Retirement planning is an important consideration for anyone working in the licensed trade, writes advisor Angus Kirk
IT’S fair to say that a lot of people don’t consider what they will do in retirement.
For those who are 30 years or so away from retirement, that may seem understandable. More often than not there are more ‘urgent’ concerns, such as getting on the property ladder, marriage or starting a family.
However, with average life expectancy set to increase to 80 years old (for children born at the start of the 1980s) this is going to bring an unprecedented issue for people being able to fund their retirement.
Company owners, like all other people, must be aware of, and encouraged to, plan for their retirement regardless of their age; from those who have just started out in business through to those considering retirement in the near future.
Begin with the end in mind
It is crucial to build a bespoke plan for a person’s particular life stage and age – a plan that has set financial goals and targets.
Most importantly, the plan should be reviewed every year to ensure that it remains appropriate and is likely to meet its long-term goals.
Good financial planning advice and sound cash-flow modelling can help people understand and visualise what they actually have to save on a monthly basis to meet their retirement needs.
It is crucial to build a bespoke plan for a person’s particular life stage and age.
It is a common assumption that outgoings fall on retirement – the mortgage may be paid off and the children have left the nest.
However, higher household bills can accrue due to more time spent in the house and there is likely to be greater leisure spending.
Covering all the bases
There are a number of financial and taxation factors to look at in retirement planning in the licensed trade.
It is crucial that all the bases are covered through structured financial planning.
These include existing investments, savings, property, capital gains tax allowances, ISA allowances and importantly lifetime allowances.
Company owners, must be encouraged to plan for their retirement.
The ‘pension freedoms’ reforms of 2015/2016 brought radical changes to the pension regime and people should be fully aware of the relevant financial and tax implications of certain strategies.
There are also financial planning implications of an owner-manager in the trade selling their business at retirement in terms of maximising the impact from the proceeds of the sale. This should also be considered when planning out specific strategies.
What is important to stress is that there is now greater flexibility in building individual retirement and pension strategies for solicitors and these can also include SIPPs (Self Invested Personal Pensions).
• Angus Kirk is a director of Edinburgh-based Bridge Investments.