RETIREMENT PLANNING

Pensions

It’s a hard fact of life that one day we will retire and our potential to earn will significantly reduce, if not lost altogether. With the state support on old age coming under terrible strain and final salary company pension schemes facing extinction, there is hardly any option but to plan for one’s own retirement funding. Your retirement may seem far away, but it’s never too early to start investing in a pension. For every day that you hesitate, that’s less money saved and potentially less income to support you when you need it most.

We will assist you assessing how much you need when you retire, how much you need to put aside from now, where you should invest to reach the targeted amount and review from time to time to make sure that you are not off the track.

Pension saving offers significant tax benefits. If you’re a UK taxpayer, you’ll only get tax relief on pension contributions up to 100% of your earnings or a £50,000 annual allowance, whichever is lower.

You can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years.

If you are not earning enough to pay Income Tax, you can still get tax relief on pension contributions up to a maximum of £3,600 a year.

Investments within the pension fund also grow tax free with the exception that tax on dividend paid at source is not recoverable.

There’s a Lifetime Allowance which puts a top limit on the value of pension benefits that you can receive without having to pay a heavy tax charge. The Lifetime Allowance is £1.5 million for the tax year 2013/14. Any amount above the lifetime allowance is subject to a charge of 25% if paid as pension or 55% if paid as a lump sum.

You have a number of options to choose from. You can also have a combination of the options to plan for your retirement.

Work place pension-  A workplace pension is a way of saving for your retirement that’s arranged by your employer. A percentage of your pay is put into the pension scheme automatically every payday. In most cases, your employer and the government also add money into the pension scheme for you. The money is used to pay you an income for the rest of your life when you start getting the pension. Recently, new law has been enacted to make eligible employees automatically enrolled to company pension scheme unless the employee decides and gives in writing to opt out.

Personal and Stakeholder pension- If you are self employed and do not have access to employer pension scheme or you want to top up your contribution to the employer pension scheme you can arrange personal and stakeholder pensions privately. You pay money into a pension fund which you use to buy a regular income when you retire. Sometimes employers set up group personal or stakeholder pensions for their employees.

SIPP- With standard personal pension schemes, your investments are managed for you within the pooled fund you have chosen. SIPPs are a form of personal pension that give you the freedom to choose and manage your own investments. Another option is to pay an authorised investment manager to make the decisions for you.

SIPPs are designed for people who want to manage their own fund by dealing with, and switching, their investments when they want to. SIPPs can also have higher charges than other personal pensions or stakeholder pensions. For these reasons, SIPPs tend to be more suitable for large funds and for people who are experienced in investing.

Income on retirement- Once you decide to start taking payment out of the pension pot you have built up over the years, you have a number of options to choose from. Most people need a minimum level of guaranteed income for life, so they use their pension savings to buy a lifetime annuity that will pay them an income until they die. There are different types of annuity, as well as other pension options such as Income Drawdown, Phased Retirement etc.

We will help you decide on the best option to suit your personal circumstances.