Pension Page

Understanding Pension Schemes

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Retirement forecasting can be tricky and that’s where the cash flow forecast software comes into its own, helping you visualise your expenditure, income and preferred lifestyle.

Cash flow forecasting is a way of planning and analysing your financial goals, projecting them forwards over time, to consider how changing circumstances will impact this plan and to see how likely it is these financial goals can be achieved and the actions needed to be taken along the way.

If you’d like to know more about cash flow forecasting, or would like to talk to us about retirement planning, please get in touch:

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Building A Reliable Income for your Golden Years

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Annuity Shopping

When it comes to using your pension pot, buying an annuity is one option that provides a regular and guaranteed retirement income for either your lifetime or a fixed term. However, it’s important to note that purchasing an annuity is typically an irreversible decision.

Do you know that shopping around for an annuity could earn you £15,000 more over your retirement? Recent analysis has shed light on the benefits of exploring your options regarding annuities. Therefore, it becomes crucial to carefully consider your options, select the appropriate type of annuity and strive to secure the best possible deal.

Valuable tool for retirement planning

Annuities are a valuable tool for retirement planning as they offer a reliable and predictable income stream, often lacking in other investment options. Furthermore, certain annuities can be linked to inflation rates, providing stability during periods of economic volatility. This makes annuities attractive for individuals prioritising risk aversion in their pension savings strategy.

The primary difference between annuities and pension drawdown products is that annuities require using the entire pension pot to purchase an insurance product that provides a fixed retirement income. In contrast, pension drawdown products allow flexible income withdrawals with the remaining funds invested.

Balance security and flexibility

Unlike pension drawdown arrangements, annuities do not typically pass down any remaining funds to beneficiaries after the holder’s death. However, it is possible to balance security and flexibility by partially combining annuities with pension drawdown.

According to the analysis, a 66-year-old with a £100,000 pension pot can now purchase

an annuity with an annual income of £6,790. This represents an increase of £842 compared to the previous year. The surge in interest rates has resulted in the highest demand for annuities in years.

Importance of shopping around

Data further emphasises the importance of shopping around. It has revealed that the difference between the best and worst annuity rates available can be substantial. For a 66-year-old with a £100,000 pension pot, rates can differ by as much as 9.1%, translating to a potential annual income difference of £622 or a staggering £14,928 over the average retirement period.

The recent focus on annuities can be attributed to rising interest rates, which have a tangible impact on the income of those who have already purchased an annuity. However, it is essential to understand that while record rates are advantageous, they should be considered part of a broader discussion.

Looking for a guaranteed income throughout your lifetime?

Annuities continue to be attractive for individuals seeking peace of mind and the assurance of a guaranteed income throughout their lifetime. If you are contemplating an annuity, speak to us and we will explain how to assess all your options. As the research suggests, shopping around is crucial in securing the best possible deal for your retirement income.

If you’d like to discuss your retirement income, please get in touch using the form below:

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Passing on wealth through your pension

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New research reveals that almost a fifth of those aged over 55 (18%) do not plan to access their tax-free pension cash, to enable them to pass on more wealth to loved ones without incurring Inheritance Tax charges. Men are more likely to do this than women, and 38% of workers also plan to leave their tax-free pension cash where it is, three in ten over-55s say they were unaware of this.

If you’d like to discuss how to transfer wealth through your pension, please get in touch:

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Will you make the right decisions around your pension pot?

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Will you make the right decisions around your pension pot?

The announcement of the removal of the Lifetime Allowance (LTA) from the 2024/25 tax year in the Spring Budget 2023 has made defined contribution pensions even more appealing for wealth transfer. This benefits individuals over 55 who intend to leave their tax-free lump sum intact with their pension to maximise their benefits.

There may be further changes to pension allowance rules. However, removing the LTA charge allows for an unlimited sum tax-free for individuals who pass away before age 75. After the age of 75, the sum will be subject to taxation at the beneficiary’s marginal rate. It is important to note that although the charge has been removed, an LTA check still takes place to work out available tax free cash and the taxation of certain lump sum payments.

Without incurring Inheritance (IHT) Tax

New research* reveals that almost a fifth of those aged over 55 (18%) do not plan to access their tax-free pension cash, to enable them to pass on more wealth to loved ones without incurring Inheritance Tax charges. Men are more likely to do this than women, and 38% of workers also plan to leave their tax-free pension cash where it is, three in ten over-55s say they were unaware of this.

Pensions usually don’t count towards a person’s estate for IHT purposes, and can be passed on completely tax-free if someone dies before the age of 75. With no LTA charge and an increased annual pension allowance, pensions have become attractive for those looking to mitigate IHT.

