Common Financial Mistakes Made in Retirement

In my line of work, as an independent financial advisor (IFA), I have the pleasure of speaking to people at all stages of their financial life. Some are just beginning to consider major decisions like pensions and investment, while others have already retired but are finding they are struggling to make their money stretch as far as they were hoping.

There are many reasons why people struggle financially in retirement, and we have found that retirees are often still making financial mistakes well into their 60s, 70s and 80s. Here’s my list of some of the common mistakes to avoid in retirement.

1. Withdrawing your pension into a bank account

Citizens Advice has found that some 30 per cent of those who decide to cash out their pension early are then paying it straight into a regular bank account with little to no interest paid on it.

We now enjoy a few more freedoms to decide when to withdraw our pension cash, but this doesn’t mean that withdrawing the money early in your retirement is necessarily the right thing to do – especially if it’s going to languish in an account that pays less than inflation.

Remember, you can withdraw 25 per cent of your pension pot as a tax-free lump sum, but once that’s gone, it’s gone. You’ll then be limited to your personal allowance only, or you’ll be paying tax on the rest. If the tax-free lump sum amount is forming part of your retirement plan, it might be best to leave it where it is for a little longer.

It is important to remember that investments do not include the same security of capital which is afforded with a deposit account. Therefore, if you have any concerns regarding the level of investment risk your pension funds are exposed to, please contact us for a review.

2. Spending too much too soon

Retirement, for most, is a marathon, not a race. You could easily spend two or three decades in retirement. Withdrawing your tax-free lump sum to help your son or daughter onto the housing ladder might seem like the best use of your cash as soon as you can access it. However, what happens ten or 15 years down the line when your money runs out?

At the same time, we understand that it can sometimes be rewarding to spend more during the early years of your retirement when you can enjoy travelling more easily, for example.

Working with an IFA can help you get the balance right by planning out your retirement clearly with your personal hopes and dreams for retirement at the centre of it all.

3. Failing to review your pension investments regularly

Even before you’ve retired, it makes sense to regularly review where your pension is invested and obtain a clear idea of your options. Simply investing your pension and then forgetting all about it is a common mistake among working-age people. However, once you’re retired, it also pays to keep abreast of new investment and savings opportunities by consulting with an IFA.

Remember, retirement is a time for a little R&R, but it’s also a surprisingly expensive period of your life, especially if you want to continue to live life to the full. Therefore, seeking professional advice even after you’ve retired will ensure you don’t suffer unnecessarily.


Important note: Pension income could be affected by 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.

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A guide to deciding your investment risk profile

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Whether you are reviewing your pension or looking to invest for the first time, the amount of risk you are willing to take is one of the main decisions you need to make. As most people know, investing wisely is all about weighing up the risk against potential reward. Although you are never guaranteed to make money on your investment, as its value can fall as well as rise, getting your risk profile right can help you reach your financial goals.

Here is a Windsor IFA’s guide to the questions you will need to ask yourself to help you get your investment risk profile right the first time.

1. How long do you want to invest for?

If you are willing to invest over a longer period, you may be able to ride out investment fluctuations more effectively. When you make higher risk investments, you may find that your investment fluctuates more than a less risky option. Therefore, a short-term investment may hold more risk than a longer-term investment. This is because, over the long-term, stock market investments tend to rise above inflation – although there is no guarantee of this, of course.

2. What are your financial goals?

This is a key factor to be considered. If, for example, you simply want to invest your cash in products that will help your gains stay above the inflation rate, but anything over that is a bonus, then a relatively low-risk investment profile may be adequate. If your investment goal is to maximise gains over a particular term, you may want to invest in riskier products.

Your investment goals are likely to be affected by factors like your age, your financial status, your employment security, your family situation and your available assets.

3. What other assets do you have?

It is vital that you take the time to understand your actual financial position when considering your risk profile. Examining your assets and their value and future potential growth can help you to understand your financial goals. Speaking to an IFA can help you to take an objective view of assets such as existing pension pots, property and savings.

When weighing up how much risk you are willing to factor into your investment portfolio, this is a fundamental question to ask yourself. If you are investing just a small portion of your wealth, then a higher risk approach may be more palatable, whereas investing your life savings might need a more balanced approach.

Answering these four questions is just part of the process of deciding how much risk you are willing to expose your investment to. Personal finances can be an emotive topic, and, whatever your personal wealth, speaking to an IFA about your investments will help you to step back and make sensible decisions, which can increase your chances of achieving your goals.

Giles Warren, Independent Financial Advisor (IFA)

The value of your investment can go down as well as up, and you may get back less than the amount invested.

