{"id":51891,"date":"2021-09-01T08:30:00","date_gmt":"2021-09-01T08:30:00","guid":{"rendered":"https:\/\/finsbury-associates.com\/?p=51891"},"modified":"2022-03-31T06:27:08","modified_gmt":"2022-03-31T06:27:08","slug":"uk-pensions-how-much-you-earn-in-retirement","status":"publish","type":"post","link":"https:\/\/finsbury-associates.com\/uk-pensions-how-much-you-earn-in-retirement\/","title":{"rendered":"UK Pensions: How much will you earn in retirement?"},"content":{"rendered":"\n[et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;3.22&#8243; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;][et_pb_row _builder_version=&#8221;3.25&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; min_height=&#8221;2522.3px&#8221; custom_margin=&#8221;-29px|auto||auto||&#8221; custom_padding=&#8221;81px||0px|||&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;3.25&#8243; custom_padding=&#8221;|||&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; min_height=&#8221;397px&#8221; custom_margin=&#8221;-52px||7px|||&#8221; custom_padding=&#8221;4px||0px|||&#8221; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<script src=\"https:\/\/2927056918d24d899d00333edddf19f0.js.ubembed.com\" async><\/script><!-- divi:image {\"id\":51791,\"width\":479,\"height\":479,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<h2><b>UK Pensions: How much will your pension pay you in your retirement?<\/b><\/h2>\n<span style=\"font-weight: 400;\">For many people, pensions form an integral component of their retirement planning. However with so many different structures, types of plans and variables involved it\u2019s important to understand exactly how much your pension will provide you in retirement.<\/span>\n\n<span style=\"font-weight: 400;\">Before we get started, if you would like to download a copy of our full guide to <\/span><a href=\"http:\/\/www.finsbury-associates.com\/uk-pension-guide\"><span style=\"text-decoration: underline;\">UK pensions<\/span><\/a>. <span style=\"font-weight: 400;\">Still confused? We also offer a <span style=\"text-decoration: underline;\"><a href=\"https:\/\/finsbury-associates.com\/contact-us\/\">complimentary consultation<\/a><\/span> to discuss your <a href=\"https:\/\/www.gov.uk\/browse\/working\/state-pension\" target=\"_blank\" rel=\"noopener\">UK Pension<\/a> and personal situation free of charge and help answer any questions you may have.<\/span><span style=\"text-decoration: underline;\"><\/span>\n\n<span style=\"font-weight: 400;\"><\/span>\n\n&nbsp;\n\n&nbsp;\n\n<!-- \/divi:paragraph --><!-- divi:paragraph -->\n<h2><b>Do you know what your projected income is in retirement?<\/b><\/h2>\n<span style=\"font-weight: 400;\">Your projected income will be dependent on the type of pension scheme that you have.<\/span>\n\n<span style=\"font-weight: 400;\">If you have a <\/span><b>defined benefit pension scheme<\/b><span style=\"font-weight: 400;\"> also known as \u2018final salary\u2019 and \u2018career average\u2019 schemes, your income will be determined by factors set out in the scheme. It is based on your final or average salary at your time with the employer and the schemes\u2019 accrual rate which is typically 1\/60th or 1\/80th.<\/span>\n\n&nbsp;\n\n&nbsp;\n\n&nbsp;\n\n<!-- \/divi:paragraph -->[\/et_pb_text][et_pb_image src=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/2-3-e1629876354365.png&#8221; alt=&#8221;Do you know what your projected income is in retirement?&#8221; title_text=&#8221;Do you know what your projected income is in retirement?&#8221; url=&#8221;http:\/\/www.finsbury-associates.com\/uk-pension-guide&#8221; src_tablet=&#8221;&#8221; src_phone=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/Sample-calculations-e1629978714754.png&#8221; src_last_edited=&#8221;on|phone&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; module_alignment=&#8221;center&#8221; min_height=&#8221;289.1px&#8221; custom_padding=&#8221;||14px|||&#8221;][\/et_pb_image][et_pb_text _builder_version=&#8221;4.9.4&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; min_height=&#8221;0px&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;12px||0px|||&#8221;]<!-- divi:image {\"id\":51791,\"width\":479,\"height\":479,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<h2><b>How does inflation affect your pension income?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Your pension income will then increase in line with the scheme rules which is typically in line with inflation at RPI (retail price index) sometimes to a maximum of 2.5% or 5% for the older schemes.<\/span><\/p>\n<p>&nbsp;<\/p>\n<!-- \/divi:paragraph -->[\/et_pb_text][et_pb_image src=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/How-does-inflation-affect-your-pension-income.png&#8221; alt=&#8221;How does inflation affect your pension income?&#8221; title_text=&#8221;How does inflation affect your pension income?