Pension as a tax-free lump sum

The research also found that almost half of all consumers (46%) believe that the amount that can be taken out of a pension as a tax-free lump sum should increase in line with inflation. It is worth noting that since the LTA has been abolished, an LTA check still takes place to work out available tax free cash and the taxation of certain lump sum payments. This means that individuals are currently limited to withdrawing a maximum of 25% of the previous LTA as a tax-free lump sum from their pension, unless any protection is in place.

Tips to ensure your beneficiaries benefit from your pension:

  • Check if your pension offers death benefits: Not all pensions provide the same level of flexibility when it comes to death benefits.
  • Check with your provider to see if your pension plan allows you to nominate beneficiaries who will inherit your pension savings, as beneficiary drawdown may not be an option.
  • Specify your beneficiaries: While making a Will can be beneficial in many ways, it usually doesn’t control who inherits your pension savings. Your pension provider or trustees have the final say in where your pension savings go.
  • Name your beneficiaries directly with your pension provider or employer to ensure your wishes are considered.
  • Regularly review your beneficiaries: Life circumstances change, and reviewing and updating your beneficiaries as needed is essential. Major life events like the birth of children, marriages or divorces can impact who you want to receive your pension savings. Ultimately the trustees of a scheme have discretion. So although there are no guarantees, by keeping your beneficiaries up to date, you can ensure that your desired
  • Beneficiaries are considered first when it comes to your pension savings should you pass away.
  • Consider the tax implications: Pensions can be a tax-efficient way to pass on your wealth since they are not typically subject to
  • Inheritance Tax. With the removal of the lifetime allowance charge, pensions offer an even more attractive option for passing on your wealth to your loved ones. However, it’s essential to consider any potential tax liabilities your beneficiaries may face when receiving your pension funds.

Remember, seeking professional advice tailored to your specific circumstances regarding financial planning and pension matters is essential.

Do you want to discuss creating a retirement plan to give you the confidence to enjoy later life?

Retirement should be the golden age of your life. It’s when you finally relax, enjoy new hobbies, travel or spend time with loved ones. But retirement can only be fully enjoyed if you have financial freedom. To discuss your options or to find out more, please get in touch with us using the form below:

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*Opinium conducted research for Standard Life among 2000 UK adults, aged 18+ between 12-16th May 2023, results weighted to nationally representative.

Divorce and Finances

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Protecting your assets and preparing you for going forward on your own.

Divorce involves many loose ends, both emotional and financial. It can generate high levels of uncertainty and financial stress, as it impacts on all areas of your life, from living arrangements to assets and pensions. That’s why financial planning through a divorce is essential to help protect your assets and prepare you for going forward on your own.

Making the right financial decisions during your divorce can be difficult. You may be worried about your future and how you will support yourself and your family. Divorce is a difficult time emotionally and financially. It is important to obtain professional financial advice to help you through this challenging period.

This will help protect your interests, ensuring that you receive a fair outcome and your future is secure. It will also enable you to have a clear understanding of your current financial situation. This includes knowing what assets and debts you have, as well as what income and expenses you have each month.

Future finances

You’ll need to be realistic about your future income and expenses. That means putting a realistic budget in place so that you can make informed decisions about your future finances.

Don’t overlook any tax implications based on any financial decisions you make. This is especially important if you are considering selling assets or transferring property.

Dividing pensions in divorce

One of the most important assets to consider is your pension. Pensions are often overlooked in divorce settlements, but they can be worth a significant amount of money. It is important to get professional advice to make sure that pensions are taken into account in any settlement.

There are several options for dividing pensions in a divorce, and the best option will depend on your individual circumstances. You may be able to keep your pension in its current form, or you may need to transfer some or all of it to your ex-partner.

Divorce settlement

Whatever you do, make sure that you obtain professional advice before making any decisions about your pension. It is one of the most important financial assets you have, and you need to make sure that it is taken care of in your divorce settlement.

With careful planning and communication, you can make the transition as smooth as possible to help you move on with your life and make a fresh start.

5 top tips when it comes to finances and divorce

  1. Get organised

Gather your financial documents to help you and your lawyer understand your financial situation and make the best decisions.

  1. Make a budget

Be honest with yourself about your income and expenses. This will help you make informed decisions about your finances going forward.

  1. Understand your rights

Speak with a lawyer to understand your rights and responsibilities during the divorce process. This will help you make decisions that are in your best interests.

  1. Communicate with your spouse

If you have children, it is important to communicate with your spouse about financial matters. This can be difficult, but it is important to try to reach an agreement on child support and other financial issues.

  1. Obtain professional financial advice

This will help ensure that you are making sound decisions with your finances during this difficult time. There are many factors to consider when going through a divorce. The advice will help you understand the financial implications of the decisions you make, and provide guidance on how best to protect your interests.

If you have any questions about your pension or other financial assets during a divorce, please contact us.

Important information: Divorce settlements are not regulated by the financial conduct authority.