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Why is Financial Planning Important?








We all have goals in life, and to achieve these goals, it is important to plan for them. The old saying “If you fail to plan – you are planning to fail” is very true. Very often, people have a good idea of what all of their pensions and investments are worth, but they have no idea if they are going to meet their capital or income goals in the future.

Whether you’re interested in savings or investments, it pays to take a sensible approach to your financial future by consulting a professional advisor about the best ways to plan.

Here, Giles Warren, a leading Windsor-based IFA, discusses in a little more detail the importance of cashflow modelling and financial planning.

What is cashflow modelling?

Cashflow modelling is all about projecting your expenditure and income, and applying a realistic growth rate to your investments and pensions, to work out how you are going to meet your financial objectives. As an IFA, I undertake this analysis in conjunction with a client’s preferred exposure to risk to help advise clients on the optimum investment approach.

Cashflow modelling means that IFA services can be tailored to each client more specifically. It also allows us to illustrate how their current approach to investment will look, and project this forward to meet the goals in the years to come. This helps clients to focus on their goals and weigh them up against the risks.

What is financial planning?

Financial planning is simply the act of working through your future, from a financial perspective, with an IFA to plan for security and prosperity during your working life and into your retirement.

This can be achieved through a combination of investments, savings, insurance, tax planning and pension savings. We may look at the following factors when examining your financial future:

· Your professional life/aspirations

· Your retirement plans

· Your investments

· Your property

· Your personal goals

· Your expenditure Vs your income

· Your Family Protection requirements

· Your children’s/grandchildren’s education

Effective financial planning will help you to put in place a strategy for growing your capital and future income over the years. We will also look at your cashflow, to allow us to build a solid financial foundation from which to safeguard day-to-day spending requirements and help you increase your disposable income in the short, middle or long-term.

How can financial planning help secure my family’s future?

Through effective planning, we help our clients to provide a plan to alleviate any financial worries and concerns that can blight even wealthy families.

We can help you obtain peace-of-mind and cope with the unexpected costs as they appear on life’s journey.

Of course, there’s no magic potion to remove all of life’s unexpected twists and turns, but we believe that proper financial planning is a fundamental process which can help you plan for them in the best possible way.

Please feel free to call us for more information on 01753 290111.

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A Guide to Pensions for the Self-Employed

Are you among the almost 5 million Brits who are self-employed? If the answer is yes, then you are also likely to be one of the two-thirds of self-employed people who aren’t yet saving into a pension. Giles Warren is here to answer some common questions:

Am I entitled to a State Pension if I am self-employed?

Yes, providing you have made National Insurance contributions, you will be entitled to a State Pension. Although there are some setbacks to being self-employed in terms of pensions, one thing you can depend on is your State Pension. Everyone who has worked is entitled to a State Pension, which, as of 2016, is linked entirely to your National Insurance Contributions record and currently (2019/2020) pays out at £168.60 per week. You can find out more about the New State Pension here.

You will receive the full payout if you have 35 years of NI contributions under your belt but will also need to keep these payments up until your pension age.

Will I receive any top-ups?

You can avail yourself of government pension top-ups if you start paying into a pension scheme of your own.

As you may know, employers must now set up workplace pension schemes for their employees. They must also pay into these schemes to help top up payments made by their employees. This is something self-employed people don’t get to benefit from However, the government will pay £25 for every £100 a basic-rate tax-paying self-employed person contributes to their personal pension scheme. Higher rate tax-payers can claim a further £25 for every £100 invested in their future through their tax return.

This contribution is not to be sniffed at and is a major incentive to set up a pension scheme today. The State Pensions is great, but it isn’t necessarily going to keep you in the way you have become accustomed, if you catch my drift. If you want a more comfortable retirement, paying into a personal pension can be the way forward.

Like all pension schemes, the earlier you get saving, the larger your pension pot will have become by retirement.

Are my contributions taxed?

You have a generous personal allowance of up to £40,000 in pension contributions, as of the 2019/2020 tax year, that you can make without paying tax (subject to certain earnings). Any contributions to your pension scheme made in excess of this allowance will be subject to a charge.

If you have had a few really good years of income and you have a surplus, even after you had paid the £40,000 into your pension for the 2019/2020 tax year, then you may wish to consider carrying forward your allowances for the previous three years. This may also reduce the amount of tax you will have to pay.

What type of pension should I choose if I’m self-employed?

There are choices to be made for self-employed people looking to set up a pension. The options include:

· Basic personal pensions

· Self-invested personal pensions

· Stakeholder pensions

· NEST pensions – if you are also an employer.

