your clients speak to an expert first as IHT can be complicated.


Work with us

When your clients are making financial decisions and considerations like this, it can be invaluable for them to speak to a financial planner.

So, if you’d like to find out how we could help your clients, please do get in touch with us at Henwood Court.

Email info@henwoodcourt.co.uk or call 0121 313 1370 to speak to us today.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

Henwood court

More news


3 unmissable lessons Elvis can teach you about choosing the right financial planner


Bonds and base rates

contact us

We’re here to help

0121 313 1370
The Cruck Barn
20 Country Park View
Sutton Coldfield
B76 1TE