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    Home / Insights / Retirement – Are you ready?

    Retirement – Are you ready?

    Often the timing of retirement will be dictated by the question, ‘how much do I need to be able to retire?’ rather than ‘what do I actually want to do in retirement?’

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    Mattioli Woods

    Understandably, some long-held retirement plans will have been sped up, slowed down, or even totally derailed in the last 24 months thanks to the pandemic completely changing the way that most of us live and work. Research by Canada Life has shown that almost two in five retirees since March 2020 have accelerated their planned retirement date due to Covid-19.



    What does retirement mean for you? Understanding this will give you a base to work backwards from, both in terms of the time you will have and the money you will need.

    Before you retire, you will need to clarify if you have put aside enough for your retirement and, if not, whether it is worth saving towards that goal. Contributing to a pension scheme is one very tax-efficient way of saving towards retirement, although it does come with some rules and regulations about how you can invest and take an income.

    Ultimately, we always like to see retirement as a lifestyle choice, rather than a decision made of necessity. What is clear, however, is that wealth must be accumulated before considering a complete or partial stop in work. For most business owners, this often needs to be in addition to the business wealth.

    A lot of business owners will simply presume that ‘their company is their pension’; however, if a friend said to you, ‘I have bought unlisted shares in a single company within my pension and hopefully that does well so I will not need to worry about wider planning’, you would probably not feel too confident about their financial security. Building a plan B is therefore essential.


    What remains key in all business sales is the need for forward planning, not just in and around the time of sale, with collaboration between your different professional contacts. By ensuring you speak to not only your adviser, but your accountant, solicitor and your close family too, you ensure that your wishes are met during the transition.

    One thing that you may wish to consider is the ‘worst case scenario’. Let’s take an example of Mr Smith, who is an entrepreneur who recently sold his business for a mid-seven figure sum with a view to starting a long and happy retirement with his family. If Mr Smith had died suddenly prior to selling his business, nearly all his previous wealth would have been held up in the firm, so his inheritance tax (IHT) position would have been nil. His executors could have simply claimed the business relief associated with holding wealth within a trading company and his remaining wealth would have fallen within the standard nil rate tax bands.

    However, after sale, this cash would be liable for the full 40% IHT tax rate. If he were unmarried, his family would be left with an enormous tax bill which would significantly reduce their inheritance.

    Had Mr Smith spoken with a financial adviser before and during the sale, they could have recommended a temporary life insurance package that would look to tide over Mr Smith’s affairs before making the necessary changes to his finances to ensure his IHT liability was manageable in the event of his unexpected death. Perhaps in due course, Mr Smith could have invested in a variety of business relief qualifying assets, which would retain similar rulings to his ownership of the business, alleviating his family’s worries about any large IHT bills.

    Mr Smith should ensure that his Will and Powers of Attorney are in place, and that they reflect his current wishes. He should also make sure his family knows where these documents are stored, to avoid any unnecessarily long delays.

    Post transition

    Once you are happily retired and have a better understanding of the actual income requirements you have, it is essential that you receive your income as tax efficiently as possible. There are certain investment wrappers that allow for income tax-free withdrawals, including individual savings accounts (ISAs) and some other structures that can pay out tax-free dividends instead (venture capital trusts).

    Gifting wealth to younger generations is one way of avoiding IHT, provided that you live at least three years after making the gift (for a partial reduction in IHT) or seven years (for the gift to fall out of the estate completely). In order to mitigate the risk of the potentially exempt transfer (PET) failing, you might want to consider a gift inter vivos insurance policy. This will cover the inheritance liability from the start of the gift to the end of the seventh year when the liability is zero. They are relatively affordable and can provide a comfort blanket for your family.

    Talking with your adviser and your family will allow you the peace of mind to enjoy your retirement, not regret it!