Monthly Archives: March 2022

LOOKING TO BUILD A BIGGER PENSION?

Don’t miss the deadline to give your pension savings a boost

As another extraordinary financial year comes to a close, it’s more important than ever to make good use of your annual pension allowances. Giving your pension savings a boost and assessing where you stand will give you peace of mind that you are on track to enjoying the retirement you are planning for.

The 2021/22 tax year ends on 5 April. Staying on top of your retirement plans is important all year round but with the tax year ending on 5 April, just a few weeks away, it’s a good time to consider if you’ve made the most of this year’s pension tax benefits. If you haven’t, there’s still time for any payments or changes to be processed.

TAX RELIEF

Pension tax relief is an extra amount that’s added to your pension contributions. So it eectively means it’ll cost you less to save more into your pension plan. Although most people receive tax relief on their pension contributions, depending on how your pension scheme works (if you’re part of a salary sacrifice or salary exchange scheme, for example) you might receive tax benefits in a dierent way. So you should either speak to us or check with your employer if you’re not sure.

The amount of tax relief you receive on your own contributions usually depends on the rate of income tax you pay. For most of the UK,
this means basic rate taxpayers (who pay 20% income tax) receive tax relief at the same rate.
If you’re a higher rate taxpayer you receive 40% tax relief on contributions that are matched by income taxed at that rate, and the same for additional rate taxpayers at 45%, but you’ll need to claim back anything over 20% from the government unless you pay using salary sacrifice or are a member of an occupational scheme operating the ‘net pay’ method of tax relief.

ANNUAL ALLOWANCE

If you don’t earn any taxable income, you’re still entitled to receive 20% tax relief on your contributions up to the amount you earn. If you have no earnings, or earn less than £3,600 in the current tax year, you can still receive tax relief on contributions up to £3,600 (i.e. if you pay £2,880 net of basic rate tax relief, an amount of £3,600 is added to your pension). While income tax is slightly dierent in Scotland, the eect on your pension contributions is broadly the same.

In addition to the tax relief limit described above, there is an annual allowance, which is £40,000 for most people. If all contributions combined, including those from an employer, exceed the annual allowance in a tax year, a tax charge will be applied to the excess.

PENSION CONTRIBUTIONS

The annual allowance applies to the total amount of contributions made into all of your pension plans in a tax year – including the ones your employer, or any third-party, makes on your behalf. The good news is that if you haven’t used all of your pension annual allowances in the last three tax years, you may be able to carry them over and use them to pay in more in the current tax year.

When planning to make large pension contributions, spreading them across tax years can make tax sense, for example, that will mean higher rate relief is available on the full contributions. Remember that you still can’t contribute more than 100% of your earnings in any tax year if tax relief is to be available on the contributions.

RETIREMENT GOALS

Most people can contribute up to £40,000 to pensions each year and benefit from tax relief. But if your income rises above a certain level – which is £200,000 for the 2021/22 tax year – this allowance could be reduced or ‘tapered’. The tapered annual allowance eectively reduces the amount of money that can be contributed to a pension by you and/or your employer before having to pay tax.

The taper doesn’t usually apply if your ‘threshold income’ is less than £200,000. If it is above this level, you will need to check whether your ‘adjusted income’ is greater than £240,000 (2021/22 tax year). The annual allowance reduces by £1 for every £2 that your adjusted income exceeds £240,000, to a minimum tapered allowance of £4,000. Without careful financial planning, you could find yourself subject to an unwelcome tax charge.

READY TO PLAN YOUR RETIREMENT INCOME WITH US, STEP BY STEP?

You should bear in mind that tax rules and legislation may change and your own individual circumstances, including where you live in the UK, will have an impact on your tax treatment. For more information about how we can help you build a bigger pension, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

GETTING READY TO RETIRE?

Bolstering your retirement lifestyle as you approach retirement

Have you ever wondered what you need to consider as you approach retirement? Whatever your concept of what is a good pension pot, one certainty is that relying on the State Pension alone will not give you a good enough pension to live on comfortably through your retirement.

‘Will I be able to retire when I want to?’ ‘Will I run out of money?’ ‘How can I guarantee the kind of retirement I want?’ These are hard questions to answer unless you obtain professional financial advice and why you need to start by reviewing your finances sooner rather than later to ensure your future income will allow you to enjoy the lifestyle you want.

After decades of working and saving, you can finally see retirement on the horizon. If you plan to retire within the next five years or so, consider taking these steps today to help ensure that you have what you need to enjoy a comfortable retirement lifestyle.

Taking these actions now could help bolster your retirement lifestyle as you approach your planned retirement date.

8 THINGS TO CONSIDER AS YOUR RETIREMENT APPROACHES:

1. TRACK DOWN YOUR PENSIONS

It’s important to track down all the dierent pension schemes you’ve previously paid into, so you can be sure you’re claiming everything you’re entitled to in retirement.

If you’re unsure where to start, the UK government oers a pension tracking service to help you find lost pensions.

