How long will my money last?

I had the pleasure of presenting to a group of financial adviser colleagues in London at the Retirement Planner seminar in London recently.

The topic of discussion was the new pension freedoms which will be available in the new tax year 2015/2016.

One key point that was considered was the issue of longevity, and the purpose of this blog is to consider how long an existing pension pot could last, given various assumptions including the amount invested, the amount withdrawn on a regular basis and investment growth into the future.

Although the graph below is based on assumptions only and is not guaranteed, it clearly demonstrates that an individual retiring at age 65 could find that their money runs out before they reach their 80th birthday.

Pension Fund Assumptions/ Illustration Only:

• Person age 65
• Income of £1,500 a month taken gross
• Growth illustrated post plan charges
• Income indexed in line with CPI
• CPI assumed at 2.5% pa
• Income taken monthly
• Growth rates are assumptions only
• £200,000 pension fund value after tax free cash has been taken
• NOT GUARANTEED

Taking into account the issue of long-term care and the pressures of inflation (both the headline rates and the amount you pay in the supermarkets) it is easy to see that, without careful planning, the scenario of individuals having to return to work in their mid to late 70s may become a reality if they draw too much from their pension pots.

On this website we have updated our Retirement Options Schedule to detail the new freedoms and you may wish to look at this here.

Careful planning in the way that you draw pension benefits is vital and if you would like advice in this area then please do not hesitate to contact Chapters Financial at the Guildford or Woking office.

No individual advice is provided during the course of this blog and as noted above the assumptions made in the illustration are not guaranteed.

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.