Retirement Planning in the UK: How to Move from Saving to Spending with Confidence

Retirement is often talked about as a financial milestone, but in reality it is much more personal than that. In this edition of our insights, Oscar Hjalmas sits down with client Nick Kesley to explore what retirement planning really looks like in practice, from saving into a pension in your early twenties to facing the emotional shift of actually drawing on your wealth later in life.

This conversation goes beyond the usual pension figures and retirement income projections. Oscar Hjalmas and Nick Kesley discuss the real challenges people face when moving from accumulation to decumulation, including how to balance saving for retirement with buying a first home, how to structure a sustainable income, why cashflow modelling matters, and how purpose, health, and social connection can be just as important as investment returns.

For anyone thinking about retirement planning in Dorset, Hampshire or further afield, this discussion offers a useful reminder that good financial planning is not only about building wealth. It is about understanding what that wealth is for, how to use it confidently, and how to enjoy the next chapter of life without feeling anxious about every financial decision.

Whether you are looking for support with pensions, retirement income, investment strategy or wider wealth management, this conversation shows why working with an Independent Financial Adviser can help you feel more secure about both the numbers and the life decisions that sit behind them.

Key Takeaways

• Starting pension contributions early is beneficial: but only if it remains affordable within the wider context of your life.
• Saving for a first property may take priority: for many younger people, building a deposit is more urgent than increasing pension contributions.
• Retirement planning is not only financial: the emotional shift from saving to spending can be one of the most difficult parts.
• Regular reviews with an Independent Financial Adviser add value: plans can evolve as income, goals and priorities change over time.
• Different assets serve different purposes: ISAs, pensions and other investments all play distinct roles in retirement planning and wealth management.
• Cashflow modelling provides clarity: it helps determine affordability of retirement and how spending may change over time.
• Social connection and purpose are essential: maintaining routine, relationships and engagement is key to a healthy retirement.
• Flexible income planning reduces risk: emergency reserves and bucket strategies can help manage market volatility.
• Retirement readiness is both financial and personal: having enough money is only one part of the equation.
• Pension inheritance tax changes are complex: avoiding knee-jerk decisions and seeking advice is essential.

Watch the Video

Video timestamps

00:00 – 00:52 – Introduction to retirement planning
00:53 – 02:47 – Starting pension contributions early
02:48 – 04:12 – Cost of living and realistic retirement saving
04:13 – 05:15 – First home vs pension saving: balancing short-term and long-term goals
05:16 – 06:28 – Setting retirement targets
06:29 – 07:49 – Reviewing your plan with an Independent Financial Adviser (IFA)
07:50 – 09:48 – Retirement saving options
09:49 – 12:49 – The decumulation mindset
12:50 – 15:52 – Finding purpose in retirement
15:53 – 18:23 – Planning before you retire and using cashflow modelling
18:24 – 20:55 – Semi-retirement, health, hobbies and family time
20:56 – 23:25 – The psychological shift from full-time work to retirement
23:26 – 27:16 – Retirement spending and financial priorities
27:17 – 30:49 – From inheritance planning to spending with confidence
30:50 – 35:24 – Flexible retirement planning and managing investment risk
35:25 – 37:59 – When can I retire? Financial vs personal readiness
38:00 – 46:20 – Social connection in retirement and avoiding isolation
46:21 – 52:49 – Managing retirement risk with a bucket strategy
52:50 – 59:10 – Pension inheritance tax (IHT) rule changes
59:11 – 1:00:47 – Final thoughts on retirement planning, financial advice and enjoying the next chapter

Full Transcript

Introduction to retirement planning

Oscar Hjalmas (0:06): Welcome to The Financial Journey Insights, brought to you by Baggette & Company Wealth Management.

I’m Oscar Hjalmas, and today we’re exploring one of life’s biggest transitions: retirement.

But this isn’t just about the numbers. It’s about the emotional shift that comes with moving from earning and saving to actually spending and enjoying wealth you all worked so hard to build.

So, Nick, let’s go back to your accumulation years. Can you go through that a little bit with us and what was your focus back then?

Starting pension contributions early

Nick Kesley (0:59): Okay, so I started my career in the city quite early, at the age of eighteen, having left school with some A levels.

And I worked for a number of financial institutions, including US investment banks, and I quite quickly became a fully-fledged trader in the City, trading fixed income securities for an American investment bank in my early twenties.

And at that stage, pensions, like for many people didn’t really enter my mind. But the scheme that the bank offered me was very financially advantageous in the fact that they matched contributions. And so, I started on my journey contributing to my pension scheme in my early twenties in quite large amounts.

Oscar Hjalmas (2:00): So, early twenties you started saving pretty much straight away.

Nick Kesley (2:03):  Straight away.

Oscar Hjalmas (2:04): Okay.

Nick Kesley (2:05): But I was in a fortunate position in that I was renumerated very well for somebody of my age. So, I didn’t have any financial constraints. Whatever went into the pension didn’t impede on my lifestyle.

Oscar Hjalmas (2:21): Oh okay. So, you didn’t feel like you had to sacrifice too much.

Nick Kesley (2:24): Absolutely not. And so, I worked for various investment banks up until my late thirties, and retired from the City at the age of forty. So, that was a period where I religiously contributed to my pension.

Oscar Hjalmas (2:46): And saved for the future.

Nick Kesley (2:48): And saved for the future.

Oscar Hjalmas (2:49): Many people aren’t in that situation, are they? So, many people will have to make sacrifices.

Cost of living and realistic retirement saving

Nick Kesley (2:53): Well, I think that is the key issue. You know, we hear a lot in the press about how it’s advantageous to start saving to your pension when you’re young.

But with the cost of living being exceptionally high, I think we’re sort of missing a point here. The fact is that a lot of people are just not in a position to contribute what they should be to ensure a financially secure life when they retire.

So, it’s a balance, and that’s a balance that didn’t really enter into my thoughts in my earlier career.

