Retiring Doctor talking to Nurse

Approaching retirement - the importance of building a cash flow plan

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Retirement can be daunting. It might be trepidation about whether your pension income will satisfy your spending habits or the emotional journey of closing the book on the career in which you have worked so hard to achieve.

Your “Total Rewards Statement” is your starting point and will paint part of the picture regarding the level of income and lump sum payable to you. It is important to visualise whether or not this will be enough to satisfy your needs. You need to think about your spending plans in retirement. Do you intend to take more holidays? Do you have a hobby you want to pursue? Will you need to buy or replace a car?

In addition to your NHS Pension, you will also have your State Pension which will have a positive impact on your overall plan, plus you might have a personal pension from any private earnings or additional pension contributions to draw on. These have different ages when the income can be paid or drawn down from and will have an impact on when you might want to retire.

Other factors to consider are if you are married or have a civil partner.  What will happen to them and their lifestyle when you are no longer here to provide for them? The good news is they will receive between a third to half of your NHS pension income. But will this be enough for them to live on?

The Retirement Living Standards, based on independent research by Loughborough University, have been developed to help us to picture what kind of lifestyle we could have in retirement. It shows what retirement could look like at three different levels – Minimum, Moderate and Comfortable. A single person will need about £10,200 a year to achieve the minimum living standard, £20,200 a year for moderate, and £33,000 a year for a comfortable lifestyle. For couples, it is £15,700, £29,100 and £47,500 respectively.

Whilst there are various ways in which you could consider these scenarios, having a cash flow model allows you to forecast which helps to visualise when and how much income you will receive, how your various money sources such as your lump-sum payments will support you, and importantly, whether your retirement plans are on track or if you need to take action now to have a more secure standard of living in retirement.

Whilst cash flow modelling doesn’t provide any guarantees and is based upon a series of assumptions, it allows us to stress test certain scenarios to find potential remedies.

One example which we often find cash flow modelling to be especially helpful is to assist with ‘when is the right age to retire’ questions. A cash flow model will allow us to test affordability, and how your overall wealth is utilised in retirement to top up guaranteed income, bridge gaps between scheme pension ages and the state pension age, or provide additional luxuries or generational planning for your family.

Armstrong Watson Financial Planning & Wealth Management are a firm of Chartered Financial Planners. Our quest is to help our clients achieve prosperity, a secure future and peace of mind. We want to make retirement planning as simple as possible for you, taking the worry of retirement away from you, so that you can concentrate on your wellbeing and the emotions that come when you finally decide to retire.  


Please contact Simon Mayoh on 07860 846 370 or email simon.mayoh@armstrongwatson.co.uk for more information.

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The deadline for June 2021 claims is 14 July 2021. If you require our JRS team to submit your claims please send them to jrs@armstrongwatson.co.uk by 9 July 2021. For details on the changes to the scheme visit our CJRS page.