&#8221; url=&#8221;http:\/\/www.finsbury-associates.com\/uk-pension-guide&#8221; src_tablet=&#8221;&#8221; src_phone=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/Copy-of-Hero-blog-Image-e1629978951116.png&#8221; src_last_edited=&#8221;on|phone&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;281.1px&#8221;][\/et_pb_image][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<h6 style=\"text-align: center;\">*Based on historical RPI data, no cap is where this has not been limited to 2.5%<\/h6>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<h2><b>What happens if I want to take out a lump sum?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">With defined benefit schemes a \u2018commutation calculation\u2019 is used to calculate how much income that would have been paid during your retirement is required to be given up to take out the immediate tax-free lump sum.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2><b>How much will your Defined Benefit Scheme pay you in retirement?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">With a defined benefit scheme, the schemes\u2019 normal retirement age is typically 65.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Depending on your scheme, you might be able to take your pension from the age of 55, <\/span><span style=\"font-weight: 400;\">but this will reduce the amount you get. You might also be able to defer taking your <\/span><span style=\"font-weight: 400;\">pension, this might mean you get a higher income when you do take it.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These options would need to be discussed with the respective scheme. Once your pension starts to be paid, it will increase each year by a set amount (your scheme rules <\/span><span style=\"font-weight: 400;\">will tell you by how much) for life but there is no flexibility in the way this income is drawn.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2><b>How much will a Defined Contribution Scheme pay you in retirement?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">A defined contribution scheme however offers much more flexibility with how benefits <\/span><span style=\"font-weight: 400;\">are drawn. The current normal retirement age is 55, this is due to increase to 57 in 2028.<\/span><span style=\"font-weight: 400;\"><\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2><b>Some options to consider:<\/b><\/h2>[\/et_pb_text][et_pb_accordion open_toggle_background_color=&#8221;RGBA(0,0,0,0)&#8221; closed_toggle_text_color=&#8221;#FFFFFF&#8221; closed_toggle_background_color=&#8221;#A49564&#8243; icon_color=&#8221;#FFFFFF&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_accordion_item title=&#8221;Annuity&#8221; open=&#8221;on&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<p><span style=\"font-weight: 400;\">This option allows you to convert your pension into a regular income that will last for life. One of the benefits with this option, similar to a defined benefit scheme is that your income is guaranteed and however long you live, every year you will receive a fixed regular payment until you die. However, if you pass away early, unless you&#8217;ve taken out a joint-life, value-protected or guaranteed annuity, usually you won\u2019t be able to leave any to your family, regardless of how much of your fund has been paid out.<\/span><\/p>[\/et_pb_accordion_item][et_pb_accordion_item title=&#8221;Flexi-access drawdown or income drawdown&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; open=&#8221;off&#8221;]<p><span style=\"font-weight: 400;\">This is where your money is kept invested until you retire, at which time\u00a0 you then \u201cdraw down\u201d or take money out of your pension pot to live on. As your money stays invested (normally in the stock market), unlike an annuity your fund may fall in value depending on how the investments perform. On the flip side, it can also increase in value, increasing your pension pot; however this all depends on the growth of your investment.<\/span><\/p>[\/et_pb_accordion_item][et_pb_accordion_item title=&#8221;Take lump sums from the pension&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; open=&#8221;off&#8221;]<p><span style=\"font-weight: 400;\">(Uncrystallised pension lump sums)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another flexible way to take money from your retirement savings is to leave your money invested and then take lump sums when you require them.<\/span><\/p>[\/et_pb_accordion_item][et_pb_accordion_item title=&#8221;Take the whole pension&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; open=&#8221;off&#8221;]<p><span style=\"font-weight: 400;\">This was allowed due to pension freedoms but there are tax considerations to this which need to be looked at.<\/span><\/p>[\/et_pb_accordion_item][\/et_pb_accordion][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;33px&#8221; custom_margin=&#8221;14px||0px|||&#8221; custom_padding=&#8221;15px||0px|||&#8221;]<h2><b>What is the investment strategy for pensions?