Pensions

Pensions are, of course, designed to enable you to save sufficient money to live comfortably after you have retired from work. There are many different 'tools' used to save for retirement and the taxation and investment elements of pensions can appear baffling. We specialise in explaining, recommending and monitoring pensions for you. Below are the most common sources of pension to fund for your retirement.

• The Basic State Pension - for people who have paid sufficient National Insurance contributions while at work or have been credited with enough contributions.
• Additional State Pension - this is now the State Second Pension (S2P). Before 6 April 2002, it was known as SERPS (State Earnings Related Pension Scheme). From 6 April 2002, S2P was reformed to provide a more generous additional State Pension for low and moderate earners, carers and people with a long term illness or disability and is based upon earnings on which standard rate Class 1 National Insurance contributions are paid or treated as as having been paid. Additional State Pension is not available in respect of self employed income.
• An Occupational Pension (through an employer pension scheme) - if your employer operates a pension scheme, it's usually a good idea to find out about the benefits of the scheme.
• A Personal Pensions Scheme (including Stakeholder schemes) - open to everyone and especially useful if you are self-employed or your employer doesn't run a company scheme. In 2012, the government is planning to introduce reforms which are being phased in over 4 years and all employers will be required to offer their employees, who meet certain criteria, automatic enrolment into a workplace pension – National Employment Savings Trust (NEST), formerly known as Personal Accounts. Employers will also be required to contribute a minimum of 3% of salary to these, which will be phased in gradually over four years. Employees will be required to make a personal gross contribution of 4% with tax relief of 1%.

State Pensions may not produce the same level of income that you will have been accustomed to whilst working. The full Basic State Pension is only £102.15 per week (2011/12) for a single person (though you would be able to claim means-tested state benefits if that was your only income). It's important to start thinking early about how best to build up an additional retirement fund. You're never too young to start a pension - the longer you leave it the more you will have to pay in to build up a decent fund in later life.

Personal and Stakeholder Pensions

Personal Pensions represent a popular and attractive way of saving for your retirement.

All monies invested into your fund grow free of capital gains tax, and the contributions you make are enhanced by income tax relief at source. For example if you invest £80, the government adds on tax relief (currently 20%) to enhance your contribution to £100! If you are a higher rate taxpayer you can claim additional relief through your pay coding. Special rules apply though to those with high income in excess of £100,000 p.a. Please contact us for further details.

A personal pension is an arrangement made in your name over which you have personal control. You can alter your contributions, suspend them, or stop them completely.

You will be eligible to take 25% of your accumulated fund tax-free when you retire, from age 55. There are a range of options when you decide to take benefits whether before or after age 75.

Personal Pensions usually offer a range of investment mediums to suit your attitude to investment risk, and you can change your investment at any time.

Stakeholder pensions are similar to personal pensions but have their charges capped at 1.5% for the first 10 years reducing to 1% thereafter. Whilst Stakeholders are generally considered a little cheaper than Personal Pensions, investment choices may be restricted.

Advanced Pensions

In recent years the pensions industry has become more advanced in terms of the flexibility of investments available and the structure of the actual pension arrangements.

It is an area of constant change and you should consult us regularly to make preparations for a secure and enjoyable retirement.

Self Invested Personal Pensions (SIPPs)

A Self Invested Personal Pension (SIPP) is a tax-efficient wrapper within which a wide range of investments can be held. A new SIPP must appoint a scheme administrator, usually the recognised product provider. SIPP's have the same tax benefits and regulations as conventional personal pensions plans but you and / or your advisers have control over the investment choice - each SIPP is unique to the individual. Otherwise, it operates in the same way as a conventional personal pension in respect of contributions and eligibility, for Her Majesty's Revenue & Customs (HMRC) purposes.

The range of permitted investments is extensive and includes more conventional investments such as deposits, unit trusts, stocks and shares and also more unusual assets such as commercial property. The complex nature of a SIPP means that it is not suitable for all investors. Often, the benefits of 'self investment' are only advantageous to people with very large funds and / or investors with some level of sophistication when it comes to investment decisions. Often, there are additional charges for arranging and dealing within a SIPP and these charges would erode smaller funds quickly.

We will be able to provide more details and make a recommendation based on your own circumstances.