March 2025 - Agile IFA

Reaching the minimum pension age and being able to access your retirement savings might mean new possibilities opening up. You may start thinking about giving up work, withdrawing a lump sum to pursue a goal, or using your pension to boost your regular income.

It’s an exciting time, but it’s also important to evaluate your decisions and consider how they could affect your long-term plans. Indeed, spending too much too soon could lead to a shortfall later in life.

Usually, you can access your pension from age 55 (rising to 57 in 2028). For many people, this milestone will come before their planned retirement date.

Yet, January 2025 research from Legal & General suggests 1 in 5 people access their pension at 55.

32% of those withdrawing from their pension at 55 said it was to cover essential expenses. However, 46% simply said they did so “because they could”.

Worryingly, 27% of UK adults aged over 50 make decisions about their pension without seeking any advice or guidance. It could mean a significant proportion of those accessing their pension as soon as possible don’t fully understand the long-term implications it could have.

If you’re thinking about withdrawing money from your pension, here are three potential risks to consider first.

1. It could increase your risk of running out of money later in life

Pensions are often among the largest assets people own. So, it’s not surprising that some look at the value and believe they have enough to splurge.

Yet, it’s important to consider why you’ve saved into a pension – to create financial security once you give up work.

If you start accessing your pension at 55, you could be at greater risk of facing a shortfall later in life as it’s likely to need to last several decades. Indeed, according to the Office for National Statistics, the average 55-year-old woman will live until they’re 87. For a man of the same age, life expectancy is 84.

Even if you don’t plan to take a regular income from your pension straightaway, withdrawing a lump sum can have a significant effect on the value of your retirement savings.

Your pension is normally invested with the aim of delivering long-term growth. Taking a lump sum could mean investment returns are lower than expected, which, in turn, may lead to a lower income when you retire.

That’s not to say you shouldn’t access your pension at 55, whether you want to use the money to travel or start reducing your working hours. However, understanding the potential long-term implications of doing so and how it might affect your retirement lifestyle is important.

2. You may face an unexpected tax bill

You can usually withdraw up to 25% of your pension without facing a tax bill, either as a lump sum or spread across multiple withdrawals.

However, if you exceed the 25% tax-free portion, your pension withdrawals may become liable for Income Tax. According to the Legal & General study, around a third of those accessing their pension at 55 are withdrawing more than 25%.

The withdrawal above the tax-free amount would be added to your other sources of income when calculating your Income Tax liability. So, you might want to consider whether it would push you into a higher tax bracket and increase your overall tax bill.

It’s also worth noting that if you receive means-tested benefits, taking a lump sum or income from your pension could affect your entitlement – something a quarter of people didn’t realise.

3. It could limit how much you can tax-efficiently save in your pension

Accessing your pension might reduce how much you can tax-efficiently contribute to your pension each tax year.

In 2024/25, the pension Annual Allowance is £60,000. This is the amount you can personally contribute while retaining tax relief benefits. However, you can only claim tax relief on up to 100% of your annual earnings.

You can normally withdraw your tax-free lump sum from your pension without affecting the Annual Allowance, but if you take a flexible income, you might trigger the Money Purchase Annual Allowance (MPAA).

The MPAA is just £10,000 in 2024/25. As a result, it can significantly reduce how much you’re able to tax-efficiently add to your pension and it might negatively affect your retirement income.

Financial planning could help you understand the effect of accessing your pension at 55

One of the challenges of understanding whether accessing your pension sooner is the right decision for you is that you often need to consider the long-term effects.

Financial planning could help you see how accessing your pension at 55 might affect your long-term finances and review other options as part of a wider financial plan. If you withdraw some of your pension now, it could help you feel more confident, or you might decide an alternative option makes more sense for you.

If you’d like to access your pension, we’re here to help you calculate the potential long-term consequences and more. Please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

Your pension income could also be affected by the 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.

The Murdoch family’s messy dispute over who will retain control of Rupert Murdoch’s media empire when he passes away has been grabbing headlines. While your affairs might not be in the spotlight, the case offers some useful insight into how to avoid family disputes.

Following his second divorce in 1999, Rupert Murdoch established a trust foundation to hold the family’s stake in News Corp. While the Murdoch family holds a 14% stake, it controls 41% of the company votes. The trust set out that when Rupert dies, control of the company would be split between his four oldest children.

A dispute arose when Rupert sought to change the terms of the trust so that his oldest son, Lachlan, would retain control and remove the voting power of his other three children.

The ensuing court case generated media attention and, ultimately, the court ruled that the family trust could not be changed.