<\/b><\/h2>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=&#8221;1_2,1_2&#8243; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;259px&#8221; custom_padding=&#8221;||14px|||&#8221;][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<h2><b>Defined Benefit Scheme Investment Strategy<\/b><\/h2>\n<p><b><\/b><\/p>\n<p><span style=\"font-weight: 400;\">With a defined benefit scheme there is no investment strategy at <\/span><span style=\"font-weight: 400;\">the individual level as your income is already predetermined. <\/span><span style=\"font-weight: 400;\">However, at the company level, every defined benefit scheme has an investment strategy that sets out the basis on which the trustees <\/span><span style=\"font-weight: 400;\">will decide how to invest the assets of the scheme in order to pay the <\/span><span style=\"font-weight: 400;\">benefits to members as they fall due.<\/span><\/p>[\/et_pb_text][et_pb_image src=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/1-3.png&#8221; alt=&#8221;Defined Benefit Scheme&#8221; title_text=&#8221;Defined Benefit Scheme&#8221; url=&#8221;https:\/\/finsbury-associates.com\/uk-pension-guide\/&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][\/et_pb_image][\/et_pb_column][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;]<h2><b>Defined Contribution Scheme Investment Strategy<\/b><\/h2>\n<p><b><\/b><\/p>\n<p><span style=\"font-weight: 400;\">With a defined contribution scheme your investment strategy <\/span><span style=\"font-weight: 400;\">should be based on your attitude to risk, capacity to loss and your <\/span><span style=\"font-weight: 400;\">length until drawing benefits.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<p><span style=\"font-weight: 400;\">This investment strategy needs to be constantly reviewed with <\/span><span style=\"font-weight: 400;\">market conditions and also updated as your circumstances change.<\/span><\/p>[\/et_pb_text][et_pb_image src=&#8221;https:\/\/finsbury-associates.com\/wp-content\/uploads\/2021\/08\/defined-contribution-scheme.png&#8221; alt=&#8221;Defined Contribution Scheme &#8221; title_text=&#8221;Defined Contribution Scheme &#8221; url=&#8221;https:\/\/finsbury-associates.com\/uk-pension-guide\/&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221;][et_pb_text _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;64px&#8221; custom_margin=&#8221;-10px|||||&#8221;]<h2><b>Want to know more?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">You can download a copy of our full guide to <\/span><a href=\"http:\/\/www.finsbury-associates.com\/uk-pension-guide\"><span style=\"font-weight: 400;\"><span style=\"text-decoration: underline;\">UK pensions<\/span><\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><\/span><\/p>\n<h2><b>Book a complimentary consultation<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">We offer a complimentary consultation to discuss your pension and personal situation free of charge and help answer any questions you may have.<\/span><\/p>[\/et_pb_text][et_pb_button button_url=&#8221;https:\/\/finsbury-associates.com\/contact-us\/&#8221; button_text=&#8221;Book a free consultation&#8221; button_alignment=&#8221;left&#8221; _builder_version=&#8221;4.9.4&#8243; _module_preset=&#8221;default&#8221; custom_button=&#8221;on&#8221; button_text_color=&#8221;#FFFFFF&#8221; button_bg_color=&#8221;#A49564&#8243; button_border_color=&#8221;RGBA(0,0,0,0)&#8221; button_border_radius=&#8221;11px&#8221; button_font=&#8221;|700|||||||&#8221; background_layout=&#8221;dark&#8221; box_shadow_style=&#8221;preset1&#8243; box_shadow_color=&#8221;RGBA(116,129,141,0.62)&#8221;][\/et_pb_button][\/et_pb_column][\/et_pb_row][\/et_pb_section]\n","protected":false},"excerpt":{"rendered":"<p>UK Pensions: How much will your pension pay you in your retirement? For many people, pensions form an integral component of their retirement planning. However with so many different structures, types of plans and variables involved it\u2019s important to understand exactly how much your pension will provide you in retirement. Before we get started, if [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":51983,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[61,40,37,58],"tags":[],"_links":{"self":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/51891"}],"collection":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/comments?post=51891"}],"version-history":[{"count":1,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/51891\/revisions"}],"predecessor-version":[{"id":52531,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/posts\/51891\/revisions\/52531"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media\/51983"}],"wp:attachment":[{"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/media?parent=51891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/categories?post=51891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finsbury-associates.com\/wp-json\/wp\/v2\/tags?post=51891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}