Imagine what would you do with tax free cash
04 April 2025Amounts of cash can appear throughout a lifetime, in large and small chunks. Sometimes these can be planned for, such as retirement, some usually cannot, such as an inheritance, or perhaps a redundancy payment (up to £30,000 of which can be tax free). What is true of these examples is that it is sensible to plan what to do with the funds.
Any financial planning for cash might depend on your age at receipt. If you are in your younger years, these funds might be used for education or university costs, and in the next stage, perhaps for a first home purchase, which is highly topical at the moment.
The middle years might simply see the funds being used to make ends meet, or to pay extra school fees costs. The 'squeezed middle' as it is often termed, perhaps with a holiday or two and some additional mortgage / debt repayment as examples.
Under current rules, once you reach over the age of 55 (57 from 2028), the source of funds available can change, and pension funds can be accessed, if needed and perhaps planned for. This can bring a different slant to any financial planning because these are your own funds and, with normal longevity, you might need your pension funds to last another 30 years, with normal longevity for males and females in our locality being 85-90 years old. We have looked at the issues and emotions associated with planning for retirement in our book 'Coming in to Land: Runway to Retirement'. More can be found here: buy here on amazon
Drawing pension benefits, such as tax-free cash and/or taxable income can be an emotive time. You may well have spent decades in the accumulation phase, to reach a point where you access funds and start to draw down value, perhaps in the form of an income drawdown plan or annuity arrangement. Getting good advice at this junction (and hopefully a little in advance) we believe is vital and more detail on the options can be found in our retirement options schedule here: Retirement Options.pdf
There might be some obvious targets for tax free cash such as:
- Paying off a mortgage
- A capital expense, such as a car purchase or house repairs / improvement
- Investing to provide the potential for additional income & capital growth
- Holidays and 'gallivanting' as we sometimes call it!
- Gifting to the children/dependants (the bank of Mum & Dad/grandparents)
- Achieving your dreams
As you might expect, this list could be endless, and it might be a combination of ideas and plans, perhaps sharing the objectives with any partner / spouse. However, the key point is that accessing cash does need planning to make sure it achieves your objectives now and into the future. It might take some time to plot out your plans; however, taking suitable advice to look at your situation at this junction is usually vital.
No individual advice is provided in the course of this blog.
Please do speak to the team at Chapters Financial for your pension and retirement planning.
Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899
