Retirement planning when the Annual Allowance bites

I'm Helen Perrin. I head up WTW's financial planning group known as FPG. We're a team of regulated financial planners who provide education, guidance, and advice on a whole range of financial planning topics, including the annual allowance and how to make use of your allowances and save in alternative ways for retirement. To help us explore this topic, I'm also joined today by Dan Jones from Atomos. So Dan is a senior financial planner at Atomos and also heads up the northwest office for Atomos. So welcome, Dan.

I'm going to start us off today by talking through pension taxation and why within your allowances pensions are one of the most tax efficient ways to save for your future. I'll also take us through the details of the restrictions and how to work out your personal annual allowance, any carry forward amounts that you have available. We're then going to turn to Dan to explain some of the alternative options available to save for your future, and we'll finish off by signposting some useful resources and options for additional personal support.

So hopefully by the end of today's session, you'll be armed with the tools to work out your annual allowance for the current tax year and any carry forward amounts to make sure you optimize use of your annual allowance for pension savings, and you'll also have a better understanding of some of the alternative ways you can save for retirement.

Dan and I are very happy to answer any questions that you have as we go through today's topic, and we'll have a dedicated Q&A session at the end too. If you do have questions, please use the Q&A function that you'll find at the top middle of your screen. And you can choose to ask your questions anonymously if you prefer to by toggling to the anonymous option within the Q&A.

OK, so let's start with a reminder of why pensions are one of the most tax efficient ways to save for the future within your annual allowance. So the contributions that you pay in receive full tax relief at your marginal rate of income tax. And if you pay by salary sacrifice, you save employee national insurance contributions too. And you may have seen in the budget there are restrictions coming on N&I savings from-- I think it's 2029. But for now, you've still got full tax N&I relief. And the contributions paid by your employer are also received tax-free, whereas most other benefits paid by your employer will attract income tax.

The contributions paid by your employer and you are then invested in a tax-free environment. So the returns on investments within your pensions are exempt from income tax and capital gains tax. And at the point of retirement, you can then take up to 25% of your pension as tax-free cash, with the balance taxed at your marginal rate of tax in retirement, which will often be lower if you've got less income in retirement than you have while you're working.

One restriction you do need to be aware of is that you can't usually access the money you pay into your pension until age 55 currently, and that's going to increase to age 57 from April 2028. So whilst pensions are a very tax efficient way to save for the future, you do need to check that the time frame works and the access works to meet your needs.

And because pensions are so tax efficient, there are some restrictions to be aware of. So until April 2024, we had a lifetime allowance, which restricted the amount you could build up tax efficiently during your lifetime. That was fully abolished from April 2024. However, a lump sum allowance and a lump sum death benefit allowance were introduced at the same time to restrict the maximum tax-free lump sums you can take from your pension at retirement and in the event of death to beneficiaries.

So the lump sum allowance is 268,275 pounds. And that usually means you can take up to 25% of the value of each of your pension arrangements, with an overall monetary cap of 268,275 across all pension arrangements that you hold. And that would usually only kick in if your pension savings exceed 1.0731 million.

The lump sum and death benefit allowance would typically be relevant on death before age 75. So under current legislation, death benefits paid on death before age 75 can be received tax-free by your beneficiaries. However, the lump sum and death benefit allowance restricts the total tax-free lump sum amount that can be paid out to 1.0731 million.

Death benefit lump sum is above that will typically be taxed as income for the beneficiaries. But it is important to note that there is no limit on the amount that can be paid tax-free as income on death before age 75. So it's really important that you nominate somebody so that they have the flexibility to choose to enter into income drawdown for death benefits, if that's the preferred option for them. So do be careful when you're nominating your beneficiaries that you do name all of those that you would potentially want to benefit from your pension death benefits.

Also, as many of you will be aware, from 6 April 27, pension death benefits paid from a DC pension arrangement will be subject to inheritance tax on death, whether that's before or after age 75. And if the estate exceeds the individual's 0 rate band, which is currently 325,000 pounds, note that transfers to a spouse or civil partner on death are inheritance tax-free. So that's something to be thinking about if you're looking at nominating benefits to a unmarried partner or children, for example.

And as far as we know, to date, there will be no change to the income tax position. So in some cases, you may have income tax and inheritance tax applicable to death benefits. So for example, if you die before age 75 and leave a lump sum that's over that 1.73 million, or if you die after age 75, then both income tax and inheritance tax could potentially apply to your pension death benefit.

So some careful planning and consideration needed there in terms of working out what to do with those nomination forms. And we will be covering inheritance tax in more detail next month with our estate in IHT planning webinar. But for now, do review your death benefit nominations for your pensions.

And then the final restriction, which is our main focus for today is the annual allowance. So the standard annual allowance is 60,000 pounds each tax year. And that applies to the total value of gross pension contributions paid by you, your employer, and any third-party paying into your pension. But for individuals with high levels of taxable income, that can be tapered down potentially as low as 10,000 pounds. And tapering starts when what's known as your adjusted income exceeds 260,000 for the tax year. So we'll take a look at what's included in that measure of income as we go through today's session.

