Retirement Planning
Most individuals do not take this subject seriously until they are in their forties. In doing so, it can be an up hill struggle if they want to retire on time.
Nowadays a larger number of over 65s are working – perhaps by choice, but then again...
Pension Review
“I left my previous employment sometime ago and have a frozen pension with them. I do not know what it is worth or how it is progressing.”
This is a very common question. A question that needs to be addressed.
Without knowing what your pension could provide at your retirement you will constantly be anxious about what you might have to live on when you retire.
Review my Pension
This service collects the information from the company you worked for or your pension provider.
It sets out in easily understandable language what it is worth to you today and what it may provide you with at retirement.
Our staff go through all relevant information:
- Type of pension
- Performance of fund
- Volatility of fund
We then write back to you with a full report, providing you with current and future values and recommendations with costings of alternatives you may wish to take up. The cost of this service is £175 per policy – a fraction of the money you could save.
Annuities
If you are about to retire you will receive information from the pension providers that informs you of the amount of income you will receive should you buy an annuity with them.
We strongly advise you to shop around and we can find the best annuity provider giving your circumstances. Our online systems can quickly quote you what is available.
Nowadays if you have a medical condition you could receive a higher income as a result of you having a potentially shorter life expectancy.
SIPPs – the Key Facts
Eligibility
You can join any type and number of pension schemes at anytime. Even if you are in your company's pension scheme you should still be able to set up and contribute to a SIPP.
Contributions
There is no limit on the amount you can contribute to a pension scheme, only on the amount that is "tax privileged".
If you are a UK resident you can have tax relief on the higher of 100% of your earnings or £3,600. Your residency and age will no longer be a factor when determining the amount you can contribute. Each year you will normally have an "annual contribution allowance" of £215,000 (this amount will rise annually to £255,000 in 2010/11). This is the annual amount of your contributions that are "tax privileged".
Each year you can contribute in excess of the annual allowance if you have earnings to support the contribution (but if the allowance is exceeded a tax charge of 40% will be levied on the excess).
The "annual contribution allowance" will not apply in the year your pension benefits are taken in full or the year of your death.
Transfers
You may choose to transfer your existing pension schemes to the SIPP. Any benefits you have in an existing pension scheme will not need to be tested against Revenue limits prior to transfer.
No tax free cash certificates will be required on any transfer.
If you are under 75 and taking income withdrawals in the form of unsecured pension from another pension scheme you can choose to transfer this pension scheme to the SIPP.
If you are 75 or over and taking income withdrawals in the form of alternatively secured pension from another pension scheme you can choose to transfer this pension scheme to the SIPP.
Investments
Scheme borrowing will be limited to 50% of the scheme assets at the date the loan is taken out.
Benefits
The minimum pension age is rising to age 55 from April, 2010. When you take your benefits from the SIPP the value of your SIPP fund will be tested aginst your "lifetime allowance".
Your "lifetime allowance", may be the "standard lifetime allowance" or an allowance in excess of this. The "standard lifetime allowance" is £1.5 million in 2006/07 and will rise annually to £1.8 million in 2010/11.
In certain circumstances you may be able to enhance the standard lifetime allowance. For example, you may be able to obtain protection on your existing pre A-Day pension rights.
If your pension fund exceeds your lifetime allowance the excess will be subject to a tax charge and the amount of charge depends on whether you take this excess as a pension or a lump sum.
Up to 25% of the value of the pension below the lifetime allowance can usually be taken as a tax free lump sum.
There will be a Lifetime allowance charge of 25% on funds in excess of your Lifetime Allowance if they are taken as a pension in addition to any income tax payable on your subsequent pension payments.
There will be a Lifetime allowance charge of 55% on funds in excess of your Lifetime Allowance if they are taken as a lump sum.
If you have pre A-day pension funds with "enhanced" protection they will not be subject to a tax charge.
Income withdrawals taken from your SIPP from minimum pension age up to age 75 will be known as unsecured pension.
Income withdrawals can continue to be takne from the SIPP once you reach age 75 - this is known as alternatively secured pension. By age 75 you must be taking income withdrawals in the form of alternatively secured pension, or must have purchased an annuity on the open market.
Death Benefits
The type of death benefits available depends on if you are taking benefits at the date of your death, and if so whether you were taking unsecured pension or alternatively secured pension.
Pension benefits can only be paid to your dependants.
The definition of dependant is expanded to allow any person who in the opinion of the scheme administrator was financially dependant on the member at the date of the member's death to be a dependant.