2. WHEN CAN YOU ACCESS YOUR PENSIONS?

Since April 2015, pension freedoms have given savers in defined contribution (DC) schemes greater access to their cash, allowing flexible withdrawals from the age of 55.

3. WHAT’S YOUR PENSION’S VALUE?

The easiest way to find out how much your pension is worth is to check your pension statements. Whatever type of pensions you have, you’ll receive an annual pension statement from your provider.

In it they’ll tell you how much your pension is currently worth and what it’s expected to pay out at your retirement date.

4. GET A STATE PENSION FORECAST

You can call the Future Pension Centre and ask for a State Pension statement. Your statement will tell you how much State Pension you have built up so far based on the National Insurance contributions and credits that are on your National Insurance record at the time your statement is produced.

Contact the Future Pension Centre for questions about the State Pension or to ask for a statement. Telephone: 0800 731 0175, or from outside the UK: +44 (0)191 218 3600. Or obtain a forecast online at https://www.gov.uk/ check-state-pension

5. GETTING INVESTMENT ADVICE

If you are close to, or at retirement, you may want to reevaluate your plans. If you have access to other savings and investments, you might want to consider using these before accessing your pension.

If you have other investments or savings, such as Individual Savings Accounts, stocks and shares, bonds, funds, property, etc, it’s worth checking their value as you approach retirement age as they can support you in addition to your pension.

6. HOW WILL YOU ACCESS YOUR PENSION?

When it comes to deciding how to use your pension pot, there’s no one ‘right answer’. There are more pension options than ever thanks to the pension freedoms that allow savers access to every penny of their retirement savings.

Your options may include taking a regular income or lump sums and keep investing the remainder in the stock market, or cashing in the entire amount. You can also choose to swap the money for a guaranteed income via an annuity.

7. HOW IS YOUR PENSION INVESTED?

Pensions may be for the long term, but it’s important regularly to review where your money is being invested. You need to keep a close eye
on which funds your retirement savings are in so that you can check you’re comfortable with the risks involved.

You should also keep a close eye on how much you’re being charged, as fees can have a big impact on the amount you end up with at retirement.

8. THE BENEFITS OF ADVICE

Pension advice is important because pension products can be complicated, and life can be unpredictable. Professional financial advice will help you make the right decisions about your money and your future.

Retirement planning is important because it can help you avoid running out of money in retirement. You need to know how much you’ve got, how to access it and when you can aord to retire comfortably.

THINKING OF RETIRING SOON? WE’RE HERE TO HELP

The good news is that whatever your situation, and however you want to enjoy retirement, we can help set up bespoke arrangements that are right for your needs. To discuss your plans or for further information, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

PENSION FREEDOMS

You work, you save and then you retire

A full and happy retirement is a priority for many. But no two people are alike. A ’one-size-fits-all’ system cannot accurately account for everyone’s individual lifestyle choices, so it makes sense that the way you prepare for your future is likely to be different from others.

On the surface, retirement planning hasn’t changed all that much over the years. You work, you save and then you retire. But while the mechanics may be the same, today’s savers are facing some challenges that previous generations didn’t have to worry about.

GOLDEN YEARS

First of all, life expectancy is longer, which means you’ll need your money to last longer. This is compounded by the fact that more companies are moving away from defined benefit pensions – which guaranteed you a certain amount of money in your golden years – to defined contribution plans, which are more subject to market ups and downs.

So, how can you have the retirement you’ve always wanted? Retirement is inevitable, butthat doesn’t mean you have to stop living. Your retirement should be a time for enjoying your life and the things you most enjoy doing.

WORKING LIVES

However, some people are unprepared for retirement due to high debt levels at the end of their working lives or because they were not saving enough during their careers. Sometimes, people are forced into retirement through circumstances outside of their control.

Some people might choose to live o their savings entirely, while others may choose to supplement their income with rental properties. Still others might prefer to have a mix of sources for retirement incomes.

PENSION MONEY

Whatever the case, being aware of the options available today can help you prepare for your future in an eective way. With the introduction of pension freedoms, there is no onus on us to cash in our pensions at set ages, and instead we can take our pension money any way we choose. But, with this freedom also comes responsibility, and for some, uncertainty.

Some people find they don’t have a clear plan for what they want from their retirement, and many underestimate how much money they will actually need when they do eventually retire. The reality is our goals are all very individual, but whatever it is you want from your retirement, it pays to plan ahead.

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If you have a defined contribution pension, here are six simple tips to consider:
1.
Use pay rises as an excuse to save more, 2. Pay in more when a regular spend ends, 3. Maximise any employer contributions, 4. Invest lump sums you receive, 5. Put off breaking into your pension pot and 6. Be choosy about your investment choices

TIME TO TAKE CONTROL OF YOUR RETIREMENT PLANNING?