But first, it is worth pointing out that you can carry forward unused allowances for up to three tax years. So, for example, in the current 25, 26 tax year, any contributions that you pay will first count towards this year's annual allowance. But you can then look back to the three preceding tax years and use any unused amounts up to cover any excess contributions.

And when you're looking at carry forward, you can use the earlier year first. So the first test will be against your current year annual allowance. But you could then go back to 22, 23, for example, for this tax year before using up any 24 or 25 carry forward. We do have some fact sheets and links to tools to help you work out those calculations, which we'll send after today.

And then the other restriction to be aware of is the money purchase annual allowance, which applies if you have accessed your pension benefits from a defined contribution pension arrangement, and you've taken taxed income from a flexible drawdown arrangement. So if you're not sure if that applies to you and you've taken pension benefits, you can ask your provider to confirm whether you're subject to that money purchase annual allowance.

But if that is the case, your annual allowance will be restricted to 10,000 pounds a year, regardless of your income level, and without any carry forward options. So if you are thinking of taking benefits from a DC pension arrangements while still working and contributing to a pension scheme, some careful consideration of those rules will be needed.

It looks like we've had a question come in, so let me have a look. If you have reached 55 before April 28, does it mean you are free to take a lump sum at any time afterwards, or do you need to make a decision on taking tax-free lump before the April 28 deadline? Yes, so if you reach 55 before April 28, but you're not going to be 57, then you would need to start that process to make sure you've crystallized your benefits before April 28.

So if you are in that position, and you were thinking of taking benefits before April 28, it is important to plan ahead. It can take a couple of months to process application forms and so on and take advice where needed. So do be aware of that window, where you have been able to, and then you might not be able to if you haven't access those before April 28.

OK, so moving on to how tapering works for those with adjusted income over 260,000. So there are two income tests that apply here. There's a threshold income test and an adjusted income test. And if your threshold income, which is broadly your taxable income from all sources, is more than 200,000, and your adjusted income, which is your taxable income plus the value of pension contributions, is more than 260,000 for the tax year, tapering will apply.

So the reason there's those two tests was mainly to do with defined benefit schemes, where if somebody had taxable income below 200,000, but a significant DB benefit value that pushed them over the 260, the government wanted to bring them out of the tapering rules. But it is a two-stage test. So if you are on the borderline of those, there may be some planning around that. But if both your threshold income is above 200,000 and your adjusted income is above 260,000, the reduction is 1 pound for each 2 pounds of adjusted income above 260,000.

So, for example, if your adjusted income is 270,000, you'd have a 5,000 reduction to the standard annual allowance, and you'd end up with a 55,000 annual allowance for the tax year. If your adjusted income was 300,000, then your annual allowance would be 40,000 for the tax year. And if your adjusted income is more than 360,000, you'll have the minimum annual allowance of 10,000 pounds for the year. So everybody who's a member of a UK registered pension scheme will have at least 10,000 pounds each tax year that they can use for pension contributions.

Another question came in. So on the lump sum death benefit, there's a limit total tax of year 1.0731 million if death before age 75. What about if you're over 75? So on death over age 75, income tax applies to pension death benefits regardless of the value. So that's the reason why that lump sum allowance only really is relevant on death before age 75.

And if you're 55 and want to access your pension, but not a tax-free lump sum, i.e, if you do income drawdown, can you still contribute to your pension? So not usually. So you can take a tax-free lump sum and continue to have your usual annual allowance. If you take taxable income via income drawdown, that's typically when the money purchase annual allowance kicks in.

So there is some planning around that. If you want to access tax-free lump sums but not take a taxable income, you can still potentially contribute the full amount. But if you are taking taxable income, you do need to be very careful how you structure that. So for example, buying an annuity wouldn't start the money purchase annual allowance. But if you take taxable income via what's known as flexible income drawdown, then that would potentially trigger the money purchase annual allowance. So worth looking into that in a bit more detail or taking some guidance around that.

OK, taxable income includes bonus, but that isn't pensionable. Is the bonus included in adjusted income? Yes, it is. Yes, so all taxable income from all UK sources is included in the income test, regardless of whether it's pensionable by your employer or not. Does your carry forward for annual allowance usage previous three years happen automatically, or do you have to submit forms to the Inland Revenue?

No, it's an automatic process. So you need to keep track of your carry forward. But you wouldn't need to submit anything to HMRC Inland Revenue, unless you've actually incurred a tax charge. So if you've exceeded your annual allowance for this year and carryforward amounts, that's when you would potentially have to report something to HMRC because you've incurred a tax charge. If you're just using carry forward, then you just keep track yourself. And it's worth keeping the records in case HMRC were to ever ask any questions, but you don't need to report anything.

If I'm already taking a DB pension but still contributing into my DC pension, am I restricted to the 10,000 money purchase annual allowance limit? No, not for defined benefit pensions. That only applies if you flexibly access your income from a defined contribution arrangement. Does your tax return automatically calculate if you've exceeded adjustable income level? No, it doesn't.

So we're going to come onto look at how you calculate your adjusted income. On your tax return, you'll know what your taxable income is. So that's a good starting point in terms of threshold income. But there are some unique features of adjusted income that we'll come on and take a look at in a bit more detail.