Each of these pension varieties carries certain charges and have various advantages and disadvantages, depending on your personal circumstances. Basic personal pensions, for example, are easy to come by and most pension providers offer them, and within Self-invested person pensions, you can buy commercial property, amongst other types of investments. Contact us today for guidance on which pensions might work best for you.

The tax treatment is dependent on individual circumstances and may be subject to change in future. The value of units can fall as well as rise, and you may not get back all of your original investment.

A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

The Financial Conduct Authority does not regulate taxation advice or some aspects of a workplace pension.

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Is a Pension Drawdown Scheme Right for Me?

Pension drawdown schemes are intended to give clients more control over their pension funds and how and when to extract money from their pension pots. When you set up a pension drawdown scheme, you have the option to take out 25 per cent as a tax-free lump sum. Funds then need to be selected for the remainder of your pension pot.

You will be able to draw an income from this remaining pot on a flexible basis, but there are many factors to consider. As with all complex financial choices, it can be beneficial to talk to an independent financial advisor about your options.


Pension drawdown schemes, which are also known as ‘income drawdown’ schemes or ‘flexi-access drawdown’ schemes carry more risk than annuity schemes. This is because the income isn’t guaranteed for life so, to decide whether this type of scheme is right for you, it’s advisable to consider whether your pension pot will last you throughout your remaining life and if you need a flexible income.

Some of your income may be secure, such as a state pension or defined benefit/final salary pension scheme. Other income is flexible, such as savings and investments, salaried income and rental income, for example. Your Windsor IFA, Giles Warren, will help you to examine your income and work out whether a pension drawdown scheme is right for you.

If you do decide to go for a drawdown scheme, you will need to consider:

  • How much you are likely to need to live on – taking into account your life expectancy isn’t always easy, but we can help you do this objectively.
  • How much you can safely draw down each year. A tried and tested approach can be to withdraw just 4 per cent of your entire pension pot in the first year after retirement, increasing the amount by inflation each year after that.
  • The fact that you can opt out of income drawdown schemes and use some or all of the pension pot to buy into an annuity later on if you prefer.
  • How much you will be expected to pay in income tax on the income you draw down each year. Your IFA can help you plan the amount you drawdown carefully to limit your tax liabilities. You’ll want to avoid going into the higher tax bracket if at all possible.
  • Your lifetime allowance. If your pension pot is worth more than £1,030,300, you’ll pay tax on the amount exceeding the limit when you withdraw it.
  • Inheritance and how the drawdown scheme impacts your estate will also need to be considered.

There are pros and cons to pension drawdown schemes and deciding whether they are appropriate for your unique situation isn’t always easy. Speaking to an IFA can help you to make an informed decision and ensure your pension doesn’t run out before you do!

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How to Limit Taxation After Retirement

Many of us look forward to retirement and hope that we can be financially secure by the time we finish working for good. Careful planning helps but being aware that taxation can continue even past retirement is important if you are going to organise your finances properly. Here, we take a look at the issue of taxation after retirement a little closer.

Income tax

Many people do not realise that you will continue to be liable for income tax after you retire. You may not be receiving a salary any more, but many of you will receive a pension income. Although the State Pension is paid tax-free, this is only the case because it is under your Personal Allowance. You will pay tax on income received from a personal or workplace pensions once you exceed this Personal Allowance. The Personal Allowance for most people is £12,500 tax-free as of April 2019. You will also be able to withdraw 25 per cent of your pension pot tax-free in most cases.

Did you know you can now apply for a State Pension Forecast by filling in this form. This will provide you with an estimate of how much state pension you will receive, together with the date from which you can claim. Or if you know your Government Gateway login, you find out immediately online here.

For those receiving larger pension payouts, income tax is payable at the normal rates on anything over their personal allowance.

Savings and investments

Your income from savings and investments may be taxed, so it’s important to try to limit your exposure by making the most of tax-free savings products. You can invest £20,000 per year into a Cash ISA completely tax-free.

Interest on other savings is taxed, but each of us has a Personal Savings Allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. This is the amount of interest from your savings you can receive each year tax-free.

Annoyingly, you used to be able to opt into receiving your savings income with the tax already taken off by filling in the R85 form, but this is now not the case. However, if you have previously done so, you will continue to receive your interest this way. For the rest of us with savings income over £1,000, HMRC collects the tax through our PAYE code.

Capital gains tax is payable on investment income, so bear this in mind when investing in the first place. Speaking to a good IFA about tax-efficient savings and investments can help to reduce your tax liability.

Inheritance tax

We can’t talk about retirement tax without touching on inheritance tax. Changes have been made recently to inheritance tax rules, which will scrap the tax completely for couples passing on their property up to the value of £1m from the 2020/2021 tax year.