Oscar Hjalmas (3:40): One of my big things here is, and I say this to a lot of young people, obviously advice depends completely on the individual, but for me saving for a property and getting on the housing ladder is arguably more important than actually saving into a retirement to start with.

Now obviously, now we have auto enrolment, which means that your employer will match up to a certain level, and I would encourage most people to consider that, but actually putting excess amounts into your pension, it might be worth putting into all the pots.

Like you said, you were in the very fortunate position that you didn’t feel like you had to sacrifice too much. But what would you say to somebody who maybe has to sacrifice? Who’s like, okay, do I save for a house? Do I save for my retirement? You know, what would you say the balance should be there?

First home vs pension saving: balancing short-term and long-term goals

Nick Kesley (4:26): I would agree with the view that saving a deposit for the house is priority one. You know, we live in a country where home ownership is considered the number one priority in financial planning, so it comes down to prioritising your financial needs.

So, yes, I would tend to agree. You know, if there was a choice between saving and buying a house and saving into your pension, I would probably choose the former, so investing to buy your first property.

Oscar Hjalmas (5:10): And then, once you have that property, would you then readdress?

Nick Kesley (5:14): Absolutely.

Oscar Hjalmas (5:15): Yeah.

Setting retirement targets

Nick Kesley (5:16): You know, affordability, as I said, is always key. Saving for the future is obviously exceptionally important, but you’re only on this planet once, you’ve got to be able to live life.

And if you’re saving for when you retire at sixty-five and you’re only twenty-five, do you really want to be in a position where you’re curtailing your lifestyle for the next forty years to save for when you’re sixty-five?

So, I think it’s important you get a balance.

Oscar Hjalmas (5:53): And you’re completely right, but then that’s a little bit abstract for some people maybe. So, what would you say to people who want to know, okay, right, I need a target, I need something to aim for?

Because a lot of people say “I want a million pounds in my pension”, but they don’t really know what that means.

So, what would you say to people like that? So, let’s say you’re in your twenties, thirties, forties, you’re trying to get to a certain lifestyle by the time you retire. Would you say there’s a way to structure that for people?

Reviewing your plan with an Independent Financial Adviser (IFA)

Nick Kesley (6:22): Well, I think reviewing it on a regular basis with a financial adviser is absolutely key, because perhaps in the early stages, when you’ve just bought a house, you can’t contribute as much to your pension as you would like.

But as you move on, perhaps you get promotion, you get pay rises, and then you can start to increase your pension contributions.

And I think setting a figure is very, very difficult. I think it’s just the realisation that, with the current state of the economy and the current state of government finances, you cannot rely on the state to provide you with a comfortable retirement.

Oscar Hjalmas (7:11): That’s a big statement.

Nick Kesley (7:12): Yeah, it is a big statement, but you hear rumours about them extending the retirement age from currently sixty-six, which I’m lucky I fall within that bracket, so I’m collecting mine next year.

But there’s views that you won’t be able to collect your state pension until you’re seventy if you’re in your early twenties now, and it means relying on the state pension for your retirement is not, I think, a sensible approach.

Retirement saving options

Oscar Hjalmas (7:49): And we’ve talked a lot about pensions, but obviously there are other ways to save for retirement. So, people save by being landlords, you can start a business, you can buy other assets.

So, you don’t have to do a pension, but one of the reasons why you would do a pension is because it’s usually very tax advantageous, isn’t it?

Nick Kesley (8:09): Well, yeah, absolutely tax efficient. And, you know, I’ve, outside of my pension, used the ISA allowances for both my wife, Katherine, and myself, and that’s sort of a safety net because that is easily accessible before your retirement age.

You’re allowed to invest currently £20,000 a year. You don’t get the tax relief when you put it in, but any gain is tax free and any income you take from it is tax free.

So that’s an additional investment strategy, which, if you can afford to do it, then I would definitely… If you’re maxing out your pension contributions, you know, to have money in ISAs, and or even as you quite rightly say, Buy-to-Let properties have been exceptionally popular over the last ten, twenty years.

Oscar Hjalmas (9:10): That’s getting more difficult now though.

Nick Kesley (9:11): It is getting more difficult because, you know, the administration, regulations and the taxation of Buy-to-Let properties is much more stringent and not so advantageous.

You could argue that Buy-to-Let properties aren’t particularly liquid. You are very much dependent on the property market when, and if, you want to sell.

So a cash ISA or a stocks and shares ISA, for easy access, if you can afford to do it, I would definitely recommend you look at that.

Oscar Hjalmas (9:47): Perfect. Thank you for that. And then, so we’ve accumulated wealth.

Nick Kesley (9:50): Yeah.

Oscar Hjalmas (9:51): We’ve got ourselves in order. How do we go from accumulating wealth to decumulating wealth? And do you want to tell us a little bit about your own journey there and how you found it so far?

The decumulation mindset

Nick Kesley (10:04): It is a very difficult mindset to overcome. So, you’ve spent the last forty years, or whatever, accumulating into your pension, or ISAs, or whatever, and then you come to the end of your employment.

I’m fortunate enough in that I still work on a much-reduced basis, but I obviously need income from the pension and the ISAs to maintain my lifestyle and enjoy life.

But it’s very difficult to get over that hump. You’ve spent forty odd years saving, and now you’ve got to come to the conclusion, “I’ve got to start reducing that savings”.

Oscar Hjalmas (11:00): It’s a big psychological mind shift, isn’t it?

Nick Kesley (11:03): That’s very difficult. And the major concern of any person in retirement is “am I going to run out of money before I die?”

Oscar Hjalmas (11:14): Yeah. Yeah.

Nick Kesley (11:15): So, you can argue that your major expenditure has occurred, and hopefully you’ve paid off your mortgage, whether you’ve educated your children privately.

But there are other things that will come up in retirement, like if you need to go into a nursing home for care, or whatever, which, as we well know, is exceptionally expensive.

Oscar Hjalmas (11:40): Or, on a more positive note, buy a boat.

Nick Kesley (11:44): Yeah, and that is the mindset. It’s taking advice to understand that you are not going to run out of money, and that takes time. It’s not an overnight decision. It takes a lot of thinking about.

