After working hard your entire life, you want to maximise your pensions and retirement income by making smart choices with your pensions and other investments.
On 6 April 2015 new pension rules came into force, giving you much greater flexibility over how you use your pension savings and the pension transfer options you have in retirement, which is termed ‘Flexi Access Drawdown’. These changes include the freedom to access the whole of your pension fund, more choice over how to receive the tax-free cash from your fund, changes to death benefits and changes to the contributions you can make.
Whether you have an occupational pension scheme, personal pension, a group personal pension, a self invested pension, a stakeholder pension or several different pension plans, these new rules are far-reaching, and they could have significant tax implications. It is therefore important to take pension transfer specialist advice on the various options open to you.
Retirement Planning
You look forward to spending your time the way you want to when you retire, for many people, retirement is about sun soaked holidays, leisurely rounds of golf and that boat or car they’ve always wanted, but for others it’s about escaping the daily grind and living a simple stress free lifestyle.
So it’s essential to have enough funds to have that choice and to be able to do the things you’ve dreamed of doing. We help you create a flexible plan to make sure you can enjoy yourself in later life and still look after your family.
To review your unique situation, please contact us.
Retirement Options
Retirement might seem like a long way off, but knowing how and when you can access your pension pot can help you understand how best to build for the future and financial freedom you want when you retire.
Once you reach the age of 55 years, you now have much more freedom to access your pension pots and decide what to do with this money – even if you are still working.
Depending on the type of pension scheme, you may be able to take tax free cash sums, a variable income through flexi access drawdown, a guaranteed income under an annuity or a combination of these options.
This means being faced with the choice of deciding how much money to take each year and setting an appropriate investment strategy.
So, it’s vital that you don’t take a lot out too early if you want your pension pot to last throughout the whole of your retirement years.
There are many things to consider when you approach retirement: You will need to review your finances to ensure your future income will allow you to enjoy the lifestyle you want; You will also be faced with a number of different options available for accessing your pension. It’s essential that when being faced with such important decisions that you obtain professional advice and guidance.
Please contact us to review your situation and consider the ways we can help you make the most of your retirement income.
Pensions Transfer Advice
TO TRANSFER OR NOT TO TRANSFER?
What to consider before making this big decision!
Occupational Pension Schemes in the form of Defined Benefits (DB) or Final Salary are one’s where the amount’s you’re paid are based on how many years you’ve worked for your employer and the salary you’ve earned.
For many people, a guaranteed salary-related pension that lasts as long as you do, and is unaffected by the ups and downs of markets, is likely to be the best answer.
But there will be some who want extra flexibility via flexi access drawdown or are focused on passing on some of their pension wealth to family for whom a transfer might be the right answer.
FIVE REASONS WHY A PENSION TRANSFER MIGHT BE SUITABLE
1. Flexibility – instead of taking a set pension on a set date, you have much more choice about how and when you take your pension.
2. Tax-free cash – some DB pension schemes may offer a poor deal if you want to convert part of your DB pension into a tax-free lump sum.
3. Inheritance – generous tax rules mean that if you leave behind money in a Defined Contribution (DC) pension pot, it can be passed on with a favourable tax treatment.
4. Health – those who live the longest get the most out of a DB pension, but those who expect to have a shorter life expectancy might do better to transfer if this means there is a balance left in their pension fund when they die, which can be passed on.
5. Employer solvency – while most pensions will be paid in full, every year some sponsoring employers go bankrupt. If the DB pension scheme goes into the Pension Protection Fund (PPF), you could lose 10% if you are under pension age, and may get lower annual increases; if you have transferred out, you are not affected.
FIVE REASONS WHY A PENSION TRANSFER MIGHT NOT BE SUITABLE
1. Certainty – with a DB pension, you get a regular payment that lasts as long as you do; With a DC pot, you have to face ‘longevity risk’ (not knowing how long you will live).
2. Inflation – a DB pension has a measure of built-in protection against inflation, but with a DC pot you have to manage this risk yourself, which can be expensive.
3. Investment risk – with a DC pension, you have to handle the ups and downs of the stock market and other investments; with a DB scheme, you don’t need to worry – it’s the scheme’s problem.
4. Provision for survivors – by law, DB pensions have to offer minimum level of pensions for widows/widowers, etc. whereas if you use a DC pension pot to buy an annuity, it dies with you unless you pay extra for a ‘joint life’ policy.
5. Tax – DB pensions are treated relatively favourably from the point of view of pension tax relief. Those with larger pensions could be under the lifetime limit inside a DB scheme, but the same benefit could be above the limit if transferred into a DC arrangement.
TIME FOR A PENSION REVIEW?
Before considering transferring your pensions, it’s essential you receive impartial professional financial advice from a pension transfer specialist about your particular situation.
We can help you do this. For a pension review, please contact us – don’t leave it to chance.
Pensions and Divorce
RELATIONSHIP BREAKDOWNS
The family home will spring to mind as a divorcing couple’s most valuable asset, but the value of a pension could well be the largest single asset in the relationship.
When and how pensions are divided on divorce depends on the circumstances of you and your family.
If your marriage has been short and both of you are in your twenties or thirties then your pensions may not need to be divided formally at all, although their value may still be taken into account in other ways.
