Pensions & Retirement Planning
We have many years experience in helping our private clients plan and enjoy their retirement - and also in helping corporate clients provide and operate pension schemes together with benefit packages for their staff.
It's a sad but plain fact that millions of people in the UK are failing to make sufficient financial provision to maintain their standard of living for when they retire. Instead of enjoying their golden years, many will struggle. Nobody can maintain a reasonable lifestyle by merely relying on the state pension - governments past and present have encouraged people to secure their own future either through personal pensions or by joining a company pension arrangement.
When it comes to providing for our retirement, too many people are doing too little too late. Putting away even a small sum early on can make a big difference to the lifestyle you will enjoy when you retire. The golden rule for most people, is to not rely on the State alone. Modern pensions benefit from some very exceptional tax breaks, and nowadays, you can even contribute to your pension when you don't work!
About to retire?
Ring us first! There are a huge variety of options in taking your benefits and we may be able to improve your pension.
If you would like advice or a financial review, call us on 01628 483470 or send an enquiry - we'll be pleased to be of help.
A Day: Everything's changed!
In April 2006, the government simplified the pension contibution process, Industry insiders dubbed these sweeping changes as A-Day. So what does it actually mean?
Previously, your contributions would have been limited to a percentage of your earnings, now there’s one rule for all, which is of particular assistance to people in the 20 to 40 age bracket that may have put off investing in a pension. These groups can now put in larger sums later, instead of saving modestly, without being penalised for doing so. Remember, however, that the benefits of saving early can be substantial.
Tax relief is normally available on member's contributions of up to 100% of earnings or £3,600 if earnings are below this figure.
Two main limits apply:
· Annual Limit
An annual earnings limit of £235,000 (08/09 tax year) is applied for the purposes of tax relief.
· Lifetime Limit
If your total fund value, including every pension you hold, is worth more than £1.65 Million (08/ 09 tax year) when you retire, then you will have to pay tax at a punishing 55% on any value above this lifetime limit.
Any money your employer pays into your pension will count toward these limits.
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Retirement funds may be formulated in many ways with a combination of pensions and other investment arrangements. We advise on Personal Pensions, Executive and Director Pensions, Self Invested arrangements, AVCs, Free Standing AVCs, Group and Stakeholder Pensions and provide investment advice where appropriate.
If you're nearing retirement, we offer an open market option comparison service. This offers a means of potentially obtaining a higher income for life through comparison of your fund in the open market. Other options could be considered as might be appropriate such as Phased Retirement or Income Drawdown which could in some instances, provide more flexibility and control.
It is possible in several instances to retire on a gradual basis or choose when and how to take benefits.
Revised legislation over recent years has seen huge changes with pensions generally.
CHANGE IN PENSION LEGISLATION 6 APRIL 2006
The change in pension legislation effective 6 April 2006 (known as A DAY) was intended to dispense with the layer upon layer of successive rules relating to previous legislation and amalgamate them into a new and more simplified basis.
In terms of contribution levels, these changed to in future allow for the higher of £3,600 or relevant earnings (namely salary plus any benefit in kind) and gain tax relief thereon up to an annual ceiling of £215,000 (for the tax year 06/07) and an overall lifetime allowance of £1.5 million limit without incurring a tax liability, both of which are scheduled to increase each year to 2010 and then reviewed again by the government. The lifetime limit at 2010 is to stand at £1.8 million.
The government recognises that some individuals have built up substantial pension funds which may exceed the proposed lifetime allowance and propose to allow, upon the individual's request to the Inland Revenue, two options of fund protection in order to provide a higher lifetime allowance so that prior arrangements are not disadvantaged.
These take the form of Primary Protection which may be claimed if the value of pension funds exceed £1.5 million on 6 April 2006. This allows for the standard lifetime allowance to be uprated by an enhancement factor which then becomes the individual's personal lifetime allowance and increased thereafter in line with increases to the standard lifetime allowance.
Enhanced Protection may be claimed whether or not the value of pension funds at 5 April 2006 exceed £1.5 million. If this option is claimed, the Revenue would normally allow the full value of the pension benefits accrued at 5 April 2006 as well as any subsequent growth to be protected from any tax charges. Enhanced protection should be considered if it is believed the growth in future will take the fund above the lifetime allowance even without further contributions. Any excess over the lifetime allowance would then be protected.
No further contributions to a money purchase pension arrangement either by an individual or on their behalf are to be allowed after 5 April 2006 whilst claiming enhanced protection. If subsequent payments are made, enhanced protection would then be forfeited (other than contracted out contributions paid by HMRC for arrangements started prior to 5 April 2006).
If enhanced protection is requested from the Revenue and any subsequent contribution is paid to a money purchase pension arrangement either by an individual or on their behalf, it is a requirement to notify the Revenue to avoid a financial penalty.
A link to notification forms requesting protection from the Revenue is given below. Notification to the Revenue is required to be given on or prior to 5 April 2009.
http://www.hmrc.gov.uk/pensionschemes/tax-simp-forms.htm
Completed notification forms requesting protection should be sent to: Inland Revenue, Audit & Pension Scheme Services, Yorke House, Castle Meadow Road, Nottingham NG2 1BG. These can't be sent prior to 6 April 2006.
Your attention is drawn to additional information provided by the Revenue which may be found on the Revenue's web site, final details for which are still being added.
http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM03100000.htm
It had initially been planned to allow placing residential property into Self Invested Personal Pension arrangements although this is no longer to be the case.
Presently it's permitted to take a personal pension between the ages of 50 and 75 and this is changing to a minimum age of 55 after 2010. The State pension age for males remains (at least for the time being) at 65 but any benefits arising from contracted out (protected rights) can be taken earlier with the option of being able to take up to 25% tax free cash from this after 6 April 2006.
Other changes amend the obligation to take an annuity by age 75 providing additional options at that stage knowen as Alternative Secured Pensions. Recent budget changes however place a heavy tax burden in trying to pass funds from ASPs over to successive generations.
The basis and rate of taxation and legislation is subject to future change.
For more information and for different types of pension and annuities, click the headings at the top of this page
NOTE: Professional advice should be sought before acting on any information contained in this brief overview. No responsibility can be taken by us for any action or non action in consequence of the above.