And once you’ve realised that, you can start taking money from your pension, and if the value of that drops until you die, that’s fine. And, as you quite rightly said, you’ve got to enjoy life.

Oscar Hjalmas (12:23): Yeah, that’s one of the biggest things.

Nick Kesley (12:26): There is no point in giving up your job and retiring and sitting at home being miserable because you can’t afford to do anything, or you don’t think you can afford to do anything.

So yeah, so that’s been a big issue for me, and it’s taken me probably a year or even two years to get over that hump.

Finding purpose in retirement

Oscar Hjalmas (12:50): I say to a lot of people as well that at this point a lot of people say, “Oh, you should be happy. This is exciting. You should be super stoked about retiring.” And actually that’s not the reality for a lot of people. A lot of people, they miss work. They miss the challenge. They miss the purpose of getting up every day.

So, then you have this really big shift of people saying “you should be so happy!” and actually you’re not. It’s not necessarily exactly what you want.

And obviously you’ve done it really, really well where you’ve been able to scale down, so you’re not jumping off a cliff. So, would you say your priorities during this, between accumulation and decumulation, do you feel they’ve changed? Your priorities for investing and your priorities for your family and all that?

Nick Kesley (13:36): Well yeah, so my investment appetite obviously became less risky as I approached retirement, because capital preservation, rather than capital appreciation, becomes the key.

But you’re quite right about when somebody retires. So, you’ve spent whatever it is forty years working 9 till 5, if you were lucky, or 8 till 6, or 50 hours a week, or whatever it is. You might have been running a business, or you might have been employed, and then all of a sudden you’ve got all that time on your own, perhaps with your partner or whatever, and you’ve got to fill that time because otherwise you’re probably going to be bored, you’re going to be frustrated, and there is a danger that you start to feel somewhat depressed, because you don’t have that daily interaction with your colleagues at work.

So the planning away from the financial side, I think, is just as important. It’s being able to realise that you’re going to have time on your side, and you need to reach out.

You might have a bucket list. I would suggest that your bucket list is commensurate with your financial.

Don’t have these dreams of buying a boat, as you described, or a villa in Spain, or whatever, just have sensible things that you might want to do. It might be just planning a six-week trip to the Far East or Australia, which you probably hadn’t done before, but you now have the time to do it.

But I found one of my biggest struggles was the time I had on my hands.

Oscar Hjalmas (15:52): So if you could go back in time then, because I find this very, very interesting, so if you could go back in time, say five years before you started semi-retirement, what would you tell yourself as advice of how you would do it differently, if at all?

Planning before you retire and using cashflow modelling

Nick Kesley (16:10): I don’t think it’s as easy as that. I mean, it’s slightly different for me in the fact that I’ve sort of slowed down, so to speak. But if you’re in full-time employment up until the age of whether it’s sixty or sixty-five, you don’t really have that time to think about the future.

Oscar Hjalmas (16:31): No, I guess not.

Nick Kesley (16:33): So, it just hits you like a freight.

Oscar Hjalmas (16:34): Yeah.

Nick Kesley (16:36): All of a sudden, your boss calls you in and says, “You’re sixty or sixty five. Thank you very much. You’ve done a great job. I wish you a very happy retirement.”

You think, “Hmm”, so you pack up your desk, you put all your belongings in there, and you go home and you think, “Huh, okay.”

Oscar Hjalmas (16:55): Yeah.

Nick Kesley (16:57): So, what would I suggest to anybody is start thinking about it before you’re retired. That’s important. Start having goals of what you would like to do in your retirement.

Firstly, the first port of call is, and that should be a good period before you actually retire, is to talk to a financial adviser about your financial situation, so whether he can reassure that you have enough money or perhaps that you might have to make a lifestyle change.

Oscar Hjalmas (17:33): Yeah, and that’s where… So obviously, I will raise the flag for financial advisers here, but for me, one of the biggest tools that we use is something called cash flow modelling, and I know we’ve used that with you a lot.

Nick Kesley (17:45): Yeah.

Oscar Hjalmas (17:46): And that is where we plug in all your financial details. We plug in all your objectives and how much we expect your expenditures to be, and then we try and map out your life, but in financial terms.

So obviously your objectives are your objectives. I’m never going to tell you what you should do, but if you can tell me what it is that you kind of want to do, then hopefully that gives people a level of comfort at least.

Nick Kesley (18:08): Absolutely. Absolutely. The only thing you can’t tell me is when I’m going to die.

Oscar Hjalmas (18:14): No, I can’t. But.

Nick Kesley (18:17): You can make an educated guess. But, I’m sure anybody entering retirement, the main concern they have is do I have enough money?

Semi-retirement, health, hobbies and family time

Oscar Hjalmas (18:33): So, Nick, you’re now in the semi-retirement phase. What does a typical day, or week, look like for you right now?

Nick Kesley (18:38): Well, I’m fortunate in that my house is paid for and I have a lovely garden, and my wife doesn’t work. We are quite sporty people, so sport is a very key part in our lives. So, we play lots of tennis and we play lots of golf.

So that’s a key part, and I think keeping fit is quite key to your mental state.

Oscar Hjalmas (19:15): Yeah. Well, you just told me before that you do about twenty thousand steps a day.

Nick Kesley (19:19): I know.

Oscar Hjalmas (19:20): That’s insane.

Nick Kesley (19:22): Yeah. I’ve got two dogs.

Oscar Hjalmas (19:23): I know. But still, that’s a that’s a lot of steps.

Nick Kesley (19:25): But I know that probably is excessive. But what I would suggest is, if you’ve had a sedentary working life, sitting at a desk or whatever, getting outside in nature, pursuing your hobbies, whether it be tennis or golf or walking or whatever, I think is key.

And so, we spend a lot of time playing sport. We socialise quite a lot. We have a group of friends that we socialise with, so yeah, we socialise quite a lot. We obviously have three grownup children who all live in London. I’m a grandfather and I’ve got one granddaughter, and one on the way.