OK, so good time to move on how to work out your threshold income. So as I say, your threshold income is broadly your UK taxable income from all sources, including your employment income, taxable interest and dividends on your savings and investments, and taxable rental income, for example. So any UK sources of income that you have, and it is important to make sure you allow for all of those, because quite often, people look at their employment income, but don't think about that wider picture.

And when it comes to your employment income, you also need to make sure you allow for your bonus taxable benefits in, and the taxable value of things like long-term incentive plans, which can often get missed when people are looking at their income calculations. There are also a few tweaks you need to make to your employment income.

So for example, your taxable income will be after contributions you pay for your salary sacrifice. So when you get your P60, your contributions paid through salary sacrifice will already have been deducted from your pay for your P60. But just for this test, for this threshold income test, you need to add back the contributions you pay for your salary sacrifice.

So again, that is the government just trying to make sure people don't use clever tax planning to get out of these tapering rules. So just for your threshold income test, you'd add back your contributions pay for salary sacrifice. They are still deductible for tax purposes. On your P60, you'd still get your salary after pension contributions. It's just when you're working out this test.

And you can still offset other tax-free benefits. So for example, if you use a cycle to work scheme, or make charitable donations through payroll giving, they will reduce your threshold income, as will things like electrical car scheme, where you've got a lower taxable benefit versus the salary that you've sacrificed to buy that benefit. And if your threshold income is below 200,000, you will have the standard annual allowance of 60,000 pounds. If your threshold income is more than 200,000 pounds, that's when you need to go on and work out your adjusted income.

And your adjusted income is your threshold income plus the value of employer pension contributions paid during the tax year for most people. If you have paid employee contributions by alternative methods from salary sacrifice, whatever reason-- so if you've paid into a personal pension or something like that-- then you would add the gross value of your personal contributions at the adjusted income stage as well.

So what contributions you pay for salary sacrifice are already included in threshold income. And then you just add your employer contributions here so you don't double count. But if you've paid contributions as personal contributions, net of basic rate tax relief, for example, you'd add the gross value of those back at the adjusted income stage.

And it's that adjusted income which is used to determine your annual allowance for the tax year. So if your adjusted income is less than 260,000, you'll have the standard annual allowance of 60,000 pounds. If your adjusted income is 360,000 pounds or more, you'll have the minimum annual allowance of 10,000 pounds. And if your adjusted income is between 260,000 and 360,000, that's when it gets a little bit complicated, and you need to go through those calculations to work out exactly what your annual allowance is.

So the calculation for people in that 260,000 to 360,000 bracket is your annual allowance reduces by 1 pound for each 2 pounds of adjusted income Above 260,000 pounds. And typically, you'll need to decide how much to pay into your pension, at least as a regular contribution, before you your full taxable earnings for the tax year. So before you know bonuses and things like that.

So when you're looking at that calculation, it's perhaps worth thinking what's the maximum possible income that I might have, a maximum possible bonus, to decide how much to pay as a regular contribution, because you can always top up at the end of the tax year, or you can use carry forward to make use of any unused allowance the following year as well.

And for those of you who are somewhere between the 260 and 360,000 who might need some help working out your annual allowance, we do have some fact sheets that take you through step by step how to do that calculation. We also have a free app that you can download. So there's a QR code for that on the screen, and we'll share that in the fact sheet after the call as well.

And there's a useful government tool also which helps you work out your total annual allowance for the current tax year, including any carryforward amounts. So the link to that will be in the fact sheet and is on this slide as well. And we'll send you a second fact sheet which covers lump sum allowances and pension death benefits. So quite a technical sheet, but very important information to be aware of. And we'll talk you through options for personal support if you're somebody who would rather leave all that technical reading and decision-making to somebody else.

So those sheets will give you some help to work out what you can pay into your pension tax efficiently. And in addition to optimizing those tax efficient contributions, it's also important for those of you who are restricted to make sure that you build up sufficient retirement savings elsewhere. Consider how much you need overall in retirement and work out the best way to do that using pensions and non-pension savings.

So the example on the screen shows the potential difference in pension savings for somebody paying $10,000 a year into pension relative to a higher contribution. So you can see it can make quite a significant difference if you are restricted. And there is some planning to do around that to make sure you're adequately prepared for retirement. And on that note, I will hand over to Dan to talk through some of those alternative savings options available to you.

DANIEL JONES: Thanks, Helen, and good afternoon, everyone. So as Helen has demonstrated their, higher earners will be subject to the tapered annual allowance, and we'll need to consider other options if they want to build a pot of money that will one day support and provide for a comfortable retirement. Now, it's worth noting that we're going to look at some other products and solutions here. But when we work with people, these products and solutions are simply the tools that we use to implement a financial plan.

We dig deep into what our client's objectives, goals, and dreams really are. People typically come to us and say, I've got these pensions. I'm not sure if they're the best ones. Can you help? They're not asking if they've got the right pension. They're asking if I'm on track to retire comfortably? Am I going to be OK?