However, if you and your partner are in your 50’s pensions are likely to play a far more central part in your negotiations or the decision a court has to make.
Many people have no idea who will inherit their pension pot when they die, which includes ex-partners of divorcees or people that are separated from their partners.
Co-habitees are also leaving themselves exposed, as they are not named as a beneficiary on the pension policy.
A relationship ending can be a very stressful time, and sorting out your pension may not be your biggest priority, but it’s important to stay on top of your finances by:
- Making sure you know who stands to inherit your pension pot when you die.
- If you are co-habiting many pension plans will require you to name that person on your policy as the beneficiary upon your death.
- Periodically check your finances, including pension pots, bank accounts, and insurance policies, and ensure the right dependents and beneficiaries are named.
Obtaining the right professional financial advice is vital in the event of a divorce or break up of a relationship.
Please contact us for guidance.
Client Testimonials
Frequently Asked Questions
There is some confusion about whether or not pension contributions are taxable. In general, contributions to a pension plan are considered to be a pre-tax expense.
This means that you will not have to pay taxes on the money that you contribute to your pension plan. However, there may be some exceptions to this rule.
For example, if pay more than your annual allowance, or 100% of your earned income (e.g. salary and/or taxable benefits), you may be subject to additional tax on your pension contributions.
A workplace pension, also known as an occupational pension, is a retirement savings plan offered by an employer. Employees contribute a portion of their monthly salary to the plan, and the employer often matches those contributions. The money in the plan grows over time, and can be withdrawn once the employee retires.
There are several advantages to having a workplace pension.
1) Workplace pension tax relief
Workplace pensions offer tax breaks. The money that is contributed to the plan is not subject to income tax, so employees can save more of their salary.
2) Fees
Workplace pensions often have low fees. This is because the employer often covers the cost of the plan
3) Growth
Workplace pensions are a great way to save for retirement. The money in the plan grows over time, and can be withdrawn once the employee retires.
4) Regulated
Workplace pensions are regulated by the government, so employers cannot take the money out of the plan. This ensures that employees will have enough money to live on in retirement
A stakeholder pension is a type of pension plan that is designed to benefit both the employer and the employee. It is a defined contribution plan, which means that the amount of money that is paid into the plan is predetermined.
This type of plan is different from a traditional pension plan, which is a defined benefit plan. With a defined benefit plan, the amount of money that is paid out to the retiree is based on a formula that takes into account the employee’s salary, years of service, and other factors.
A stakeholder pension plan can be either an occupational pension plan or a personal pension plan. An occupational pension plan is one that is offered by an employer to its employees. A personal pension plan is one that an individual sets up on his or her own.
There are several advantages to having a stakeholder pension:
- The employer and employee both make contributions to the plan. This can help to lower the overall cost of the plan.
- The funds in the plan are portable, which means that the employee can take them with him or her if he or she changes jobs.
- A stakeholder pension plan is also flexible, which means that the employee can choose how to invest his or her money. This gives the employee a lot of control over his or her retirement savings.
- Finally, a stakeholder pension plan is easy to set up and does not require a lot of paperwork.
There are several disadvantages to a stakeholder pension plan as well
One disadvantage is that the employee may not be able to access his or her funds until he or she reaches retirement age.
Another disadvantage is that the employer may not contribute as much money to the plan as it would to a traditional pension plan
A stakeholder pension plan is a good option for employers and employees who want to save for retirement. It is a flexible, low-cost plan that gives the employee a lot of control over his or her retirement savings.
Financial Advisors who have adopted the Pension Transfer Gold Standard demonstrate good practice:
- Helping you understand when advice is appropriate, before you take it.
- Ensuring advice given supports your overall wellbeing in the content of your stated objectives, needs and wants.
- Ensuring the most appropriate technical skills are utlised on your behalf.
- Ensuring your transfer is invested appropriately.
For further information, you can download the Official Consumer Guide.
It is possible to transfer an occupational pension scheme, to a personal pension or a SIPP yourself.
However, if the CETV is above £30,000 or includes safeguarded benefits or guarantees, then advice from a financial adviser is required.
The annual allowance is a limit on the total amount that can be paid into your pension scheme(s) each year and still receive tax relief.
The annual allowance is currently capped at £40,000.
The Lifetime Allowance is a limit on the amount of pension benefit that can be drawn from pension schemes, whether lump sums or retirement income and can be paid without triggering an extra tax charge.
The lifetime allowance for most people is £1,055,000 in the tax year 2019-20. It applies to the total of all the pensions you have, including the value of pensions
Your unused pension pot wouldn’t normally be included in your estate for Inheritance Tax purposes.
In addition, if you die before age 75 your pension pot will pass tax free to your beneficiaries, provided the money is paid within two years of the pension provider becoming aware of your death.
If you die after the age of 75, then the remainder of your pension pot will still pass free of Inheritance Tax, but any benefits withdrawn will be taxed at the beneficiary’s marginal income tax rate.
Saving for a retirement via a SIPP pension puts you in control of your financial future.
Just like any other kind of pension, Self-Invested Personal Pensions are designed to help you save for retirement and take an income when you reach it. Any individual who is resident in the UK under the age of 75 may make contributions to a SIPP, and in certain circumstances non-UK residents who have had UK earnings in previous years may also be eligible.