So, I could see us spending a lot more time going up to London and being with them, which is lovely. You know, it’s a different part of your life which is very exciting.

The psychological shift from full-time work to retirement

Oscar Hjalmas (20:59): So, I want to dig a little bit deeper into that then. So, what would you say is the one biggest adjustment you feel you’ve had to make? And I know you’re not retired yet, but what is the one thing you’re like, “that is the biggest change that I’ve had to make in my routine”?

Nick Kesley (21:16): It’s when you wake up and get up.

Oscar Hjalmas (21:19): Okay, tell me more.

Nick Kesley (21:20): If you spent forty years, and I, as I said, I worked in the City, and so I was up at half past five, six o’clock to get into the office for a morning meeting at seven o’clock, and, you know, that changed a little bit throughout my life.

But I’m convinced that you will never ever get out of that routine. You will always wake up at whatever time you had to wake up, whether it be six o’clock or five thirty, and I do that regularly, all the time.

But I am now only just able to turn over to go back to sleep for a couple of hours, because I realise, I don’t have to get up at six or six thirty. So, I now get up at quarter to eight or eight o’clock, but it takes time.

Oscar Hjalmas (22:15): I know, because I usually get texts at six o’clock in the morning from you going, “Have you seen the markets? They’ve done this.”

Nick Kesley (22:22): Yeah, exactly. And I think, well some people might be different, but I would hazard the guess that if you’ve always woken, an alarm’s gone off at six or six thirty, it will continue, and you’ve just got to train yourself that you don’t need to get up at that time and sort of roll over and go back to sleep.

So that is major, because if you’re up at six o’clock and you’ve got nothing to do, it makes the day quite long.

Oscar Hjalmas (22:52): Yeah, I can imagine that. But you’re slightly different. So, there’s two camps of people, I think. So, there’s the people that want to stay somewhat professionally active and the people that want to retire, and both are absolutely fine.

But you’re more in the camp of wanting to stay slightly professionally active, aren’t you? Why do you think that is?

Retirement spending and financial priorities

Nick Kesley (23:11): Mental stimulation. It’s purely mental stimulation. Yeah, it’s being engaged. It’s connection with society. I think the danger is that if you’re retired and you don’t have an interest outside of your hobbies, there is a danger that you become slightly insular.

Well, for me, it is purely down to mental stimulation.

Oscar Hjalmas (23:46): Super important.

Nick Kesley (23:47): Super important. I spent my whole life in the financial markets, and I’ve loved it. I’m fortunate in that I’ve always loved what I’ve done, and to stay informed about the markets is key to my mental health, to be honest.

Oscar Hjalmas (24:08): Yeah, I couldn’t agree more. I think a lot of people go through this.

Nick Kesley (24:12): Yeah.

Oscar Hjalmas (24:13): Yeah. And I read a terrifying statistic the other day that most people that die are retired.

Nick Kesley (24:20): Well, hopefully I’ve got a few years left. But keeping your mind active, I think, is key. And it doesn’t have to be in the same sphere of employment that you had.

I’ve got friends who do charity work because they want to give something back to society, and I think that is quite key. We’ve worked all our lives, and we’ve been paid, and we now have the option of, and time, to give something back to society.

I haven’t had the time to do it because I’m maintaining a slightly busy lifestyle, which I think is key to me, but it’s not for everybody. Some people want to relax, just enjoy the time on their own.

Oscar Hjalmas (25:34): Which is also okay.

Nick Kesley (25:35): Which is also okay, you know, there’s

Oscar Hjalmas (25:40): No right or wrong here.

Nick Kesley (25:41): There’s no right or wrong. It’s what you feel comfortable with, what you feel is good for your mental health, which I think is key, because there is the danger of becoming insular and becoming slightly down and depressed, which is obviously not great.

Oscar Hjalmas (26:05): What would you say then during this phase? What would you say is your biggest positive surprise? The thing you thought, “Oh, I hadn’t even thought that was going to be the case.” Has it been being able to get up later?

Nick Kesley (26:19): Yeah, actually, it has. The ability to turn over and have an extra hour and a half in bed is great. It’s having time to think about life and being grateful.

Oscar Hjalmas (26:36): Yeah.

Nick Kesley (26:37): Being grateful for what you have is one of the most uplifting emotions that you can have. And being financially secure enough to realise that I could spend time with my children, who were all grown up and who’ve had gainful employment, thank goodness.

I don’t think they’re ever off your hands financially, but that’s another story, and with grandchildren to come, that’s what I’m grateful for, to be able to plan my life to do what I want to do.

From inheritance planning to spending with confidence

Oscar Hjalmas (27:17): Yeah, so you said that your children are never financially off your hands, which I think I probably agree with. So, how would you say then your mindset around spending has changed during this phase?

Nick Kesley (27:31): You can’t take it with you.

Oscar Hjalmas (27:34): Ooo I like that. Yeah.

Nick Kesley (27:36): You can’t take it with you. Passing down monies to your children has not become… You know, two to three years ago, inheritance tax planning was one of the key things in my mind.

Now, having got over that hump of decumulation, my view is they will have enough when I eventually fall off my perch. My priority is for my partner, Katherine, and I to enjoy life, and if that means spending money with my children, that’s fine.

We’ve been fortunate in that we’ve managed to help our children, to some extent, in getting on the housing ladder, and having that discussion with them is quite key, because what they want is for you, as their parents, is to enjoy life.

Oscar Hjalmas (28:37): Yes, yeah, and most children do, and we tell this to people all the time. They want their parents to enjoy it, and the parents have this view that actually they think the children… and it’s like, no, no, no, no, have fun, go enjoy yourselves.

Nick Kesley (28:50): They might joke when we do go on a long holiday and rather than go in the back of the aeroplane, we decide to go on business class, and they might joke, “well that’s my inheritance going down then”.

But they don’t mean it, and it’s joking. My children want us to enjoy life, and hopefully that will mean spending a lot more time with them, going on holiday and just being there and being present.