The pension is just a tool that can be used to help achieve a goal or a comfortable early retirement. And there are many more tools available to us, as we'll see. For today's presentation, the topic is retirement. So let's stick with that objective. What we see on the screen here are three elements of establishing a risk profile, which play a big part in a financial plan that is looking to deliver a comfortable retirement.

So risk. There are many types of risk, but one that appears first in everyone's mind is the risk to capital. The worry of losing money built up, and rightly so. This is your retirement. This is what's going to fund your income for the next 30 odd years. You can't afford to lose it. So it's natural to have concerns. Some people are more cautious than others, and this can be because it's in their nature. Quite often I find that people are cautious when investing because of a lack of understanding about how investments work.

I appreciate in the audience there will be those of you more familiar with how investments work, and others less so. This stuff isn't typically taught in school, and the media only ever scream about billions wiped off pension values. It's never billions and trillions wiped on. So lay people only ever really hear bad news about investments, and that can impact their attitude towards investing.

This can mean that people often revert to keeping their money in cash in the bank. It's safe. It won't go down in value. It's low risk. But is it low risk really? Your biggest enemy in retirement is going to be inflation. We've seen high inflation over recent years. If you're retired, you've got a pot of money to fund your income for the rest of your life.

If you're lucky and have a defined benefit pension, your income will likely rise with inflation. And I'm very jealous as I don't have one. Although, there might be situations where there are caps on how much it might increase by. Similar to the state pension with a triple lock, which is under pressure, and probably won't be sustainable going forward. So being able to manage inflation yourself is a crucial element in retirement.

If your money is in cash earning little interest from the bank, then it's going to be eroded by inflation. Remember, the biggest worry most people have is, am I going to be OK? Am I going to run out of money? If your money is sat in cash, a low risk investment, actually, there's a very high risk that you will run out of money. So cash is your main source of retirement funding. I would say is actually a very high risk option.

When I talk to clients about this, I prefer to refer to it as low return and high return rather than low risk and high risk. If presented with a question of choosing a low risk option or a high risk option for their retirement savings, then most people will naturally say the low risk option. It's like saying there are two ways to cross a ravine, a low risk or high risk. I'll take the low risk option. Thanks. This is why I think it's important to frame the question from the perspective of returns.

When asked this way, then, yes, both people would likely choose the high return option. Higher returns, more money, happy days. But if you want higher return, then the price of admission is volatility. The investment could drop by a significant amount, and that's the trade off. You need to accept that there can and will be points where you're going to have to ride out a market for. Some people, that's OK. But for others, it could cause sleepless nights and just wouldn't be suitable.

It might be that you need to have higher returns to get your retirement part to where you need to be. For others, it might be that they're close to the goal, and might not need to take as much risk. This point around time then is really important in the conversation. If you're in your 20s and you've got 30 or 40 years before you retire, you can afford to be more adventurous with your investment approach. The aim of getting higher returns.

If markets fall, it doesn't matter. You've got many years ahead of you, and it will recover and grow even further. If you're approaching retirement, it might not be so suitable to be exposed to such large potential drops in markets at a time when you're going to start to rely on the money to provide you with an income.

This moves us on to capacity for loss. How much of your investment could you afford to lose without affecting your financial plan? Two considerations here. How much you could lose, and how much the value might change by? If you're buying shares in a single company, such as Woolworths, for example, then that's a high risk strategy. If the company goes bust, which it did, then you lose all of your money, all your eggs are in one basket.

By contrast, if you have a well-diversified portfolio holding thousands of different companies in many different countries, you got lots of different sectors, then the only way your value goes to 0 is if every single one of those holdings goes bust. And that's quite unlikely. So then we're talking about a value change in certain market conditions.

At Atomos, we offer a range of investment solutions across six risk profiles, and we discuss with our clients how the investments are made from different asset classes that allow us to control the risk level within the portfolio and show how in past economic downturns each risk level would have performed. So people understand what a significant market drop might look like for each risk level.

For those that may know, WTW plays a significant role in helping Atomos build and implement these investment solutions and have done a fantastic job over the last three years that we've worked together. So depending on many factors, including emotional and financial, some people will have more capacity than others for changes in their investment value. Hopefully, this is starting to make sense, that when you have a plan with an objective, and these matters are considered, then we can start to think about what products and tools are actually going to be suitable for you in your plan.

So moving on to the next slide, we'll look at some of these options. So cash, I mentioned, can't realistically be your only source for retirement planning, but it can very much have its place. First of all, everyone should have a cash buffer to draw on for any short-term unexpected expenses. But it can play a much more important role too.

We just spoke about capacity for investment risk. If you want 100,000 pounds a year, for example, income in retirement from your investments, then it might be a suitable solution to build up a cash pot equal to a few years worth of income. So 2 or 300,000 pounds in this example say. What this does is give you capacity for your investments to be invested for higher returns, but equally in where there will be bigger drops in market falls.

It's not ideal to draw on your investments when the value has falling as you need cash in more units to give you the same level of income that you have had to use when the market was high. This can erode the capital and make the recovery even more difficult. So turning off the income and drawing on your cash instead will allow the investment to recover far more quickly.