Planning for your financial future can help ensure that your lifestyle is what you want it to be after you retire. There’s a whole lot to think about when you’re planning for retirement. But where do you begin? To ensure your plans stay on track or for more information, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

COST OF LIVING CRUNCH

Savers still recognise the importance of long-term planning

Britain’s cost-of-living crunch has hit the country hard, with inflation
at its highest level in three decades, petrol prices spiralling, retail price increases rising to their highest levels in ten years and, most recently, Ofgem announcing a 54% price hike in energy bills affecting 22 million households.

Chancellor Rishi Sunak has been forced to announce an emergency £350 of support per household to help with the cost of heating. As a result, almost half (47%) of those not retired say that they cannot afford to save right now due to the rising costs of everyday living, a new survey has revealed.

IMMEDIATE FUTURE

The news comes following widespread reports of many UK households struggling to make ends meet following higher inflationary pressures – sending everyday bills soaring – as the country tries to recover from the effects of the COVID-19 pandemic.

Yet despite the concern about saving for the immediate future, savers are still recognising the importance of long-term planning and having a suitable pension in place for when it comes to retirement.

RELATIVELY COMFORTABLE

The survey – which took place at the start of this year – also found that around a third of people with a pension said that they spent some of their time over Christmas reviewing their finances, including their pension (31%). This was especially true for those aged 18-34 years old (41%) compared with those aged 55+ (24%).

Overall, just 5% of Britons describe themselves as being ‘very comfortable’ financially. Two in five (39%) are relatively comfortable, while a third (34%) say they can normally cover essential costs but don’t often have money for luxuries. One in seven (14%) say they can only just aord their costs and struggle to make ends meet, and 3% say they cannot afford their costs at all and often have to go without essentials, like food and heating.

FUNDAMENTAL MISUNDERSTANDINGS

Around a third (32%) of those surveyed said they could afford to contribute more to their pensions now in order to boost their retirement income. But while savers are seeing the value of pensions, the survey discovered that there remains a number of key fundamental misunderstandings by savers about their pensions, with many unsure how their contributions were being invested on their behalf.

The survey also revealed that only a third of people know the minimum contribution rate that people make via Automatic Enrolment. Additionally, around two-fifths (39%) are not sure if the government gives tax relief on their pension contributions and around a third (31%) are unsure if their pension savings are invested in stocks, bonds or other investments.

WANT TO DISCUSS ACHIEVING YOUR FINANCIAL GOALS NOW AND IN LATER LIFE?

Our service looks at your financial arrangements as a whole. We can help you to manage all aspects of your finances and investments and ensure they are structured to achieve your financial goals now and in later life. Speak to us to find out how we can help you.

Source data:

[1] Pensions and Lifetime Savings Association (PLSA) research conducted by Yonder Data Solutions from 10/01/22 to 11/01/22 with a nationally representative sample of 2,093 adult

MIND THE PENSION GENDER GAP

Women are being urged to think about their long term savings

Imagine reaching retirement age and discovering that, despite years of saving, you don’t have enough money to get by. Worse still, suppose you’re unable to pay for the right kind of care in your old age.

If you and your partner separate or your spouse dies unexpectedly – will you have sucient funds to see you through retirement? Now, all of these might sound like worst-case scenarios but, unfortunately, for women right across the UK one or more of them could become a reality.

EARNING TRENDS

Women are still behind men when it comes to retirement savings. The ‘Women and Retirement’ report[1] has found that if current work and earning trends continue, young women today will need to save an average of £185,000 more during their working life to enjoy the same retirement income as men.

The colossal gender pension gap is made up of a savings shortfall, plus the need to fund a longer retirement because women on average live longer than men. This also leads to higher care costs. Many women will naturally take time o to start a family – resulting in gaps in their work history.

And even if women remain in the workforce, some still tend to earn less than men, on average.

VULNERABLE SITUATION

21% of women surveyed said they plan to rely at least partly on their partner’s income in retirement. However, this can leave women in a particularly vulnerable situation should they separate from their partner.

Right now, it’s rare for divorce settlements to account for pension assets, which means that women could end up in particularly unstable financial situations following divorce.

FUNDING RETIREMENT

Also, women tend to live longer than men – two to three years, on average. Indeed, this continued rise in longevity means that a 25-year-old man today can expect to live to 86, while a woman can live to 89.

And while rising longevity is of course a good thing, it does raise specific challenges – especially when it comes to funding retirement and old age.

LIVING LONGER

Together with living longer, women are also more likely to need care when they’re older. In fact, of the 6 million people in the UK over the age of 60 currently living with a disability, 3.5 million of them are women.

And those women who do need care spend on average a year longer in care homes than men. Right now, the average cost of care is £679 per week, which means women would need an extra £35,000 during retirement for residential care costs.

Moreover, as women can expect to live two to three years longer than men, they would also need around £50,000 for their retirement – bringing the total amount needed to match a man’s retirement income to £185,000.

CONCERNED ABOUT THE PENSION GAP?

As a women, your pension is a key part of your retirement planning. How much you put away now, how you invest for the future and how you choose to access your pension once you’ve stopped working, are all key considerations

for anyone hoping to enjoy a long and happy retirement. If you have any concerns or questions about your retirement plans, please contact us for more information.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.