So, what can you learn from the case when handling your estate plan and potential disputes?

1. Effective communication with loved ones is important

When setting out your estate plan or making changes to it, effective communication can make all the difference.

Rupert has stated that he believes the change to the trust was necessary to ensure the long-term profitability of News Corp. However, his three children who were set to lose their voting rights were reportedly blindsided by the news.

When someone is surprised, they might be more likely to act based on the emotions they’re feeling and it could lead to disputes escalating.

So, being clear about your wishes and setting aside some time to talk to your beneficiaries could help you understand each other’s perspective and get everyone on the same page.

2. Disputes aren’t always about monetary value

Your estate covers all of your assets, from investments to material items. When you think about which ones will be the most important to your beneficiaries, you may believe it’s the assets with the highest monetary value, but this isn’t always the case.

Indeed, emotional attachment could lead to disputes too.

In the Murdoch case, modifying the trust wouldn’t have affected the financial inheritance of the beneficiaries, only their voting rights in News Corp. Yet, they felt strongly enough about it to go to court to block the changes.

While you might not be passing on a multi-billion-pound company, your estate is likely to hold assets that are valuable to your loved ones. Even if they don’t have a high financial value it could lead to bitter disputes.

Again, speaking to your loved ones could help you form a clearer idea about what’s important to them and where issues might occur. You may find they value a particular piece of jewellery for sentimental reasons, or they’d like to inherit a painting that reminds them of a childhood home.

When you’re writing your will, you might choose to name specific items you’d like to go to a particular beneficiary.

3. Consider your family dynamics

While passing on assets that will be equally split or controlled by your children might seem like a fair way to distribute your estate, family dynamics can be complex.

For some families, sharing assets or working together to manage them can be effective.

However, if your children have very different views on how to manage wealth, it could lead to conflicts arising. For example, if your children jointly inherited your home, would there be potential conflicts around what to do with the property and who would take responsibility for different tasks?

In some cases, passing on separate assets to each beneficiary could make more sense.

An estate plan could help you understand your assets and how you might pass them on in a way that aligns with your wishes and family dynamic.

4. Consider potential conflicts when making an estate plan

Being proactive may help you avoid conflicts in the future. Considering where disputes might occur could allow you to have important conversations with loved ones or take steps to minimise the chance of them occurring before they arise.

So, when making your estate plan, you might want to consider questions like how a relationship breaking down could affect how your assets are distributed. For instance, you may take steps to ensure wealth would remain within your family if your child divorced their current partner.

5. Carefully consider your goals before establishing a trust

A trust can be a useful tool if you want to pass on assets in a way that allows you to retain some control.

When creating a trust, you’ll name a trustee to manage the trust on behalf of the beneficiaries, and you can set out conditions. The conditions you can apply depends on the type of trust you set up. So, if you want to create a nest egg for your grandchild, you might state the assets can only be used to cover educational costs during their childhood and they’ll receive full control of the trust when they turn 25.

As Rupert Murdoch has discovered, changing the terms of a trust once it’s established can be very difficult or, in some cases, impossible. Similarly, once you’ve placed assets in a trust, you may not be able to remove them.

So, if you think a trust could be right for you, take your time to assess your options.

Seeking professional advice when establishing a trust could be valuable. A financial planner might help you assess which assets to use and how transferring them may affect your financial security. In addition, a solicitor can offer advice on the different types of trusts and minimise the risk of mistakes or contradictions occurring when writing a trust deed.

6. Carry out regular estate plan reviews

As the Murdoch case has highlighted, your wishes might change over time. So, regular reviews of your estate plan could help ensure it continues to reflect your circumstances and goals.

It’s often advised that you review your estate plan following major life events or every five years.

Contact us to talk about your estate plan

Whether you need to create an estate plan or would like to review an existing one, we can help. We could work with you to understand your long-term goals, ensure your financial security later in life, and consider how you might pass on wealth during your lifetime or when you pass away.

Please get in touch to arrange a meeting.

The Financial Conduct Authority does not regulate estate planning, trusts, or will writing.

At the start of February 2025, the Bank of England (BoE) cut the interest base rate. If you have a variable- or tracker-rate mortgage, it could mean your repayments will go down. While that’s likely to be welcome news, you might want to consider overpaying your mortgage – it could save you thousands of pounds over the full mortgage term.

As well as saving money, overpaying your mortgage could mean the debt is paid off sooner. For many families, being mortgage-free is a milestone they’re looking forward to that could provide greater financial freedom and take a weight off their shoulders.

So, read on to find out why you might want to consider overpaying your mortgage.