Oscar Hjalmas (29:26): So how did you refine your own security then? Do you feel secure with your money now? And what would you say were the main drivers to make you secure in this phase?

Nick Kesley (29:39): I think cash flow modelling was a key point for me, in the fact that how it was explained and when certain things happen, like your state pension kicks in.

And I think it’s something that you pointed out, Oscar, which I’ve really valued, is “you’re sixty five, Nick, in five years time or six years time, hopefully we remain fit and active, but the likelihood is that you’re not going to be going on far away holidays quite so often, so your expenditure will naturally decrease”, and I think that I’ve really taken that on board… so I’m spending all my money in the next five years.

Oscar Hjalmas (30:32): As quickly as I can.

Nick Kesley (30:33): Yeah, as quickly as I can before I become infirm and whatever.

Flexible retirement planning and managing investment risk

Oscar Hjalmas (30:46): Yeah, so if I pause you there very quickly, what would you say the strategies are then for you to make this transition a success?

So, one of the things you just talked about was, right, I understand that I’m going to spend more in early retirement. It’s not a flat line; it goes up at the start and then it’s going to fall off naturally.

So that’s obviously one of the strategies. Anything else you feel has helped you make this transition a success?

Nick Kesley (31:13): I think flexibility. So, having the ISA portfolios, which one could pigeonhole as rainy day money, is key, because you don’t know what life’s going to throw at you.

Your car might explode, or you might have a health issue, or something that impacts you financially, so having something outside of your pension, having a pot of rainy-day money, I think is very reassuring.

Oscar Hjalmas (31:50): And having a bit of a financial plan?

Nick Kesley (31:52): And having a financial plan, yeah. So, as I said before, I think if you are in a fortunate position where you can contribute your ISA as well as your pension, then I would recommend you do that.

And I guess it’s constant reassurance that your plan is working, and that really does mean talking on a regular basis with good financial advice. I’m not, I’m by no means suggesting that you constantly look at your portfolios, because markets do go up and down, and there is a danger, you know, and I do know some individuals, that do nothing but spend every single day looking at their portfolios, and that is a danger because they’ve got nothing else to do.

Oscar Hjalmas (32:44): And that’s market volatility isn’t it. So, events happen.

Nick Kesley (32:48): Events happen.

Oscar Hjalmas (32:49): And I remember we had a big event not too far in the past that really shocked the markets, and that can cause anxiety, right?

Nick Kesley (32:57): Sure.

Oscar Hjalmas (32:59): It can worry you, and the best thing that we say is just try and look through the noise. It’s time in the market, not timing the market.

To make sure that, do not, whatever you do, do not sell when it’s cheap. You buy when it’s cheap and you sell when it’s high. And if you can stick to that strategy, you’ll be the most successful trader in the world.

Nick Kesley (33:19): Well, exactly. And if we all did that, we’d all be multi-millionaires and we wouldn’t need financial advisers, would we? No, no. But it is the power of staying invested.

I’ve lived through many financial crises in my time, and history will always tell you that a knee-jerk reaction of disinvesting will almost always, 99%, be the worst outcome for you, so it’s reassurance in these times.

And I don’t want to get technical here, but there is a danger when you’re in drawdown of a pension that you could be drawing down when the markets are low. But, as you quite rightly suggested to me, we can take out what is called sequential risk, where you have a pot of money which is invested in very cautious instruments, which allow you to draw down without having an impact on your capital.

Oscar Hjalmas (34:38): Well, we always suggest to people, have, like you do in your ISAs, have a pot aside as an emergency fund. Now, obviously it depends completely on personal circumstances how much is in that emergency fund, but having something for, like you said, when the car blows up, or something happens to your roof, or whatever, because then you’re not forced to sell at a low, right?

Nick Kesley (35:01): Yeah.

Oscar Hjalmas (35:02): And when you save for retirement, sequential risk, or what’s called pound cost averaging, works in your favour, because hopefully you’re buying cheap all the time as the markets go up.

Nick Kesley (35:13): Sure.

Oscar Hjalmas (35:14): Whereas the complete opposite effect, the markets are going down and you’re having to sell lower and lower and lower.

Nick Kesley (35:21): Exactly.

Oscar Hjalmas (35:22): You want to try and stay away from that as much as you can.

Nick Kesley (35:24): Yeah, so flexibility is key. So, if you are fortunate enough that when markets are low that you have a pot of money outside of your pensions, you might choose to halt taking your pension payments and dipping into your other investments such as ISAs, but that’s all down to sensible financial planning.

And, as I said, it’s an ongoing process, because the world changes, your circumstances, my circumstances, I’m sure, will change over the next five, ten, fifteen years.

And another key thing, about getting back to being on your own when you retire, is having a professional adviser and the ability to be able to call up that professional adviser any time is very important, because there are always going to be times when you are going to feel uncomfortable.

But, as I said, the danger is that you daily look at your portfolios and you measure, “oh it’s gone down 1%, or it’s gone down 2%”. That is quite dangerous.

Oscar Hjalmas (36:48): Yeah.

When can I retire? Financial vs personal readiness

Nick Kesley (36:49): Oscar, we’ve had a relationship for quite a long time and you obviously know my financial circumstances in detail, and those of my partner, Katherine.

But I guess one of the difficult questions you’re probably asked is, “when can I retire?” When do you, Mr financial adviser, suggest that you’re in a position when you can retire?

Oscar Hjalmas (37:24): Yeah, I always split that question into two. So, I split it into personal and financial.

So, a lot of people that we work with, from a personal level, I don’t think they should retire. They think they want to retire, they retire, they hate it, and they go back to work, which is always a very, very interesting scenario to be in. And I’ve had over 100 clients retire throughout my career, and I think it’s one of the worst decisions that people can make. And I think what you’ve done, is when you scale down, I think works a lot better for people. For example, the three-day working week, I think, is amazing because actually then your time off is four days, and your work is three days, and all of a sudden, the balance of life is a lot easier.

