Introduction

One of the key stages of retirement advice is to understand the different tax wrappers the client has and the tax implications associated with drawing income from them. Indeed, our calculations show that your clients could waste up to £19,700 of tax free allowances in the 2018/19 tax year by taking their retirement income solely from their pension, which not only reduces the amount of money they have to spend in retirement, but also the amount they have to leave to loved ones in the future.

While tax planning will certainly be part of your BAU process already, it’s important to note that pension freedoms have changed the ways in which your clients can access their money and in turn their advice needs. The key here is ensuring that you understand these client needs and you tailor your recommendations accordingly. This will then give you a tangible way to show how much your advice has saved them.

For your business

Using a tax policy framework will help you to establish clear repeatable processes which aim to provide tax efficient income and investment growth for your clients in retirement, and will help you to:

  • More clearly demonstrate the value of your advice.
  • Improve efficiency by having repeatable processes, making tax planning strategies easier to implement.
  • Reduce risk for your clients and your business.

For your clients

Using a tax policy framework will help meet your clients’ spending needs in retirement in a tax efficient way and secure the greatest inheritance for their loved ones. This can be done by:

  1. Minimising the tax payable on withdrawing funds by maximising the use of available allowances.
  2. Limiting the effects of tax on future investment returns by making full use of tax privileged investment wrappers.
  3. Future proofing their retirement strategy to ensure that avoidable future tax charges are not stored up.

For couples this could also mean spreading savings and investments between each party to ensure both sets of allowances are utilised, doubling the amount that can be taken tax free. Married couples and civil partners can transfer assets (for example, shares, investment bonds) to each other without generating a tax charge on transfer.