Overpayments reduce the balance of your mortgage

If you have a repayment mortgage, your regular monthly repayments will cover the interest accrued and a portion will be used to reduce the debt.

As a result, a large proportion of your repayments could be going towards the interest, especially if you have a long mortgage term.

For example, if you borrow £150,000 through a repayment mortgage with a 25-year term and an interest rate of 4.5%, your monthly repayment would be £833 and you’d pay £9,996 over a year.

Yet, during the first year of your mortgage, your mortgage debt would reduce by just £3,325 because most of your repayment is covering the accrued interest.

As your outstanding mortgage balance falls, the amount of interest added slowly declines and a larger portion of your repayments will go towards reducing the debt.

In contrast, when you make a mortgage overpayment, this will reduce the outstanding balance. So, it can be an effective way to reduce your mortgage term and means that less interest is accrued.

Even small regular mortgage overpayments could save you thousands of pounds

According to Santander calculations from January 2025, overpaying your mortgage by the equivalent cost of just a few pints a week could save you thousands of pounds.

With the average pint of larger now costing £4.81, just three pints a week can add up to £57 a month.

The research shows that if you had a 25-year repayment mortgage of £200,000 with an interest rate of 4.5%, and you overpaid by £57 each month, you’d save £12,983 in interest alone. What’s more, you’d be mortgage-free two years and one month earlier than planned.

If you increase the regular amount you were overpaying, the benefits are even larger. In the same scenario, if you overpaid by £144 a month, the cost of around 30 pints, you’d save more than £28,000 and take four years and eight months off your mortgage term.

So, even small but regular overpayments have the potential to save you thousands of pounds when you look at the effect of them over the long term.

As well as making regular overpayments, you might choose to pay off a lump sum too.

Let’s say you have a £150,000 repayment mortgage and 15 years left on the term with a 4.5% interest rate. If you used a £15,000 lump sum as an overpayment, you’d save more than £13,000 in interest alone over the full mortgage term. You’d also be mortgage-free two years earlier than expected.

So, next time you receive a bonus or you’re deciding where to save a lump sum, you might want to consider using it to overpay your mortgage.

You might also choose to combine regular and lump sum overpayments to reduce your mortgage debt as quickly as you can.

Check if you could face an early repayment charge

Before you make regular or one-off mortgage overpayments, be sure to check your mortgage agreement.

If you have a mortgage deal in place, you could face an early repayment charge (ERC). Usually, you can pay up to 10% of the outstanding mortgage balance as an overpayment each year without an ERC applying. However, this isn’t always the case, so checking your mortgage terms could help you avoid an unexpected fee.

Contact our team to talk about your mortgage

As well as overpaying, taking out a new mortgage with a more competitive interest rate could also help save you money in the short and long term. If you’d like to talk to our team about your mortgage options, please get in touch.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Those who have retired or are nearing the milestone are consistently overlooking the risk of financial shocks when compared to other generations, a survey published in PensionsAge in December 2024 suggests.

According to the report, 43% of over-50s had thought about financial shocks but not included the risks in their retirement plan. A further 32% haven’t considered risks at all.

Later in life, you might feel more financially secure than you did when you were younger, and if you no longer work, you don’t need to consider the risk of losing your job or being unable to carry out your role due to illness. So, it’s easy to see why weighing up financial shocks may become less of a priority in your later years.

However, financial shocks still have the potential to have a significant effect on your financial security and lifestyle. Read on to discover three shocks you may want to consider when you review your retirement plan.

1. An illness could affect your short- and long-term finances

During your working life, illness may have been a financial shock you incorporated into your financial plan as it could limit your ability to work. While an illness may not affect your income in retirement, it could still derail your finances.

For example, your outgoings could rise significantly. If you’re ill, you might need to factor in the cost of travelling to appointments and increased heating bills, or you might even choose to pay for private medical care. In some cases, a long-term diagnosis could lead to other large costs, such as needing to adapt your home or pay for a carer to provide support in your daily life.

If you haven’t budgeted for these outgoings or don’t have an emergency fund you can use, the cost of being ill could mean you deplete your pension and other assets quicker than you expect. This might leave you in a financially vulnerable position later in life.

Despite this, illness is something only 19% of over-50s considered when setting out their retirement plan. Similarly, just 17% had thought about the possibility of going into care.

2. A partner passing away may leave an income gap

The death of your partner can be difficult to think about. Indeed, it’s something only 18% of over-50s have fully planned for and almost a third have avoided the topic completely.

Yet, it may be an important part of creating long-term financial security for both you and your loved one. If one of you passed away, how would it affect the surviving partner’s finances in the short- and long-term?