You also benefit from higher returns in the good years, meaning you'll have more financial security through retirement. The low returns from cash are unlikely to be able to fund your income and retirement long-term. It will lose its buying power as inflation rises over time, so you'll need to generate better returns.

But first of all, let's just look at mortgage and debt repayments. Another strategy for planning for retirement is to clear all liabilities. A mortgage is often a big expense that can keep you in work, so having a plan to clear it ready for retirement would mean your income requirements is significantly reduced.

If you're paying higher interest rates on car finance or credit cards, then clearing them makes financial sense. But when a mortgage is 3%, say, you might prefer to invest the money and aim for higher returns of 10%, for example. Effectively, get more bang for your buck than paying off the mortgage.

I often have this conversation with clients, and shorter time frames might be more suited to overpaying the mortgage. Longer-term investing rather than overpaying might allow you to pay off the mortgage sooner. The point is that clearing debts ahead of retirement is usually best practice. Reduce your outgoings, and therefore, the amount of income you're going to need.

So let's have a look now at some more mainstream options starting with ISAs, which I'm sure most people have heard of. They're tax-free savings that you can hold in either cash or stocks and shares. If it's a choice between them, I generally go for stocks and shares, ISA, on the basis that returns are expected to be higher over longer periods of time, and so you're getting more tax efficiency rather than investing in a lower return in cash ISA, for example.

You can pay in 20,000 pounds per person per tax year. They're easily accessible at any time, so it can suit funding early retirement before you reach minimum pension age, for example. They're typically a first port of call for investing surplus cash, so something that everyone should probably look to invest in with any surplus cash they've got beyond their pension savings.

For those looking to save more than the 20,000 pounds allowed into an ISA, a general investment account can be a great solution. There are no limits on the amount that can be invested, but they're not quite as tax efficient as ISA's. Tax can be due on interest and dividends, as well as capital gains tax when withdrawals are made. And for this reason, it can be useful to shift 20,000 pounds from the general investment account to the ISA each new tax year, thereby moving it from a taxable environment to somewhere more tax efficient.

Investment bonds are coming back into vogue a bit more now as capital gains tax thresholds have reduced over recent years. These are typically best suited to lump sum investments rather than regular contributions. This is because the investor can draw 5% of the initial investment amount each year, with no tax to pay. It's deemed to be a return of capital, and so you can only do this for 20 years, as that will amount to 100% of your capital being repaid to you.

If you don't make a withdrawal or draw only 3%, say, then the unused allowance rolls forward to future years to be drawn as needed. So you may draw nothing in years one and two, but in year three you might take 15%, for example. This is the same for both onshore and offshore bonds, but there are some tax differences between them.

Onshore bonds pay tax within them at 20%, and they can be further taxed to pay on withdrawals above the 5% limit for higher and additional rate taxpayers. Offshore bonds also have tax to pay on withdrawals above the 5% limit. However, they pay no tax while invested. This means that they grow more efficiently compared to onshore bonds as they don't have the tax drag.

You can also control the tax to some extent. For example, if you're an additional rate taxpayer now whilst in work, then when you retire, you may fall into the lower tax bands, or may even have a period of time where you have no income and pay no tax. This could be an opportune time, then, to draw the money back onshore out of the bond very tax efficiently.

In addition to pensions, ISAs, and GIAs, and bonds, the typical mainstream tax wrappers, well, you can invest in the same way. You can invest in any of the products with the same investment strategy, the same risk profile, or it might be that you have different strategies for each of them. It may be that in retirement, you're going to draw on your ISAs first while you wait for your pension minimum age to come around. So it's quite often that clients can have the same risk profile across all of those tax wrappers, or it may be that it's appropriate to have a different risk profile for each.

Investing in property is pretty common. A lot of people are familiar with that as an investment, and it can work out well for a lot of people. You can have the rental income. You hopefully get some value appreciation. If you're buying with a mortgage, the tenant is effectively paying the mortgage for you, and down the line, you fully own the asset.

But it's also becoming more difficult to be a landlord, exams to pass, property efficiency standards to meet, increasing rates of income and capital gains tax, greater protection for tenants, maintenance repair costs, insurance, lister and agent costs. And on top of all that, it's an illiquid asset. If you want to access some cash, you can't sell part of the house. You can't sell a window, for example. And that's what I might feel like there's quite a lot of negatives there.

And I think it's quite important to highlight those because these are fairly recent changes in some cases, and people may not be aware of them. And property can still be a very good part of your portfolio, even to diversify away from some other assets and investment solutions. So yeah, consider property, but do consider all of the potential downsides as well.

The next three investments we'll look at are a bit different. EIS and VCTs offer a 30% income tax reducer. So if you invest 100,000 pounds, they will give you 30,000 pounds of your income tax back. So the investment has only effectively cost you 70,000 pounds. The investments are made into smaller, growing companies, which could benefit the UK economy if they succeed and employ more people, pay more tax, et cetera. This is why the government give you this incentive. It also means that your capital is at greater risk too.

Returns are more volatile than mainstream investments, so it's typically suited to surplus cash. Think back to when we said before about capacity for loss. You wouldn't be putting all of your retirement plan into these investments. The government also announced in the recent budget that VCTS would have the tax relief cut from 30% to 20% from April 26. So if you were thinking of investing in VCT, you may want to act before April if you want to secure the higher rate of tax relief.