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Preparing for retirement

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Preparing for retirement

Here are the top four things you can do to prepare for retirement:

1. Prepare a budget

One of the most important things you can do is to create a realistic budget that will help you track your expenses and income. This will allow you to identify any areas where you can cut back and save more money for retirement. By tracking your spending and income, you can create a plan that helps you save for a comfortable retirement.

2. Consider pension decumulation options

As you approach retirement age, it’s essential to explore the various ways you can convert your pension savings into a retirement income. There are several options available, such as annuities, income drawdown and immediate vesting personal pensions. Seeking professional financial advice will help you understand your options better and make informed decisions about how to access your pension.

3. Review your asset allocation

As retirement approaches, it’s essential to reduce exposure to higher-risk assets such as equities. By reviewing your asset allocation, you can adjust your investments to make sure you have a well-diversified portfolio that is designed to provide steady income for your retirement years.

4. Review your retirement plan regularly

Regularly reviewing your progress is crucial to ensure you are ready for retirement and make the necessary adjustments if needed. Changes in your income, expenses or the financial climate may require you to adjust your plan. By following these four tips, you can set yourself on a path to financial security for your retirement years.

Seek professional financial advice

By planning ahead and taking the necessary steps, we can help you build a robust retirement plan. To tell us about your retirement planning goals and discover how we can help you, please book a chat. Alternatively, watch our video on “the benefits of financial advice when planning retirement“.

6 ways women could boost their pension pots

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6 ways women could boost their pension pots

  1. Contribute as much as you can to your pension – and start early
  2. Check the charges on your pots & see if consolidating will bring them down
  3. Check the amount of your State Pension & plan how you’ll cover any shortfall
  4. Put more into your pension when you get a pay rise
  5. Talk through your pension planning with your partner
  6. Keep a regular eye on your pension to ensure you’re in full control

For more information on the gender pension gap, read our latest article “The Gender Pension Gap Issue“. Alternatively, if you would like to speak to one of our Financial Advisors about the pension planning services we offer, then please get in touch.

Our Pension Services

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We offer help and financial advice on all aspects of pension planning, from the basics of pension savings and tax-relief to the more complex areas of pension sharing on divorce and estate planning.

There are various benefits of pension planning including tax relief, potential cost savings and legacy planning.

One of the main benefits is making sure that you are on track to meet your retirement goals. Our Financial Advisors use sophisticated cash flow forecasting software to help you bring your financial future to life.

How much of my pension can I take tax-free?

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Many over-55s are unaware that they can access 25% of their pension pot tax-free.

A surprising 43% of individuals over 55 need to be made aware that they can withdraw 25% of their pension pot tax-free, according to recent research[1]. Knowledge could lead to better decision making when it comes to accessing pension savings.

Similarly, 52% of those surveyed between the ages of 50 and 54 were also unaware of this rule, indicating a widespread lack of understanding about pension withdrawal options.

We answer the important questions regarding tax-free pension withdrawals.

How much can I withdraw from my pension tax-free?

Typically, most people can withdraw 25% of their total pension pot tax-free, although this may vary depending on the type of pension plan and if you’ve exceeded your lifetime allowance. The remaining 75% is subject to Income Tax when withdrawn.

When can I take my tax-free lump sum?

Generally, you can access your pension savings, including the tax-free lump sum, at age 55 (rising to 57 in 2028). In rare cases, you may be able to access your pension earlier due to ill health or a protected scheme.

Can I take my lump sum in smaller amounts?

This depends on your pension product and its terms. Taking smaller withdrawals over time can be beneficial in most cases, as it allows for potential growth and tax-efficiency.

Should I take my lump sum immediately?

It’s essential to consider the longevity of your pension savings throughout retirement. Taking too much too soon could result in running out of funds later in life. Delaying access to your savings may allow for additional growth.

Are there any implications to be aware of?

Accessing your pension savings can impact state benefits, such as Universal Credit or Pension Credit. Additionally, taking a tax-free lump sum won’t affect the amount you can contribute to your pension plan, but accessing taxable income may reduce your annual allowance.

Professional financial advice

Understanding your pension withdrawal options and seeking professional financial advice will help you make informed decisions and maximise your retirement savings. To learn more about how we can help you, please contact us today.

Source data: [1] Opinium conducted research among 2,000 UK adults aged 18+ between 12″16 May 2023 for Standard Life, part of Phoenix Group. Results have been weighted to be nationally representative.

Important information: A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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7 Benefits of Financial Planning

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7 Benefits of Financial Advice

Whether you want your money to work harder or if you are approaching retirement and want to make informed decisions about your pension options we will offer expert, qualified advice at every stage of your journey.

  • To help you build your assets
  • To help you achieve your financial goals
  • To plan the right investment strategy for you
  • To help you tax plan efficiently
  • To help you plan for retirement
  • To protect you and your family
  • To give you financial peace of mind

We will work together with you to create a holistic, comprehensive financial plan to achieve your goals. Please get in touch with us for more information.