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Pensions and Retirement Planning
Retirement planning is about aiming to have sufficient capital and income to support your desired lifestyle in retirement. For many people a major source of this income will be from their pension funds built up during their working life.
While most people can rely on some level of State Pension it is unlikely that the level of income provided by the State will be sufficient to provide an acceptable lifestyle. Therefore most people consider arranging additional pensions an essential part of their financial planning.
The Pensions Planning Process
The first stage of the planning process is to work with you to estimate the level of income you will require in retirement. Having done this we then need to assess your current position. It is likely that you will have already accrued some savings in pension plans and we need to establish the value of these plans in order to determine what future action you may need to take.
Since the 1970's there have been many types of pension schemes each with there own set of rules and benefits. For example, there are Company pension schemes, retirement annuities contracts, personal pension plans, stakeholder plans, AVC’s and Free Standing AVC’s, executive pension plans, Small Self Administered Schemes and Self Invested Personal Pensions. We will need to gather information on any plans you have and understand the type of benefits you have accrued. In short, we conduct an audit of your present arrangements and establish their future suitability.
In some cases it may be advisable to transfer existing plans to another plan or consolidate your plans in order to benefit from lower charges or greater investment choice. However, some of your existing plans may have advantages that would be lost on transfer such as entitlement to a higher amount of tax free cash at retirement, guarantees on the level of retirement income, guaranteed annuity rates or transfer penalties. We would recommend you do not take action without first taking advice.
If a shortfall in your retirement income is identified and saving into a pension plan is an appropriate way of addressing the shortfall we will recommend an appropriate plan based on your requirements. Following changes in the regulations governing pensions introduced in 2006, all pension schemes are now governed by one set of rules aimed at simplifying what had become a rather complex area. You can now contribute and receive tax relief on higher levels of contribution to as many pension plans you choose subject to the Annual and Lifetime Allowance rules.
Taking Benefits
If you are approaching or have reached the age when you can take benefits from your pension plans there are still important decisions to be a made that can significantly affect your retirement income. There are now more options available for how you take your retirement benefits than ever before and it is important that you fully understand and take advice on these retirement options.
If you wish to discuss the above further or require information on any of our services, then please contact us.
Any reference to legislation and tax is based on The Financial Planning Partnership's understanding of UK law and HM Revenue & Customs practice. These may be subject to change in the future. Tax rates and reliefs will also change and their value to you will depend on your individual circumstances. No guarantees are given regarding the effectiveness of any of the above strategies.