S3 Ep 7: Decumulation Strategy

In Episode 7 of our ‘Practical Financial Planning’ season, Simon explains the relevance of a decumulation strategy to managing finances in retirement. Typically, money needs to be taken from various sources during this phase of life in order to fund expenditure, but the choices to be made regarding the timing and order of such withdrawals can make a big difference.

Some key points of interest covered in this episode include the following:

• Simon explains that the aim of a decumulation strategy is to manage the timing and order of financial withdrawals during retirement. [01:06] A good decumulation strategy is based on a clear understanding of the tax arrangements that apply to investments that have been made in preparation for retirement. [03:44]
• Simon works through examples of how a newly retired individual might release money in retirement. [06:18] He demonstrates that for anyone who has more than one source of income, understanding the relevant tax factors can make a huge difference to the right order in which to withdraw money. [14:15]
• In response to a question from Bex, Simon explains how to use crystallisation to manage the process of taking withdrawals from a pension fund in a tax efficient manner. [18:14]
• Simon explains that not all pensions include a 25% tax free cash element, meaning that different types of pensions can require different treatments in order to maximise withdrawals. [21:24]
• Simon deals briefly with points to note when taking money from Individual Savings Accounts (ISAs) and General Investment Accounts (GIAs). [23:43]
• Simon summarises key points covered in this episode. [26:11]
• The final ‘Practical Financial Planning’ episode will deal with ‘Estate Planning’, including various matters relating to inheritance tax. [28:24]

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