Why having a financial plan is more important than ever


Having a financial plan in place is important. It allows you to focus on your long-term goals, helping you decide what your financial future will look like, whilst providing the roadmap to get you there.

The coronavirus pandemic has had a global impact on people, society, and the economy. It has also highlighted the peace of mind that a long-term financial plan can bring.

As some elements of lockdown are tentatively lifted, you might find that your priorities are different. But it’s unlikely that your long-term goals have changed.

Here are three reasons why having a financial plan in place, and sticking to it, is more important than ever.

1. You’ll know what your goals are

World travel might be on hold for now but having a financial plan in place means that you’ve at least thought about your long-term goals. You should also have confidence that you can achieve them.

The unprecedented nature of the coronavirus pandemic might have shifted your priorities in the short-term but have your long-term plans changed?

Ask yourself the following questions:

  • What do you plan to do in retirement?

If you planned to travel or loan a house deposit to a child this year, global travel bans and the recently lifted housing market freeze might have postponed your schedule.

But if your current dream retirement looks similar to before the pandemic, you’ll likely want to stick broadly to your plan.

  • When do you want to retire?

Your retirement date is a milestone to build your financial plan around.

That doesn’t mean that it is set in stone and can’t change and lockdown may have given you time to reflect. Maybe you’ve enjoyed working from home and now want to retire earlier than planned? Maybe you’ve missed the sociability of working life and are considering pushing your retirement back?

A financial plan will take your current and future cash flow into account and will have in-built contingencies to guard against the unexpected. That means you can pick the retirement date that works for you, regardless of what happens in the wider world.

  • How do you want to retire?

Phased retirement may look more appealing in the current climate than it has previously. Whether for financial or social reasons, the so-called cliff-edge might no longer be for you.

Splitting time between family and work, maybe in a part-time or consultancy role might allow you to enjoy the best of both worlds.

Your retirement represents the culmination of decades of hard work. Thinking about how and when you want to retire, as well as what your retirement might look like, means that we can help you build a financial plan that supports your goals.   

2. You can keep track of your progress

Checking in with pensions and investments helps to ensure you’re on track to meet your goals. If you’re falling behind and need to make up a shortfall, the earlier you know the better.

  • How are your pensions performing?

If you haven’t checked in on your pensions for a while, now might be a good time to request valuation statements and quotations.

You may have more than one pension pot. Be sure to speak to all your providers to get a clear picture of how much money you’ll be taking into retirement.

Remember that your investments are designed for the long term, with diversified portfolios capable of weathering the storm of brief drops in the market. If your retirement is still several years off, current market volatility needn’t be too big a concern.

  • What about the State Pension?

The full State Pension for 2020/21 is £9,110.4 per year. To get this you’ll need 35 qualifying years of National Insurance Contributions.

If you’re not sure how much State Pension you’ll receive, request a forecast from HMRC and be sure to factor your State Pension entitlement into your plan.

  • What other income might you have in retirement?

You might have other sources of income too, whether that’s Buy to Let properties, an investment portfolio, or fixed-term bonds.

Remember that your investments are for the long term but also understand how they fit into your retirement planning.

Speak to us about your financial plan. We can take all your income into account, matching it to your retirement goals to provide the advice you need to make your goals a reality. We can help you make up any shortfall too, ensuring you achieve your dream retirement on time.

3. You can understand your retirement options and how they fit into your plan

The retirement options you choose will depend on your long-term goals and what a ‘dream’ retirement looks like for you.

An Annuity is considered the ‘traditional’ retirement option and will provide you with a regular, known income, perfect for covering fixed expenses. You could receive up to 25% of your pension pot tax-free, with the remainder used to purchase a guaranteed income for life.

If you have any one-off, high-cost items planned for retirement – such as an around the world trip or a deposit for a child’s first house – a lump sum might be a better option.

Opt for an Uncrystallised Fund Pension Lump Sum (UFPLS) and you could receive your whole pot in one go, 25% tax-free with the rest taxed at the highest rate you pay. This option could free up a large sum in one go but remember you’ll need to budget carefully.

Flexi-Access Drawdown was introduced in 2015 and allows you to withdraw, or ‘drawdown’, income as and when you need it. This could be a good option if you’re looking to fund discretionary expenses such as holidays, with fixed expenses covered elsewhere.

Get in touch

Financial planning means thinking about your long-term goals and working out the best way to achieve them.

Periods of global uncertainty might give you cause to reflect on what matters most. That might mean making tweaks to your plan – altering your desired retirement date maybe – but it’s unlikely to overhaul your aspirations entirely.

If you’d like to discuss any aspect of your long-term financial plan or your investment goals, get in touch. Please email info@investmentsense.co.uk or call 0115 933 8433.