This is being brought in through a new Main Residence Allowance, which will increase in increments over the coming years until it reaches £175,000 per person in 2020. This can be added to the existing £325,000 inheritance tax allowance to total £500,000 per person, hence the £1M per couple.

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Capping the tax-free lump sum would be a mistake

A new report by an influential think tank has suggested that the tax-free lump sum for pensions should be capped at just £40,000. Giles Warren Financial, and many other independent financial advisors, think this would be a mistake.  Here, we explain why.

What is the tax-free lump sum?

Currently, pensioners are usually able to take as much as 25 per cent of their pension savings as a tax-free lump sum. The maximum this could be, with a lifetime allowance standing at £1m, is £250,000.

Now, the Resolution Foundation has published a report calling for this tax-free lump sum to be capped at just £40,000. It argues that this would generate massive revenues for HMRC while only impacting a quarter of pensioners.

The report states: “The current ability to take over £250,000 tax free is worth up to £119,000 to an additional rate taxpayer, £105,000 to a higher rate payer, £53,000 to a basic rate payer and nothing to lower income pensioners who’d be below the personal allowance each year anyway.”

Why are IFAs hitting back?

IFAs around the country have been hitting back against these claims, pointing out the fact that a move to cap the tax-free lump sum would be damaging in several ways. Most importantly, we think that capping the amount you can withdraw as a pensioner without paying tax would discourage people from saving for their retirement in the first place.

“People are already feeling discouraged from saving for their retirement and a cap on the tax-free lump sum would simply disincentivise pension saving even further,” stated Giles Warren. He added: “We have seen cuts to the lifetime and annual allowances in recent times and a further cap would make pension saving less appealing to younger workers who need to be putting money aside for their future.”

As well as the pension cap idea, the Resolution Foundation’s report also called for the inheritance tax tax-free threshold to remain at £1m. This would mean that it would not increase alongside inflation.

Here at Giles Warren Financial we believe this would amount to a stealth tax increase. It is another idea that will work to disincentivise saving – as the real rate of tax will increase over the years. Failing to adjust the tax-free threshold in line with inflation means a greater proportion of people’s inheritance will be taxed.

Other ‘tweaks’ proposed by the Resolution Foundation in their report included scrapping savings schemes such as the Help To Buy ISA and the Lifetime ISA, both of which are aimed at trying to encourage responsible attitudes to money. They are open to everyone and help people to save tax-free for their future or for a home of their own.

Giles Warren argues: “Scrapping these products will leave a great number of people with very few avenues for saving without heavy taxation.

“Saving is already unattractive to many younger people, but at least tax-free ISAs give them a means through which to grow their cash. Taking these away would be damaging.”

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How much money do I really need to retire?

Whether you have a final salary pension scheme, a private pension or no pension at all, you are likely to wonder how much money you will actually need for retirement. Perhaps you are hoping to retire early and wonder if you have enough in savings to allow you to do this. Here, your trusted Windsor IFA, Giles Warren, takes you through some simple steps to help you work out how much you are likely to need once you’ve stopped working for good.

Consider your priorities

Firstly, it’s important to point out that enough money to live on for one household isn’t necessarily enough for another. Of course you need to consider the amount of money you are used to living on now, but you also need to think about how many luxuries you are hoping to enjoy in retirement.

Many people see retiring as an opportunity to travel more, so the cost of this needs to be factored in. Others prioritise things like new cars, or eating out. Your plans for retirement, in terms of how you see yourself spending time (and money), are a crucial in helping you work out how much you need.

Will you have debts?

We all hope to be debt-free by the time we retire (and that includes a mortgage), but this isn’t always possible. Factoring in mortgage or other debt repayments is a must-do when you start to plan for retirement.

What do most people live on in retirement?

Again, this is hard to say, but research by Which? found that their members spent an average of £2,200 per month (£26,000 per year) in retirement, rising to £39,000 per year for those leading more luxurious lifestyles with long-haul travel etc.

Another common calculation for working out how much you need to retire is to aim for around 70 per cent of your current annual salary, or your final salary before retiring. You’ll then need to deduct the state pension you receive, and the value of your workplace pension and other retirement income, if you have any. This will help you to identify if you have a shortfall that will mean you need to increase your savings.

What does a state pension provide?

The current state pension for a retired couple amounts to, a not-inconsiderable, £251.90 per week. This will go some way towards covering your retirement expenses, but you’ll need to find the remainder from elsewhere if you hope to live any more than a pretty simple existence.

And Workplace Pensions?