And then you have the financial side. So, you know, when can I afford to retire? So, there’s a lot of studies, there’s a lot of data out there that shows kind of how much you want to have in retirement, and they’re very, very personal discussions. You know, from a financial perspective, when can people retire? It is all to do with what kind of lifestyle they want.

So, I always use one of my clients as an example. He sold his business, multi, multi, multi-millionaire, and loves gardening. He spends £25,000 a year. He has a state pension. He has also got a generous defined benefit scheme, a final salary scheme which pays him for the rest of his life. So, he actually saves money every single year, and for him it was all to do with the personal, nothing to do with the financial.

I’ve also got people who are desperate to retire. You know, they do hard jobs. I’m very happy that I’m a pen pusher, you know, there’s very little physical strain in my job, if any at all, whereas we work with people who have extremely physical jobs, oil rig workers and stuff like that, and obviously they’re from the completely opposite view. They’re like, I want to retire as “quickly as possible” from a personal view because I want to get out of this line of work. When can I afford to retire?

So, it is an extremely difficult question to just answer, and I do not believe that there’s a blanket answer to it. I think you have to have a conversation with somebody about what are the levers that I can pull, what are the sacrifices that I’m willing to make, and what are my hard stops.

So, I have people who say, “I want to be able to run my house in the UK and I want to be able to run my house in France, and that for me is a non-negotiable. I never want to have to sell either of those houses until I’m 90.” Fine, let’s work out a plan then, let’s work that out.

But for other people, they have a lot higher requirements. One of the things that I say as well, and you touched on it, is you need, in my opinion, you need to own your property in the UK. You need to own it outright, because the last thing you want to do is go into retirement and have to rent. I think that’s a quick way of destroying quite a lot of capital very, very quickly.

So, it is different for different people and how far they should go.

Nick Kesley (40:30): Yeah, I guess matching the personal side with the financial side, there’s not a perfect equation, and I would suggest to you that the personal side is more difficult advice.

Oscar Hjalmas (40:48): Yeah, and I always say to people, you know, I’m not a life coach. I can only tell you from my own experience.

But I think it’s very easy if you have a high-pressure job, if you just retire, then depression is very, very likely. Alcoholism is very, very likely. Divorce is insane. You know, you’ve spent 30 years apart from your spouse and then all of a sudden you retire, and then you divorce within two years. It’s very, very likely.

There are all these things because there is such a big shift in your life, yeah.

Nick Kesley (41:26): Yeah

Social connection in retirement and avoiding isolation

Oscar Hjalmas (41:27): So, I think being gentle and being kind to yourself. A lot of people, they’re not kind to themselves, and they don’t reach out, and they don’t talk to other people, and it’s about that discrepancy when people say you should be happy, but actually “I’m unhappy. This doesn’t make me happy.” So you feel really isolated, you feel really alone.

And I believe that people need purpose. I think that’s one of the biggest things in life, and not having a reason to get up in the morning, I think, is one of the saddest things ever, because that creates loneliness, it creates isolation. I always say that the worst punishment that we could possibly come up with for people is isolation. So, when you go to prison and for the most heinous criminals that we have, we put them in isolation. So why would you purposefully do that as a retiree? Why would you isolate yourself from your network of friends in work?

Also, another thing, and this is really, really common for us, we work a lot with business owners, and we have a lot of people in their thirties, late thirties, early forties that retire, right. So, they sell a business, they make millions, and from a financial side I can sit with them and go, yeah, you can afford to retire with the lifestyle that you want, there’s absolutely not a problem to retire. Those people really struggle because they are so alone, because all of their friends still work, all of their family still work, and for some of them even their parents still work.

So, it’s so important to get the balance right. You know, we’ve mentioned charity work. You don’t have to go into another high-pressure job. You can even say to yourself, “right, I’m going to take a couple of years off. I’m going to do nothing. My objective for the next two years is to do nothing, get my health back,” or whatever it is.

And I can’t remember who it was now, I think it was the Dalai Lama who said, “Western society confuses me. You spend your youth and your health to get wealth, and then you spend your old age and your wealth to try and get back your health.” Now, wouldn’t it be much better if we can kind of even out that equation a little bit and preserve ourselves more throughout this journey?

And I think for people who do retire, it’s having one eye on the fact that, okay, this isn’t necessarily going to make me happy. I need to find something to fill my life with. The world was very different fifty years ago. You know, if you and I were miners, I probably couldn’t wait to retire if I had to dig coal. That is such a physically demanding job that I think I couldn’t wait to have a real break. That’s not the world we live in anymore. We live in a world where people are living a lot longer.

Nick Kesley (44:00): Sure.

Oscar Hjalmas (44:01): Not just from a physical standpoint, from a mental standpoint. Like there’s a lot of really, really good medication that helps you live a healthy life, mentally and physically, for much longer.

So before, I think, when the state pension was introduced from the Navy, I think the expected life expectancy after retirement was sub five years. You know, for someone who retires today at sixty-five, I think the life expectancy is about ninety-two. So that means that you have approximately thirty years in retirement, whereas before you had five. That’s a very different equation.

So, I think it’s a very individual thing, and I think you absolutely need to take it very seriously, and you need to talk to somebody. It doesn’t have to be a financial adviser necessarily, but you need to talk to somebody about “how do I manage this, so this transition is as smooth as possible.”

Nick Kesley (44:51): Yeah, so in summary, it’s health and connection, isn’t it really? If you have the financial situation under control, which will afford you the lifestyle you want, it’s more the emotional side to it which is key. And, as I said earlier, the sooner you start thinking about it, the better.

Oscar Hjalmas (45:23): Absolutely. Stanford have run this psychological experiment, and it’s the longest psychological experiment ever run. I think they’re 60 years in now, and it’s about what makes people healthy.

And it’s quite surprising in many ways for some people, but smoking, drinking, doing extreme sports and all of that, it pales in comparison if you don’t have one element to your life, and that is social connections. So it is much worse for you not seeing friends, not spending time with your partner, not spending time with your children or anything like that, having your golfing buddies, having the charity, having the local health club, whatever it is.