Business relief. It's not typically suited to retirement planning or inheritance tax planning, but it does have a place here. It can be difficult to balance what money you're going to need for yourself, and are prepared to allocate to inheritance tax planning. These investments allow you to keep control of your money while addressing an inheritance tax problem at the same time.

If you hold money in these investments for two years, then they're exempt from inheritance tax. You need to die holding them, but you can draw down on them if you need access to the cash. They are, again, higher risk to capital, the more mainstream and diversified investments, and typically only target lower returns of between 3 and 5%. So not likely that'll suit everyone's retirement planning, but an option for some.

So we've covered off the main types of tools that you might use to implement your retirement plan. Now let's look at how we bring this to life on the next slide. So cash flow modeling software is a tool, as advisors, we use with clients, and it's an excellent way of bringing to life a financial plan. Often explain that this is like turning the light on. All of a sudden, we can now see how the pension and the ISA, et cetera, are all going to interact with one another and fit into the plan, and when they're going to be drawn on, and what impact that will have on the value of the investments in future.

We're typically trying to answer that one big question to clients have, am I going to be OK? And so cash flow modeling software can illustrate this in a way everyone can easily understand by showing you the value of your plans over time. And if you need to draw money, what impact that will have on the values.

If they are currently look on track to live a comfortable retirement, then great. If someone's off track, how are the actions that we're going to take going to get them back on track and achieve their goals? In some cases, people are way beyond where they need to be, and have far more money than their plan requires.

This might sound great, and it is, but there's actually a point here where we can challenge the plan. Are they really living life to the full? Maybe they can afford to upgrade their plane ticket when they travel. Maybe they can support their family more or move house and give to charity, whatever it is that matters most to them or bring them the most fulfillment.

These things are much easier to action when you can see the impact of doing them on your future cash flow in a visual output like this. They're quick and easy to tailor, the what if questions that come from clients during meetings. So it's very personal. I've got lots of amazing stories about how people have retired early or changed their lifestyle for the better when they're able to benefit from having these conversations.

It can also be really easy to be cautious. Retirement is a leap of faith. And people often will take a more cautious approach, and it could be that they don't spend enough money or maybe hold back on doing certain things. And it could be that they're 85 years old, with 10 pounds million in the bank, wishing they'd have done more.

And it's probably too late then. We don't have health and the ability to travel and do all these great things at that point. So yeah, cash flow modeling, a great way to bring to life a financial plan and show people how values can change and how the plan is actually all going to come together in the future. Helen, back to you.

HELEN PERRIN: Thanks, Dan. Lots to think about there. We've had a few questions come in, actually. So how many years before retirement should you consider moving your funds to lower risk funds? Do you want to take that one?

DANIEL JONES: Yeah, I think there's no right or wrong answer to that. It's a very personal question. So it depends on all those factors that I spoke about before and what the strategy is going to be in retirement. I think if you have a lifestyle approach, which a lot of funds do, then it'll start 10 years or even more beyond that. But it depends on what the starting point is, and it depends on how much income you're going to take and what the-- yeah, sorry to not be able to give you a definitive answer, but it is very personal.

And it might be that, actually, people don't reduce the risk level in retirement. If you've got a healthy cash buffer, maybe that gives you the capacity to continue to invest at a higher risk level and generate higher returns. So yeah, sorry I can't be more definitive about that. Happy to have a conversation though.

HELEN PERRIN: Thanks, Dan. Yeah, I agree with that. It depends on how you're going to use the money and your own attitude to risk. So lots to think about before giving an answer to that one. Are there any ways to protect your minimum pension age now for SIPPs workplace pensions? Does anyone offer guaranteed pensions access age anymore? So there's no way that you can personally protect your minimum pension age. It will depend on the product that you're invested in.

So there are some schemes that may have had a retirement age of 55 or 50 in the past written into their scheme rules, which means that you continue to be able to benefit from that. But there's no way you can switch now to make that happen. It will depend on the arrangements you're in and what they have got in terms of their scheme rules. So the only way to know that for sure is to check with your specific providers if you have a guaranteed minimum pension age and what that is.

And then a question about what about corporate bonds? So I think this is when you were talking about the different wrappers, I guess, for investment. So corporate bonds are a type of investment that you might hold in any of those wrappers, for example. So if you've got an ISA, it may have a fund that invests in equity funds.

It may have a fund that invests in corporate bond funds, or a multi-asset fund where you've got a range of different investments. So corporate bonds will form part of someone's overall investment potentially. But that's the underlying investment rather than the wrapper, where Dan was talking about the ISA of the general investment accounts, things like venture capital trusts, and so on.

Once you've chosen that wrapper, then how are you going to invest that money in terms of your asset allocation? And when is the ISA limit changing? And if you are already retired, what is the limit for people? So the cash ISA limit is going to be reducing for people below-- I think it's age 65. Can you remember the date? It's a few years away, isn't it? It's a couple of years away.

