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What would you do with tax free cash?

24 May 2023

Amounts 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. What is true of both 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, maybe using the Lifetime ISA (LISA) facility to boost your funds where appropriate.

The middle years might simply see the funds being used to make ends meet. The 'squeezed middle' as it is often termed, perhaps with a holiday or two and some additional mortgage / debt repayment as examples.

Once you reach over the age of 55, 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. We have looked at the issues and emotions of planning for retirement in our book 'Coming in to Land: Runway to Retirement'. More can be found here:

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 drawdown value, perhaps in the formation of a drawdown or annuity arrangement. Getting good advice at this junction we believe is vital and more detail on the options can be found in our retirement options schedule here: Retirement Options

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
  • Gifting to the children / dependants (the bank of Mum & Dad!)
  • 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 needs; however, taking suitable advice to look at your needs 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
CFP Chartered FCSI
Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899

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