It is much worse to not do those things than to smoke and drink. It reduces your life expectancy. It reduces your happiness a lot more.

So, yeah, the connection part when you retire is so imperative, and you need to try and get that right. And I’m a self-proclaimed workaholic, you know, I love working. It’s one of my absolute favourite things to do. Some people say I do it way too much. I wish I could do it more.

So, I know that for me personally, when I retire, I need to really look after myself, because I know that a lot of my work and connections will naturally drift away, as they should. So, I need to have a replacement for that when I do it.

Managing retirement risk with a bucket strategy

Nick Kesley (46:42): So, Oscar, let’s take my example, for instance, is that we would reach our so-called retirement age where, in my case, I have decided to slow down, not fully stop, but I have a pension pot, and I have an ISA pot, and I have income from investment properties that I own.

How do we bring that all together? Because we mentioned before the danger of drawing down on your pension portfolio, or any portfolio for that matter, when markets are experiencing turbulence and drawdowns.

So, you know, we mentioned cash flow modelling, which I think was obviously part of that process, but how do you bring the whole of somebody’s financial circumstances together to produce a plan?

Oscar Hjalmas (47:44): I think that is a wonderful question, and I think that is one of the most important questions to ask yourself when you’re moving from accumulation to decumulation.

There are many ways of doing it. I have decided, for us as a firm, we don’t care about attitude to risk necessarily, so how you feel about risk and how much risk you should be taking in your investment. I don’t think that’s particularly important. I don’t think your personal, as in my clients’, investor experience is particularly important. They need to have an understanding of what it is that they do, but I don’t think they need to necessarily have too much input into it.

The main thing that we care about, and that I feel is the most important, is something called capacity for loss, and it’s exactly as it sounds, so how much money can you afford to lose? I always make the joke of when I go to the casino, I love going to the casino, but I only ever take out fifty pounds. And the reason why I take out fifty pounds is because I don’t care if I lose fifty pounds. I would have had a good evening. I would have had a couple of drinks. I would have had a laugh with my friends, and actually, if I walk out with zero pounds in my pocket, it is what it is. I’ve spent fifty pounds and I’ve had a good night. I would not have that same feeling if I spent five thousand pounds. That would make me sad. I’d look at the opportunity cost and I’d go, “Well, actually, that was a stupid thing to do.”

So, we do exactly the same for our clients. We don’t go to the casino, we put you into different risk buckets. So, we have one risk bucket for your emergency fund, so when things don’t go too well or we have a big downturn in markets or something like that, we like having a pot of money that is very, very safe, usually invested in cash and just trickles away, and that is a percentage of your overall wealth. And again, that depends on the individual, but it’s a percentage of your wealth.

And then we have the second bucket, which is more medium-term, where we have more risk than the first bucket. And that bucket’s primary objective is to feed your emergency fund, so when you draw money down, you and I will sit down every year and we will put more money, hopefully, into your smallest risk bucket. And we tend to look at this to be about a five to ten year horizon on the medium risk.

And then we have the long-term one, and this is the one where we have a ten plus year investment horizon. This is used to feed the middle bucket, and what we do here is this: we invest much more aggressively. It’s much more long-term. We look at it all the time, but we tell our clients, please, please, please don’t look at this very often because it can have very, very large volatility and very, very large fluctuations.

That way we’re able to give you a much more comprehensive financial plan, because if we have one investment, or one set of investments, and we have what’s called a very, very specific risk, you can then really, really be disadvantaged if there is a market downturn.

The best example is Covid. So, Covid hit the world in early 2020. It only trickled through to the financial markets in about February, and then by early April the full effects had been realised within the financial markets, which coincides with the end and the start of the tax year, which is when a lot of people take money out.

So, we were very, very fortunate that we were able to call up all of our clients. We had very, very stringent communication throughout. We wrote to most people either weekly or bi-weekly, and we said, listen, isn’t it fantastic your long-term thing has fallen a lot? Okay, it is painful right now to look at the overall value of your portfolio. However, Mr. and Mrs. client, your low-risk bucket has hardly moved at all, if anything, because it’s invested in cash and stuff like that, so it’s absolutely safe.

So, this year I will recommend that we take 100% of your income from this bucket. Now, we didn’t know at the time it was going to be something called a V-shaped recovery, which means that the markets actually came back relatively quickly, and I think by about September, October time we were back to where we were pre-Covid, but we didn’t know that at the time.

So, a lot of our clients took money out here. We didn’t do any rebalancing, and then when markets came back to a normal level, we called everybody up again and went, “hi, we would now like to rebalance your portfolios. We’re now comfortable with where they are.” Now markets continued to rally, which again we didn’t know, but at least no one had to sell at a massive discount.

So, what you do is you do holistic financial planning. You look at your overall portfolio, you look at all of your assets, all of your expenditure, all of your potential income, and then you formulate a comprehensive plan, thinking about all of those things.

Pension inheritance tax (IHT) rule changes

Nick Kesley (52:50): Yeah, that’s very reassuring, and that’s exactly the path I have followed. And I think one of the major concerns I have now, as a client, is the potential changes to IHT rules regarding pensions.

Has that changed your outlook and advice to clients? Are you suggesting, for argument’s sake, that they should look to draw down on their pensions more fully, and use perhaps other outside investments like ISAs and general investment accounts to further IHT planning? Is that something that you’re considering, or?

Oscar Hjalmas (53:43): It’s a very interesting question because, as we sit here today, it’s not legislation. Yeah, I have no reason to think that it’s not going to be legislation, but as we sit here today it is not legislation, which means that it’s very difficult for me to give advice on.

Because there was talk of potential reduction in the tax free cash that people could take out of their pension, and that never materialised. So, we had some clients who wanted to take out the tax free cash before then and then ended up having to do reversals, which means that we put the tax free cash back in, because you have something called a 30-day cooling off period, which is really, really messy.

So, at the moment, I’m keeping half an eye on the fact that, yes, legislation is changing. There are legislations out there that do help you as a retiree. So, you can gift to your children or anybody out of excess disposable income. So, if you were to draw down extra, you are able to pass that without affecting what’s called a seven-year rule, which means that it falls out of your estate straight away.

