Trustnet Magazine Issue 21 September 2016 - Page 7

/ YOUR PENSION POT / the things he had not been able to do before.” “He felt he had the controlling hand because it had been his pension, investments and savings and she had never had any income,” said Mealing. “However, as far as the wife was concerned, the agreement was that she would be the homemaker and give up her ability to earn and so expected a greater say in how it was to be spent.” WHEN ONE BECOMES TWO This may seem like an abstract concept, but divorce rates have increased rapidly among the baby boomer generation as partners realise they are growing apart and may have different aspirations. This can place women at a distinct disadvantage as they often have limited savings of their own. However, both partners will suffer if the retirement planning has to be unwound to make provision for two individuals and it becomes even more expensive if the split occurs after the purchase of an annuity. While the secondary annuity market will offer a degree of flexibility to those wishing to sell a product, it will come at a considerable cost. Prevention is always better than cure and regular planning provides greater savings potential for the partner with a low income. Divorce rates have increased rapidly among baby boomers as partners realise they are growing apart “This doesn’t have to be about equalising levels of savings,” says Mealing, “but is about taking advantage of all the tax breaks available and is certainly better than transferring assets between couples at the point of retirement.” KNOW YOUR OWN MIND Perhaps the most crucial decision overlooked by those entering retirement is not how to access their income, but their ability to make financial decisions in the future. Robertson has a client in his nineties who still sits on a board and is “tack-sharp”, but he is the exception to the rule and there can be a considerable reduction in mental capacity by the age of 70. “At retirement – and certainly before it is required – is the point where you should have a conversation about creating a lasting power of attorney,” he explained. “Thankfully, we seem to be moving away from the British reserve that doesn’t involve the family in financial affairs, but it is important to do it before it is too late, so include it in your retirement planning.” THE FINAL SOLUTION Even if you don’t choose a one-stop retirement income in the purchase of an annuity – and fewer will in the future – keeping abreast of your requirements is essential. If the kids don’t want or need a bequest, investment may become more of a holding pattern, with a depletion model the most effective route to draw income. With time, annuities become better value and may be more appealing if you don’t wish to be bothered with making financial decisions – or worrying about their potential outcome. These decisions may seem far off, but so did retirement itself, once. “The most important thing to remember is there is no default solution,” said McPhail. “Finding the best outcome requires that you plan in advance.” So, consider all opportunities, reject none out of hand and regularly review your journey. 5