DANIEL JONES: 27 is the proposed date. It's not officially happening yet, as with a lot of these things at the moment. But yeah. So yeah, 12,000 pounds is the proposed cap on a cash ISA for people below 65, although anyone over 65 could still pay in 20,000 pounds to a cash ISA. This is because the government wants to drive people more into stocks and shares ISAs rather than lower returning cash ISAs, which I don't think is a bad strategy. But again, a point about risk is one that they're trying to apply here. People over the age of 65 may want to have less risk, and so allowing them to put the full 20 into a cash ISA is why they're doing that.

HELEN PERRIN: But for the 26, 27 tax year, you've still got the full 20,000 that can be in cash ISAs or stocks and shares ISAs, depending on your objectives. For the 26, 27 tax years next tax year, and then you've got this year 25, 26, if you've not used your ISA allowance yet as well. And would you recommend buying an annuity when you retire? I think the answer to that is similar to Dan's earlier answer, in terms of it is down to your own personal circumstances.

For some people, it might be helpful to have a secure level of income. An annuity can pay an important part in securing that. But for other people, they may prefer to leave more money invested and take ongoing risks. So if you want to discuss that in terms of your own personal circumstances, we'll talk you through some options for that. But it's not one that we can answer in this group session, unfortunately. Lots to think about in order to reach that conclusion.

And on that note, we will send some fact sheets around different tools and resources to help you. But for those of you who would like some additional personal support, whether that's someone calculating your annual allowance for you, including carryforward, or talking through your financial plans in a bit more detail, we have an individual guidance or an individual advice option to suit your needs. So we'll explain a bit more about how those two options work.

So the first is WTW's pension guidance service. That's available to elect on Flexmart, a flexible benefits platform as an any-time event. Guidance is delivered by our regulated financial planning team. So WTW's internal financial planning team. And that guidance service is, I guess, a bit of a financial planning MOT almost.

So we talk you through a strategic level, any ideas to improve your financial planning, including pension planning. Once you've elected the benefit on Flexmart mart, we'll ask you to complete a confidential fact find so we can better understand your specific personal circumstances and objectives. And you then book in an hour video call to suit you to talk through your options.

So we'll tailor that to the questions you've asked in your specific circumstances. So for example, we might use a spreadsheet to calculate your annual allowance for you, and help you gather the information you need to do that if that's something that's on your mind, or we might be talking you through alternatives to save for retirement if you're someone who's restricted by the annual allowance, and looking at your overall financial plans.

So our guidance service might suit if you don't necessarily need full-regulated advice on an ongoing basis, but would value the chance to talk through your financial circumstances and work out if there's anything you could be doing better or want to look at your annual allowance, for example. What we can't do through guidance is provide a specific recommendation for a regulated product.

So if you wanted to have a specific recommendation or ongoing wealth management, for example, then regulated advice will be more appropriate for you, and Dan will talk you through that option in just a moment. But in terms of how to access the WTW guidance service, as I say, you can select that on Flexmart, the flexible benefits platform. It's an opt in benefit paid for through salary sacrifice.

So the cost of that service is 500 pounds, but it is tax and NI deductible. So the after tax savings-- sorry, the after tax cost will be somewhere between 265 and 360 pounds depending on your tax position. And you'd usually pay for that monthly. So if someone pays over the full 12 months benefit years, 30 pounds a month or less, if you elect that in January to go live from February spread 9/11 months, for months.

If you have any questions on our guidance service before signing up, you can ask those now, today, or you can contact our dedicated helpline by email or telephone. But as I mentioned, we can't give you regulated advice through that guidance service. So I'll pass on to Dan to talk through the option for financial advice from the Atomos financial planning team.

DANIEL JONES: Thanks. So as I've mentioned, the financial plan is the very heart of what we do at atomos. The first meetings with prospective clients are all about understanding what it is they really want to achieve, what matters most to them. As you can see on the bullet points, this might mean addressing education costs, or retirement plans, or inheritance tax planning.

We take a holistic approach. So it's often the case that there'll be multiple goals that needs to be addressed. We call these discovery meetings. These would be held with an Atomos financial planner. You can book your discovery meeting through the links in the QR code you can see on the screen. You'll have an initial call booked with a financial planning associate, who'll gather some background information and arrange a meeting with a financial planner on the back of that.

And it may be that actually a further conversation with the planner isn't needed sometimes. It might not be the most appropriate way forward, in which case the financial planning associate might give some guidance as to the best way forward. But yeah, if you're keen to explore your options and work together with us, then please get in touch. Our investment solutions are effectively managed by WTW. So there's already a good close link between our businesses. And so you should be in good hands.

HELEN PERRIN: Thanks, Dan. And we have shared with us most details of our employee benefit structures as well. So they should already be armed with lots of the information needed to support your advice needs. We've had a couple of more questions come in. So can you invest in a VCT in a stocks and shares ISA? And if you do, do you still receive an income tax relief. Is that income tax relief simply 30% until April of the value invested in said at VCT?

So a venture capital trust, or VCT, is effectively the wrapper. So it would be separate allowance from your stocks and shares ISA. So if you invest 20,000 in a stocks and shares ISA, you don't get any income tax relief on the way in, but you get growth tax free or income tax-free within the ISA.