So, there are things that you are able to do, but until it is legislation, we are not going to be pivoting too hard, because I personally believe that with this double tax, I don’t like double taxation personally. I think, you know, I absolutely don’t mind paying inheritance tax, I think that’s fair. I don’t mind paying an income tax, I think that’s fair. I don’t have any problem with it.

But what the legislation is proposing is that your pension is first taxed for inheritance tax purposes, and then your beneficiaries from your estate then pay income tax at their prevailing rate. So, for example, if I earn £50,000, the excess will be paid at 40%, which means that my pension for my daughter could potentially be taxed first at 40%, and then an additional 40%.

So, I think I’m not a big fan of these double taxation rules. I do hope the government reconsiders it slightly, but no, we’re not giving active advice on that yet, but we are discussing it with people.

It does leave a bit of a sour taste in the mouth with regards to putting more money into our pension. We have something in the UK called the pension gap, which I can’t remember exactly how much it is, but I believe it’s in the trillions, which means that we are very short with how much we are saving for retirement as a country as a whole.

And policies that discourage people putting money into a pension, I don’t really understand. But arguably I would say that I’m a financial adviser, it’s the industry I work in, so I would obviously want to protect it as much as possible, and I would encourage people to save for their retirement. And I think this is a deterrent to saving, which I don’t like to see.

I think it’s a very, very complex issue. I think this policy is probably one of the reasons why we’re seeing millionaires leave the UK, because actually other countries have zero tax on pensions, they have zero inheritance tax. So, you know, if you’re in your late eighties and you’re like, “well, actually, if I move and live in Switzerland for a few years, then my estate doesn’t pay anything.”

So, I think it’s a counterintuitive policy. We talk a lot about secondary effects of stuff, so the primary effect of this policy would have been to try and get more taxes in, or more revenue in, for HMRC, but I think, unfortunately, it’s counterproductive.

And I think the secondary effects of this policy is going to mean that you’re going to have less tax receipts and you’re going to see more people leaving the country or moving their pensions abroad.

Nick Kesley (57:34): So, my takeaway from that is beware of knee-jerk reactions.

Oscar Hjalmas (57:40): Yes. Absolutely.

Nick Kesley (57:42): You know, somebody in retirement who is probably not as financially savvy as you and I, there is that danger that you read a headline figure and you act.

Oscar Hjalmas (58:01): Yeah.

Nick Kesley (58:02): Accordingly, or hastily, which can have unwanted effects on your retirement. Yeah, I know, you know, and I think that is where I think the communication between an adviser and a client is paramount.

Even if you are unable or unwilling to give advice on legislation that hasn’t come about, at least you want to have that discussion.

Oscar Hjalmas (58:37): Yes, yeah, one hundred percent, one hundred percent. You should be aware of what’s coming down the line, you know, and we still talk to clients now who aren’t aware. So, they think that their pension is one hundred percent tax free when they leave it to their children, and even with current legislation, that’s not necessarily the case.

If you die after the age of seventy-five, your pension doesn’t fall into your estate, but your beneficiaries still pay income tax at their own prevailing rate.

So, there’s a lot of nuances, and I think it is very complex. So yeah, I would encourage people to speak to a professional about it when they come to retirement.

Final thoughts on retirement planning, financial advice and enjoying the next chapter

Oscar Hjalmas (59:15): Great. Nick, thank you so much for coming in today. I super appreciate it. It’s always lovely talking to you. I mean, we’ve had many discussions over the years, so thank you so much for your time today.

Nick Kesley (59:25): It’s been a pleasure. And you know, it is a subject, you know, retirement is key to my life because I’m experiencing it, but I think the takeaway is it’s not all financial.

Oscar Hjalmas (59:40): No.

Nick Kesley (59:41): It is a mixture of emotional and financial, and the most important thing, and I think you’ll probably concur, Oscar, is the ambition of anybody entering into retirement is to enjoy life.

Oscar Hjalmas (59:58): Absolutely. I’d say even before then.

Nick Kesley (1:00:01): Indeed.

Oscar Hjalmas (1:00:05): Thank you for joining us for The Financial Journey Insights, brought to you by Baggette and Company Wealth Management. I hope Nick’s story has offered some reassurance and shown that feeling uncertain about retirement is completely normal.

Whether you’re preparing for retirement or already starting to draw on your pension, this phase of your financial journey deserves just as much care and confidence as the years of building wealth.

If you’d like to explore your own retirement planning, understand your retirement income options, or get advice on how to manage that shift from saving to spending, we’re here to help. You can find more financial planning insights on our website or speak to one of our independent financial advisers.

At Baggette and Company, we believe retirement isn’t the end of your journey, it’s the beginning of a new one. Take care, I will see you soon.

Speak to an Independent Financial Adviser in Dorset About Your Financial Plan

At Baggette + Co. Wealth Management, we support clients across Dorset and Hampshire with independent financial planning that brings peace of mind to decisions about pensions, investments, retirement, and longer-term goals. As an independent and Chartered firm, we take a whole-of-market view and help you build a plan that fits your circumstances and priorities.

Whether you are thinking about retirement soon, building wealth, managing an inheritance, or simply want to feel more confident about your finances, the right adviser will guide you with confidence. We help you move forward without relying on assumptions or leaving important decisions until they feel urgent.

If you would like a straightforward conversation about where you are today and what might need to happen next, speak to Oscar Hjalmas on 01202 676 983 or email [email protected].

FAQs About Retirement Planning and Working with an Independent Financial Adviser

DISCLAIMER:

Baggette + Co. Wealth Management is authorised and regulated by the Financial Conduct Authority. The Financial Conduct Authority does not regulate tax planning, cashflow planning and estate planning. The above information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon as, financial advice. Capital is at risk. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement. Tax rules may change, and the value of tax reliefs depends on your individual circumstances. Your property could be repossessed if you do not keep up repayments on a mortgage, or any debt secured on it.