Ready for retirement

Changes in pensions regulation means we need to think differently about retirement 'pots'.


Jonathan Brownlow

Jonathan Brownlow

Wealth Planning Director

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There was a time when reaching State Pension Age and retiring, in the traditional sense at least, would coincide. Now, though, the line between working and retirement has blurred. Many people of pension age might be starting a business, or using skills and experience from a successful career to help other entrepreneurs. For some, retirement might mean taking on caring responsibilities for grandchildren or even their own parents.

People are living longer and ‘pots’ need to last longer, and be flexible enough to accommodate these changing needs. Reducing the impact of tax will help to improve the longevity of assets. This starts with creating tax-efficient environments in which money can grow, taking advantage of the various tax reliefs and allowances that are available, and making withdrawals with the lowest tax implications.

Since the introduction of caps on how much can be paid into a pension and how large it may grow, a pension alone will not provide many people with sufficient income and capital for their desired lifestyle in retirement. Pensions do still have a place because the cost of putting money into one is reduced by tax-relief and the investments grow tax-free. A tax-free lump sum is available at retirement, with any income from the rest of the fund taxable when it is received. However, a number of other solutions are commonly used to complement pensions:

  • A portfolio of investments enables various personal tax allowances to be used.
  • Individual Savings Accounts (ISAs) allow UK taxpayers to shelter investment income and gains from tax and can be invested to provide a tax-free income, while withdrawals do not attract Capital Gains Tax (CGT).
  • For people willing to take more risk, venture capital schemes offer up-front tax relief as an incentive to invest in growth-stage businesses, as well as an exemption from CGT on the disposal of shares. Dividends paid by Venture Capital Trusts are tax-free, and Enterprise Investment Scheme (EIS)* shares may qualify for an exemption from Inheritance Tax (IHT) under Business Property Relief (BPR) rules.
  • Investment bonds (life insurance policies designed to hold investments) provide another shelter from tax within which investments can grow more efficiently. CGT is not paid on the disposal of investments, and no further income tax is charged on interest and dividends within the bond. The policyholder can withdraw up to 5% of the initial investment each year without an immediate tax liability, deferring tax on any gains until a future point.

Much has been said in the press during the past 12 months about transferring defined benefit pensions, also known as final salary schemes, to take advantage of the rules available to more flexible personal arrangements, and the larger transfer values being offered by schemes. Individuals’ needs will guide what is most appropriate for them. It is therefore important to understand what is being given up when transferring, and whether the guarantees offered by the scheme could play an important part in your retirement plans when combined with other solutions.


This article is for information purposes only. Nothing in this article should be deemed to constitute the provision of financial, investment or other professional advice in any way. Statements concerning taxation are based on our understanding of the taxation law in force at the time of publication. The levels and bases of taxation may change. You should obtain professional advice on taxation where appropriate before proceeding with any investment. The value of investments and the income received from them can fall as well as rise. Investors may not get back the amount invested. *Please note that investing into EIS qualifying companies is high risk and is not suitable for everyone. Professional advice should always be sought to ensure you understand all of the risks before you invest. EIS shares are investments in small companies that are generally not publicly traded or freely marketable and therefore may be less liquid (take longer to buy or sell). Readers should seek professional advice for their individual circumstances. BPR assets may also be higher risk and less liquid.


Jonathan Brownlow

Jonathan Brownlow

Wealth Planning Director

Jonathan joined in 2016 and is a Wealth Planning Director, providing advice to clients on pension and tax planning issues. Previously he worked at RBC, HSBC, and a privately owned wealth management firm specialising in advice to financial services professionals. Jonathan has 20 years’ experience, is a Fellow of the Personal Finance Society and a Chartered Financial Planner.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.