A venture capital trust is a separate wrapper, so you'd get the 30% income tax relief on the way in, and it has its own tax reliefs on dividends and growth as well. But it's a separate allowance to the ISA allowance. So you could potentially use your ISA allowance and then have a VCT on top of that to save towards retirement. Anything you want to add on that, Dan, from a VCT perspective?

DANIEL JONES: No, you covered that really well, yeah.

HELEN PERRIN: And if someone already has a financial advisor in place, can the Atomos service be used as a form of sense check perspective, albeit noting the comments made about the advice? Do you want to-- yeah.

DANIEL JONES: Yeah, absolutely. We're always happy to have a conversation with anyone. These discovery meetings, there's no cost for them. If you want us to go away and do some work as a comparison to the advice that's already been given, then there could well be a cost for doing that. But yeah, we can be transactional if you'd rather retain a relationship elsewhere.

HELEN PERRIN: Thank you. And do keep those questions coming. Actually, there's one more before I talk about our next webinar. I have heard it's not advisable to buy VCTs after a launch. Is this true? I mean, I guess-- sorry go on. You go.

DANIEL JONES: Yeah, I was going to say that they are higher risk investments. So whenever we recommend, the due diligence has been done on our side to make sure that it's an appropriate solution as best we can. But they are high risk investments. So you know that going in. That's where you get the tax relief is the benefit the attraction of going into it. Yeah, you go in, well, knowing that you're going to be taking that risk.

HELEN PERRIN: Yeah, so I guess with the subscriptions, you get the 30%. And if you invest after the subscription, you don't, yeah. What are the benefits of your service for WTW staff versus non-staff? I'm not sure if that's aimed at the guidance service or at the advice service, but the WTW guidance service, we make available both to external clients and internal colleagues. And there's no difference between the two. Dan, do you want to cover that from an Atomos perspective?

DANIEL JONES: Yeah, I think in terms of the way that we approach it is exactly the same as we do for other clients. I guess there's probably not much difference, actually. The discovery meeting is always free as it is to any other person from any other backgrounds. So probably not too much different in that respect.

HELEN PERRIN: I guess the benefit is that you do have the knowledge of our employee benefits as well, so you can explore those options without having to do some of that fact finding. So from a smooth operating perspective, that helps.

DANIEL JONES: Yeah, for sure.

HELEN PERRIN: Can you elect to reduce your employer pension contribution and flex the cap? And what happens to the remaining amount? Yeah, so WTW employees, if you are someone who's restricted to the annual allowance of $10,000 a year, you can elect to opt down option where you, say, receive some of the contributions as pension and some as cash. The amount you receive as cash will be netted down for the cost of employer NI because your employer has to pay national insurance contributions on cash benefits, not on pension contributions. But then you can receive that cash and invest that elsewhere if that suits you better.

If you have lifetime protection allowance 2014, is a 25% tax-free lump sum cap still 268,000? Usually, no. So if you've got a form of lifetime allowance protection, that normally gives you an up lifted tax-free lump sum amount, so depending on which form of protection you have. 2014-- testing my memory. But I think that was the 1.8 million one. So the tax-free cash would be restricted to 450,000. That protection is still relevant even though the lifetime allowance has disappeared.

Can you explain how the WTW sessions work in a bit more detail? How many sessions are there? Is the output the cash flow plan, or is there anything else as part of guidance versus advice? So in terms of the WTW guidance session, we'll ask you to complete information before the call. We'll have what's usually about an hour call. If it goes longer, we can do longer than an hour, depending on what you need to talk about.

We then have a written follow-up, which outlines some planning tips for you to say, these are some of the things that you could think about doing differently. If you want any clarification on those points, then we can book in another call to go through those. So it's not a kind of, you've had your guidance call. You've got to pay again if you want any more help. We will continue to have that dialogue with you over the benefit year as needed.

We wouldn't do full cash flow modeling as part of guidance because that is quite a detailed piece of work. We could do a approximate are you on track for retirement, and share some figures with you. But if you want that full detailed cash flow modeling, including pensions, non-pension assets, then that would be an advice piece. But it can be just a one off strategic advice piece as opposed to ongoing financial advice if that's what you prefer.

So I think that's it for questions for now. Do keep them coming. We've got seven minutes left if you've got any more questions to answer. I'll also just signpost that our next webinar is coming up on the 11th of February, where we'll be helping you pass on family wealth with our estate planning and inheritance tax tips.

And so we'll be looking at the importance of making a will, putting into place powers of attorney, how to pass on wealth during your lifetime whilst not jeopardizing your own needs, and the potential use of more complex structures, such as trusts and family investment companies, and also the potential implications of those new inheritance tax rules on pension death benefits from April 27. So if you want to hear more about that, come along on the 11th of February.

Also, I just need to share our limitations of reliance in terms of the information we've shared today is intended to be information and guidance rather than regulated financial advice. And if you are looking at making specific financial decisions, you will need to take advice or make those decisions yourself. And similar important information from Atomos too. But thank you again for joining today. I hope it's been useful, and have a lovely rest of the day.