For instance, if just one of you has an annuity that pays a regular income throughout retirement, this would stop when the person passes away, potentially leaving an income gap for the surviving partner. To mitigate this risk, you might select a joint annuity instead, which would continue to pay an income to the surviving partner for the rest of their life.

So, while these types of conversations can be emotional and challenging, having them and adjusting your retirement plan, if necessary, could offer peace of mind that you or your partner will be financially secure if the other passes away.

3. You might want to support other family members

If your child, grandchild, or other loved ones faced a financial emergency, would you want to offer them support?

Many people will answer “yes” to this question. Yet, only a small proportion of over-50s have considered how they’d lend a helping hand in retirement. As part of their retirement plan, 16% of parents have included a provision in case their children need urgent financial support and 7% have thought about how they may need to support their parents.

If you haven’t thought about how you’d lend support, it could mean you’re unsure how to respond if a loved one approaches you for help. It may lead to a decision that’s not right for you and could affect your long-term finances.

For instance, if you were to withdraw a lump sum from your pension to gift to your child, you could be faced with a larger tax bill than you expect, and it might have an impact on the long-term investment returns of your pension. Instead, depending on your circumstances, depleting other assets, like savings, could be more efficient.

Making this type of financial shock part of your retirement plan could mean you’re able to feel confident in the support you provide.

While you’re weighing up how to support your loved ones, you may want to review your wider estate plan, which includes setting out how you’d like your assets to be distributed. For some, this will involve writing a will that will state how assets are to be divided when you die. You may also consider gifting during your lifetime.

If you’d like support when reviewing your estate plan, please get in touch.

Considering financial shocks could boost your confidence in retirement

While weighing up the risk of financial shocks might seem like a daunting task, it may lead to you feeling more confident about your retirement. Knowing you’ve taken steps to improve your financial security, even if something unexpected happens, could allow you to focus on enjoying the next chapter of your life.

Get in touch with our team to talk about which steps may mitigate the effect of financial shocks during your retirement.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning or estate planning.

How long do you leave essential tasks on your to-do list? If you’ve put off tasks because they feel overwhelming, you’re not alone, but delays could be harmful. Read on to find out how financial planning may help you overcome decision paralysis.

According to a January 2025 study from the Post Office, half of adults in the UK have delayed important tasks because they feel too overwhelmed. As well as potentially affecting your plans, procrastinating can harm your wellbeing. Indeed, 63% of survey participants said they feel “weighted down” by their to-do lists.

Commonly delayed tasks include writing a will (25%) and filling in tax returns (18%). For those under 35, managing a pension was also a common sticking point, with 87% feeling overwhelmed by the task.

For some, procrastination can be due to having too many options or worrying about making the “right” decision, leading to decision paralysis – where you know you should tackle a task but don’t know where to start or what to do next.

If it’s financial tasks you’ve been putting off, working with a financial planner could help you overcome decision paralysis.

We can help you prioritise your to-do list

If you have a long to-do list, one of the first challenges might be deciding where to start. Should you write your will first, or spend some time reviewing your pension options?

As your financial planner, we could help you prioritise the tasks depending on your circumstances and needs. Having a clear order could mean your list feels more manageable and give you the confidence to focus on one thing at a time, which could be more productive than trying to multitask.

We can explain the different options to you

Modern life often means you have a lot of options. While this can be a good thing, it may also feel overwhelming as well – how do you sift through all the different options and decide what’s right for you?

This can affect many aspects of your to-do list, including financial tasks. Perhaps you want to start investing but aren’t sure where to invest or how to create a balanced portfolio that reflects your goals. Or maybe you want to set up a trust to protect assets for your child, but you aren’t sure how to compare the different types of trust.

Working with a professional means you have someone to turn to when you have questions. It might mean your options are clearer and you feel empowered to make a decision.

With 30% of people telling the Post Office survey too much information was a barrier for them completing tasks, having someone who can simplify the details and highlight which parts might be important for you could be invaluable.

We can help you understand the long-term effect of your decisions

Financial decisions may be complex and could affect your long-term financial security. So, decision paralysis might occur if you’re worried about making the “right” choice.

Let’s say you’re ready to retire and access your pension. You may be concerned about withdrawing too much and running out later in life. Or you may be unsure if purchasing an annuity or taking a flexible income is right for your lifestyle.

A financial planner could help you understand the long-term effects of your decisions, so you can feel confident about the future.

This may include using cashflow modelling to visualise how your wealth might change depending on how much income you withdraw from your pension each year. You could even use it to model financial shocks to see how you might create a safety net, which may put your mind at ease and help you move forward with a decision.