These automatically put aside 8 percent of your income each month (from April 2019) but you may need to increase this to save enough to retire in comfort.

If you have a pension through work, you have several options in terms of how you draw down the cash – including a lump-sum, a choice that requires some self-discipline.


To conclude, there’s an awful lot in the media about the shortfall in pension and retirement income. However, many people also tend to overestimate how much they will spend in retirement. Consider talking to us about your specific situation if you have concerns about retirement and we can help you to plan for a prosperous future.

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The Autumn Budget – Our View

As trusted providers of financial planning services in Windsor and beyond, we think it’s important to provide you with a quick debrief on how the recent Autumn Budget might impact you. Below we’ll explain how Philip Hammond’s latest Budget will actually affect you and your finances.

For taxpayers…

There was good news for taxpayers in the Autumn Budget. The Chancellor had previously announced his intention to increase the Personal Allowance to £12,500 from April 2020. He also promised to up the Higher Rate threshold to £50,000 at the same time.

In the Autumn Budget he brought these changes forward by a year to April 2019, so some of will see a meaningful reduction in our tax bill a little sooner than expected.

For homeowners…

Hammond also announced the extension of the relief on Stamp Duty to First Time Buyers of shared ownership properties up to the value of £500,000. This is the second year in a row that the Chancellor has extended Stamp Duty relief, further cementing the government’s attempts to help more people get onto the property ladder.

There were also some changes that will impact those selling their homes. As a homeowner, you can avail yourself of the Private Residence Relief on Capital Gains Tax charged on profits made from property. However, there were some minor changes to tighten this relief a little.

Now, if you let out your primary residence for a period, you must be in joint residence with the tenant to still qualify for full Private Residence Relief. Also, if you move out towards the very end of the period of ownership, you will only qualify for the relief if this takes place within nine months of the sale date.

For savers and investors…

There was very little in the budget to interest savers this Autumn. Hammond did, however, offer a small crumb to parents saving for their kids’ futures with an increase in the Junior ISA and Child Trust Fund tax-free limit to £4,368.

And for National Savings and Investment (NS&I) savers, there was good and bad news. On the one hand the government said it wants to attract more people to Premium Bonds by relaxing rules on parents buying them for their children. It is also planning to reduce the minimum purchase of the bonds and release an app to make them even more attractive to savers. On the other hand, those who invested in NS&I’s index-linked savers certificates, will see their returns reduced significantly as the interest will now be linked to the Consumer Price Index, as opposed to the Retail Price Index (reducing the interest from 3.3% to 2.4% as things stand today). This is likely to leave around 500,000 people rather disappointed.

For pension savers…

Although many of us expected changes to the pension tax relief regime, this didn’t come up. However, the Lifetime Allowance, which is the limit on the value of the private pension each person can draw from before they are taxed, will increase a little to £1,055,000, from £1,030,000 from April 2019.

Our conclusion…

Despite all the talk of the ‘end of austerity’ and increased economic growth projections, there was very little in this Budget to suggest anything much has changed. It seems that the shadow of Brexit is simply looming far too ominously for Hammond to make any significant moves towards putting cash back into people’s pockets just yet.



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Pension changes – Annual Allowance and how it affects high earners.

Postitstax3There is something called the Annual Allowance which is the maximum pension contribution that an individual and employer can make into a pension.   The size of this annual allowance has been reduced from £40,000 to £10,000 for those earning over £210,000 a year.

Let’s assume Dave’s salary is in the middle of these figures – £180,000 and his employer puts in a 10% Employers salary and Dave puts in 5% – he is effectively making a £27,000 annual pension.  This will not affect Dave immediately however when it comes to January in the following tax year its time to do his Self Assessment,  he will then not be able to claim all the extra tax on his pension.

So you work it out like this – £ 180,000 – £150,000 =  £30,000 divide by 2 = £15,000.  Therefore the annual allowance will drop from £40,000-£15,000 = £25,000.

In this rough example, Dave would have normally received 20% at source on the contribution of £27,000  (£5,400) and then claimed back on Self Assessment an additional 25% (£6,750) making a total tax break of £12,150 for his £27,000 contribution.  However, under the new rules, he will only receive 45% on the £25,000 i.e. £11,250.  This equates to a loss of tax relief of £1,100.

However, there is a way in which you can claim extra pension contributions and this is by making sure you’ve used up your previous allowances by using a Carry Forward Calculator.  The Prudential has a good one which can be found at the following link Annual Allowance Calculator

 If you would like us to help you with any of this information then please call us on 01753 668831 or email


Giles Warren

[This is Giles Warren’s interpretations of the rules.  E&OE]

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