Your Investments, Your Financial Future
Many people feel that investments can be a confusing and complicated topic. Sadly, because of this, they don’t bother with an investment review and simply take the view that ‘out of sight, out of mind’ means that everything will be ok, eventually. This is definitely not the case.
Any investment you make or have already made needs to meet certain basic criteria which are personal to you and your circumstances. Can you answer ‘yes’ to the following questions?
Pension Release – Pension schemes can prove extremely complicated and difficult to understand. Your own pension fund is unique to you so full details of your existing pension arrangements need to be obtained so our financial advisor can provide you with the best pension review options.
Unless your current pension plan is able to provide pension release benefits directly to you, it may be necessary to transfer the pension fund to a new plan in order to release these benefits early. This could take time and could incur penalty charges.
If you are considering early pension release benefits, your objective may be to obtain a tax free lump sum. Before you proceed, you must be satisfied that you have a genuine need for cash which justifies the loss of income you will suffer later in your life.
Your specialist pension adviser will inform you of the facts and figures involved for pension release and other issues you need to consider before a final recommendation is made. However, you are the best-placed person to understand if your objective for cash is real (and therefore justification for the cost of early pension release) or not. Unless you have a genuine need, releasing pension benefits early is unlikely to be suitable for you.
We provide a service that enables you to meet a financial advisor and have a specialist pension review. The initial meeting is an opportunity to review your current pension arrangements, including charges you are incurring and a review of your existing investment performance.
Below are listed the most common types of company pension schemes:
- Pension schemes through your work
•An occupational scheme (company pension scheme or superannuation scheme).
•A group personal pension (GPP).
•A stakeholder pension scheme.
- Final salary scheme
- Career average scheme
- Money purchase schemes
Contracted out pensions are more commonly known as “Opted out“.
Back in the late 1980’s the Government offered people the chance to pay into a private pension scheme by diverting part of their contributions from the state pension scheme to a private provider (choosen by the employer). This is “opting out”.
Previously this portion had been paid into a government scheme known as SERPS (State Earnings Related Pension Scheme) which in 2002 became 2SP (Second State Pension).
The government also made extra payments into opted out contributions.
Private Pensions – The Truth Of Why You Need To Act Now
Pension charging structures have changed dramatically over recent years. Due to the introduction of stakeholder pensions the charges applied to new Stakeholder benchmarked plans are far lower than in the past. Many individuals now find themselves with outdated, overpriced pension contracts. It may be possible to transfer to a cheaper plan with the same provider.
Preserved or frozen pensions – Once an employee has left their employer they cease to be an active member of the company pension scheme. Typically, if you have been in a company scheme for more than two years you will be left with a “preserved or frozen pension” that will be looked after by the company pensions department until retirement age. Although the term “Frozen” is commonly used it is somewhat misleading as the pension will normally increase or revalue, as its correctly known, between the date you left and your retirement (this is known as the deferred or preserved period).
With Profits Pension – The Truth Of Why You Need To Act Now
With Profit funds, which were once a popular and seemingly secure way of investing into Pensions, have been in decline for some time as insurers continue to cut maturity payouts.
One needs to check if there are any guarantees, maturity bonuses and periods when funds can be accessed or transferred without penalty. A review of these funds is a must.
Traditionally, at retirement, one would have purchased an annuity. However, when you take out an annuity, whilst you do get a known level of income, you do agree the terms at the outset and you can-
NEVER CHANGE YOUR MIND.
Career average scheme also known as CARE schemes.
Career average schemes are similar to Final Salary Schemes in that:
- the payments depend on how much you have contributed
- the period over which you have contributed
Conventional annuities provide a guaranteed income for life. The income is neither subject to investment risk nor mortality risk. This means that it doesn’t matter what happens to stock markets, house prices or any other investments, the income from your conventional annuity will continue to be paid out, even if you smash the longevity record!
Your smoking habits and any medical condition or conditions, both past and present, can all affect your normal life expectancy. Some annuity providers now take this information into account when setting their annuity rates. In some cases, this can mean substantially higher income levels than those payable from standard conventional annuities.
Contact us for more information about our Enhanced Rate Annuities.
A small number of providers have developed what have been termed Flexible Annuities. These plans combine a guaranteed taxable income for a limited period with the balance of pension funds remaining invested.
You can arrange most personal pensions as a single plan, or as a cluster of many separate plans, sometimes called ‘segments’. You can use these segments to buy annuities or unsecured pension plans at different times. You must use all the segments to provide a retirement income by the time you reach the age of 75, either via a lifetime annuity or Alternatively Secured Pension. This process is called phased retirement.
Unsecured Pensions are a popular alternative to buying a lifetime annuity. They allow you to take a Tax Free Cash Lump Sum and draw an income from your pension fund whilst it remains invested. The maximum level of income you can draw is about 120% of the non increasing income normally provided from a more traditional annuity, based on a single person of your age and sex; the minimum income is zero.