We can handle tasks on your behalf

43% of UK adults told the Post Office survey that they would hire a personal assistant to help them with life admin if they could.

If you want to take a hands-off approach to managing your finances, building a long-term relationship with a financial planner could be right for you. We’d take the time to understand your aspirations and how your assets might be used to support them to create a tailored plan.

With regular reviews, we can work with you to ensure your plan continues to reflect changes to your circumstances and wishes and make adjustments if necessary.

Contact us to create a financial plan that works for you

If you’d like to review your finances and how they might support long-term goals, please get in touch. We could work with you to create a tailored plan that suits your needs, offers a clear direction, and provide ongoing support should you have any questions or concerns.

The Financial Conduct Authority does not regulate trusts or will writing.

When you’re making large financial decisions, basing them on facts and logic could help you choose the option that’s best suited to your needs. Yet, even when you take this approach, cognitive biases may affect the conclusions you draw.

Over the last few months, you’ve read about how past experiences and emotions might affect your financial decisions. Now, read on to find out more about cognitive bias.

Cognitive bias refers to processing errors that might arise from problems with your memory, attention, attribution, or other mental mistakes.

Lots of different factors can affect how you think from your attention wandering if you’re feeling stressed about something else to mental shortcuts known as “heuristics”. Cognitive bias happens to everyone, so read on to discover how it could affect your financial decisions.

1. Confirmation bias

Researching your options when making an investment decision is important. However, confirmation bias might mean you don’t give new information the attention it deserves.

With this bias, you’d favour data that corroborates your pre-existing belief. So, if you already believe that a particular investment opportunity is right for you, you’ll seek out information that supports this view. It could mean you dismiss vital details because it contradicts what your mind has already decided.

By focusing on information that confirms your belief, you may end up making investment decisions that aren’t appropriate for your goals or financial circumstances.

2. Anchoring bias

Anchoring bias occurs when you rely too heavily on a single piece of information, so your views are “anchored” when making decisions.

When you’re investing, the anchor might be the first piece of data you see, such as the value of a stock or share, or you might focus on it because of where it’s come from, like a trusted friend.

Tethering your decisions to a piece of information that might not be relevant can be damaging.

For example, as an investor, you may anchor how you value a particular investment to the price you initially paid for it rather than assessing its current or future value. This could mean you’re more likely to hold on to an investment even if that doesn’t align with your wider investment strategy.

Anchoring bias could lead to you avoiding new opportunities or failing to make changes because you’re focused on a particular data point instead of looking at the bigger picture.

3. Framing bias

How opportunities are presented to you could affect how you perceive them.

Imagine you’re talking to a friend about an investment. If they say there’s a 20% chance that you’ll lose all your money, you’re likely to start worrying about how the loss could affect your finances. On the other hand, if they said there’s an 80% chance of success, it can sound far more appealing.

Even though both statements convey the same chance of success and failure, they can lead to very different outcomes. You may be more likely to make riskier decisions if it’s communicated to you in a positive way that focuses on potential gains.

4. Sample size neglect

Researching financial options can feel overwhelming, whether you’re looking for the best way to invest or are seeking financial protection, as there’s often a lot to weigh up. One shortcut that could lead to bias is basing your decisions on a small sample size.

If you’re looking for the best account for your savings, you might ask family or friends and follow their advice. However, what’s right for them, might not be suitable for you, and if you researched your own options, you could find that a different account is better suited to your needs.

Alternatively, you might review investments and see that a particular sector has performed well over the last few months, so you decide to move more of your money into this area. Yet, as you’re basing a decision on short-term figures, you could miss out on wider trends and inadvertently increase the financial risk you’re taking.

Sample size neglect may lead to overconfidence in predictions that are based on limited experiences.

5. Loss Aversion

Loss aversion is similar to framing bias as it’s about how you perceive losses and gains.

The theory suggests that you feel losses more keenly than you do gains. So, if your investment portfolio falls by 5%, it would affect your emotions more than if it had increased by 5%.

For some investors, this cognitive bias could lead to them becoming risk-averse and potentially missing out on opportunities, even if they’re appropriate for them. A cautious approach may seem “safe”, but it has the potential to harm your long-term wealth creation and affect your plans.

An outside perspective could help you limit the effects of bias

It can be difficult to recognise when bias might be affecting your decisions. Sometimes an outside perspective could help you identify where past experiences, emotions or cognitive errors are influencing the conclusions you’ve drawn.

As financial planners, we can work with you to create a financial plan that aligns with your goals and circumstances. Please get in touch if you’d like to arrange a meeting.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.