/ PLATFORMS /
We’ll tackle this in more detail
next month, but in essence, the
new pension freedoms require
a different approach to your
retirement planning.
In a drawdown world, there are
still opportunities to increase the
value of your pension pot when
you are actually in retirement.
The accepted investment wisdom
used to be that you dialled down
risk in the final few years before
you stopped working, at which
point you purchased an annuity
or converted the focus of your
portfolio from growth to income.
Now, as we live longer and can
freely access our investment fund,
we should take a fresh look.
If you retire at 67 and live until
your late 80s, a further 20 years
of potential growth are still to be
had as you enter drawdown. There
is the risk of your investments
falling in value, which can mean
you have to sell assets at a loss in
periods of down markets, but you
can mitigate these risks.
26
A beer and
a coffee less
a day could
result in a
£180,000
retirement pot
By entering retirement
with a high-risk portfolio and
around three years of cash,
you can sell funds that are in
profit in positive markets and
dip into your cash in negative
ones, so you don’t have to sell
investments at a loss. They tend
to recover as markets go through
the cycle and you can top up
your cash in the good times.
EFFECT OF INCREASING RETIREMENT CONTRIBUTIONS
£800,000
0% increase in contributions
£700,000
2.5% increase in contributions
£600,000
5% increase in contributions
£500,000
£400,000
£300,000
£200,000
£100,000
£0
2016
2017
2018
2019
2020
2020
2021
2022
2023
2024
2025
2025
2026
2027
2028
2029
2030
2030
2031
2032
2033
2034
2035
2035
2036
2037
2038
2039
2040
2040
2041
2042
2043
2044
2045
2045
2046
2047
2048
2049
2050
2050
2051
2052
2053
TIP 3: DON’T GIVE UP
ON GROWTH
Assumptions: £240 per month, (£2,880 first year) contributions. Growth rate per annum of 5 per cent.
Source: Trustnet Direct
trustnetdirect.com