Pensions
Statistics tell us that a healthy, non-smoking, married 45 year old man could live until he is 85, whilst a woman with a similar lifestyle could live until the age of 92. With modern medicine these ages are increasing every year. (source University of Wales Institute Cardiff, website)
With this thought in mind it is very important that suitable plans have been made for your life after you finish working, where this could be a period of in excess of 20 or 30 years. Although the government are indicating that we may work longer, (age 70 may become the norm for receipt of State Pension), many people wish to enjoy retirement as it is often a time when they can do many of the things they were unable to accomplish when they had young families and other ties.
Many people think that the State Pension will offer them a suitable income in retirement, unfortunately this is just one of the “building blocks” that should be considered for your retirement income provision. The State Pension for a single person in 2009 is just £95.25 per week. (More information about state pensions can be found at the Government Website ).
Arranging, at the earliest possible time, a suitable pension plan to provide for your retirement, and then having the most suitable advice once you reach retirement is therefore imperative.
Client Portal – Online Valuations
Once you become a client of Gregory Adam Financial Management, under the terms of our “Full Client Proposition”, you can access details of your pension funds via our client portal. This is a service we offer to clients to enable them to obtain real time valuations* of their holdings at any time convenient to themselves.
To enter the client portal click here.
If you have not yet signed up to access your pension plans online, please contact us.
Tax Breaks
The Government are very aware of the importance of prudent pension planning, and thus offer excellent tax incentives for those who save for their own retirement future.
Pension contributions made personally are paid net of basic rate tax relief. Thus if you made a personal contribution from your bank account of £50 each month, you would actually have a further tax credit allocated so that an amount of £62.50 per month is invested into your pension.
Pension funds themselves also attract tax breaks, and most funds are able to accumulate free of most capital and income tax implications.
At retirement a portion of your accumulated fund can be drawn by you as a lump sum free of any tax. This is currently an amount representing 25% of the underlying pension fund. (Some people are able to draw a higher figure, if they had a pension in existence prior to 6th April 2006 – if you think this may apply to you, please ask us for further advice).
What will Gregory Adam Financial Management Offer Me?
When Gregory Adam Financial Management make recommendations for you, we will take into account your own personal and financial situation and offer you solutions tailored to your own needs and aspirations. We will recommend the most appropriate pension arrangements to suit your own requirements. Such pension arrangements may include the following types:
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Pre-Retirement
Stakeholder Pension Plan
A stakeholder pension plan is one of the simplest pensions you can arrange. Introduced by the Government in 2001, they have strict rules with regards to maximum charges, exit penalties and availability
Anyone can invest in a Stakeholder Pension Plan if they are UK resident, paying in up to £3,600 per annum regardless of whether or not they have any earned income. It is also possible to make a payment on behalf of another person, including a child; this could be a valuable method of assisting a young person today to support themselves in future years.
There are a range of insurers who offer this type of pension, with differing rates of charges, and different underlying fund ranges.
Even with a simple arrangement such as this it is important to seek independent advice, to ensure that you are investing your hard earned money in the right environment for your future.
The idea of a stakeholder pension plan, is that you invest a regular monthly amount, which is then invested in units (linked to markets) appropriate to your attitude to investment risk. Over time these regular investments will grow into a pension fund.
At retirement (which can legally be at any age from 55 to 75, based on current legislation) you can draw 25% of this fund as a tax free lump sum, and the residual fund is used to provide you with a regular income for the remainder of your lifetime. (See annuities and income drawdown sections below)
Self Invested Personal Pension Plan (SIPP)
In its most basic form a SIPP is identical to an individual Personal Pension Plan. When used to its full extent however, it can provide you with excellent additional benefits. These include a wider range of permitted investments. At present the available investments within a SIPP can include:
- Other insurers funds
- Mutual funds, such as unit trusts or OEICS
- Direct investment in stocks and shares
- Commercial property purchase – including your own business premises
- Offshore investment bonds
You can make regular payments, single payments or transfer one or more other pension arrangements into a SIPP. If you are employed, your employer can also pay into this type of plan.
At retirement, you can draw 25% of the fund as a tax free lump sum (often in a staggered manner if this approach is more tax advantageous for you) and then draw an income, either by purchasing an annuity or often directly from your pension fund under the unsecured drawdown rules.
With such a wide range of investments available to you, it is increasingly important that you have professional advice to ensure that you are investing in the most appropriate manner for your own circumstances. Gregory Adam Financial Management can assist you in all stages of this recommendation and the ongoing administration of this type of arrangement. We are also able to offer you help in arranging commercial property purchase, acting as the main liaison between all the relevant parties involved in this complex transaction.
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Occupational Pension Schemes
If you are an employer you may be considering setting up a pension scheme for your employees. This may be:
- Defined Benefits scheme
- Defined Contribution scheme
- Group Personal Pension
- Personal Account (from 2012)
We have the knowledge and expertise to guide you through all the required phases of establishing such a scheme. We can also assist you with any existing arrangements you have.
If you are or were a member of an employer’s pension scheme, we can offer guidance and advice based on your personal circumstances. (Sometimes the scheme adviser acts only on behalf of the employer, and does not take into account the individual’s situation.).
Post-Retirement
Secured Pension – Annuity
Once you have spent your working life building up your pension funds, it is equally important that you receive the right advice about how to spend these funds.
Many different types of annuity are available both directly from your pension provider and on the open market. It is also possible to receive a higher pension if you are suffering from ill health. Your own pension provider will not give you details of the pension incomes that may be available to you from these open market sources, it is important therefore that you seek independent advice.
Research has shown that you could be up to 15% better off using the open market option in certain situations.
An annuity is designed to pay you an income for the whole of your remaining lifetime. Additional options can be built in to include inflation linking, dependants pensions and even a return of unused funds. This is an aspect that often concerns people when considering purchasing an annuity.
Unsecured Pension - Income Drawdown
This form of obtaining your income in retirement is relatively new, and comes with its own set of complex rules and guidelines. At Gregory Adam Financial Management we will be able to talk you through the complexities of this contract, so that you are able to have a genuine choice when you reach retirement age.
Some of the advantages of income drawdown are the following:
- Flexible income in retirement – levels drawn can be amended at any time
- Facility to draw on the tax free lump sum but no requirement to draw an income (may be appropriate for someone still earning)
- Ability to take further advantage of stock market investment
- Beneficial death benefits, allowing even a return of the remaining fund as a cash lump sum (subject to a tax deduction, currently at the rate of 35%). This could be particularly useful if you are not living with a dependant at the date of your death, as a younger generation could potentially still inherit some of your pension fund
It must be noted that this type of arrangement has some risk attached to it, it is imperative therefore that full independent financial advice is sought before you invest in this type of plan.
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