Planning for retirement involves more than building up a pension. You'll also need to think about when to stop working, where your income will come from and how your tax position might change.
An accountant can help you make sense of your finances, understand your options and prepare for the decisions ahead.
Why Use an Accountant for Retirement Planning?
An accountant can help you understand how your pensions, savings and other sources of income fit together, so you have a clearer picture of your finances before and after retirement.
They can also help you:
- Understand your retirement income: Work out what income you could have available once you stop working.
- Plan for tax: Understand how different sources of income may be taxed and identify opportunities for tax-efficient planning.
- Prepare for financial changes: Consider how your finances might be affected by reducing your working hours or retiring completely.
- Plan your business exit: Understand the financial and tax implications of selling or passing on a business.
How Can an Accountant Help You Plan for Retirement?
Understanding Your Retirement Income
Before retiring, it's important to understand how much money you'll have coming in and whether it will be enough to support your plans.
Your retirement income might come from several sources, including workplace or private pensions, the State Pension, rental income, investments, dividends or part-time work.
It's also worth knowing what types of pension you have. Defined contribution pensions provide a pot of money built up through contributions and investment growth, while defined benefit pensions provide an income calculated under your scheme's rules. Your State Pension entitlement will depend on your National Insurance record.
An accountant can help bring these figures together and compare your expected income with your likely expenses. They can also look at different scenarios, such as retiring earlier, working part-time or delaying retirement, to help you understand how each could affect your finances.
For more guidance on estimating your retirement expenses, read our Retirement Budgeting: Your Essential Guide.
Making the Most of Pension Tax Relief
Pension contributions can be a tax-efficient way to save for retirement, as you may be entitled to tax relief on the money you contribute.
However, there are limits to how much you can contribute while benefiting from tax relief, and the rules can vary depending on your earnings and circumstances.
An accountant can help you review your pension contributions, check what tax relief you're entitled to and understand how the annual allowance and other relevant limits apply to you.
This can be particularly useful if you're self-employed or a company director, as there may be different tax considerations when making personal pension contributions or contributions through your business.
They can also check whether you're entitled to claim additional tax relief and explain how your contributions affect your overall tax position.
Understanding the Tax You'll Pay in Retirement
Retiring doesn't necessarily mean you'll stop paying Income Tax. Depending on your circumstances, you may still have tax to pay on your pension income and other earnings.
For example, if you receive the State Pension alongside a private pension and income from a rental property, these can all contribute towards your taxable income. Taking a large taxable pension withdrawal could also push some of your income into a higher tax band.
An accountant can help you understand how your different income sources are taxed, estimate your potential tax liabilities and consider the tax implications of decisions you make before and during retirement.
This is particularly useful if you have several sources of income or plan to continue working part-time.
If you're considering withdrawing money from your pension, it's also important to understand the different options available. We explain these in our guide to accessing your pension after retiring.
Planning Your Business Exit or Succession
If you own a business, retirement can involve more than simply deciding when to stop working. You'll also need to consider what happens to the business when you step away.
You might want to sell it, pass ownership to family members or gradually reduce your involvement while retaining an interest in the company.
An accountant can help you understand the financial implications of each option, including:
- Business valuation: Establishing what your business and its assets may be worth.
- Tax planning: Understanding potential Capital Gains Tax liabilities and any relevant reliefs.
- Preparing for a sale: Getting your financial records and accounts in order for prospective buyers.
- Succession planning: Considering the financial and tax implications of transferring ownership.
- Retirement income: Assessing how sale proceeds or continued business income could support your retirement.
Planning ahead can give you more time to prepare the business for a successful transition and understand how your exit decisions could affect your personal finances.
Reviewing Savings, Investments and Other Assets
Your pension may only be one part of your retirement finances. You might also have savings, investments, property or other assets that could provide income or be used to support you after you stop working.
An accountant can help you understand how these assets fit into your overall financial position and what tax implications you need to consider.
For example, rental income, investment returns and profits from selling certain assets may have different tax treatments. Understanding these differences can help you plan for potential tax liabilities and make more informed decisions about your retirement finances.
Preparing for Later-Life Financial Decisions
Retirement planning isn't just about your finances immediately after you stop working. It's also worth considering how your circumstances might change as you get older.
For example, you may want to make financial provision for your spouse or dependants, review any existing life assurance arrangements, consider the potential cost of long-term care or understand what will happen to your assets when you die.
An accountant can help you review the tax implications of these decisions, including Inheritance Tax and how your estate is structured.
They can also help you understand how changes to tax legislation may affect your plans, such as the inclusion of most unused pension funds within the scope of Inheritance Tax from April 2027.
For matters such as wills, trusts, insurance policies and investment recommendations, your accountant can work alongside solicitors or appropriately authorised financial advisers to help you plan for your circumstances.
When Should You Speak to an Accountant About Retirement?
You don't need to wait until you're ready to retire to speak to an accountant. In fact, planning several years in advance can give you more time to review your finances and make decisions about pension contributions, tax and other sources of income.
This is particularly important if you own a business. For example, a company director planning to retire in five years may need to consider their pension contributions, when to sell the business and how their income will change afterwards. An accountant can help them understand the financial and tax implications of these decisions before committing to a particular plan.
Even if you've already retired, an accountant can still be useful, particularly if you have multiple income sources, need to complete a Self Assessment tax return or your financial circumstances change.
Do You Need an Accountant or a Financial Adviser for Retirement?
Accountants and financial advisers can both help with retirement planning, but they have different areas of expertise.
Depending on your circumstances, you may benefit from working with both. An accountant can help you understand your financial and tax position, while a regulated financial adviser can recommend suitable pension and investment arrangements.
Get Help Planning Your Retirement With Ryans
Whether you're approaching retirement, planning to leave your business or already receiving pension income, Ryans can help you understand your financial position and prepare for the tax implications of retirement.
Our team provides straightforward, practical advice to help you make sense of your options and plan your next steps.
Find out more about our retirement planning services or get in touch to discuss your circumstances.