Pensions

Despite common opinion retirement planning is not just about pensions. This is just one type of product that can be used as a pension vehicle. Planning for retirement involves investment in property, ISA’s, savings in the bank and even releasing equity from your home (although not generally thought of as a good planning tool.)

The average pension fund in the UK is just £30,000! Retiring with a pot this size wouldn’t even secure an income above the national minimum wage especially if you consider that people can be retired for 40 years. Whether you are just about to retire, just starting out in your career or in the middle of saving for your later life you need access to a pension specialist. The complicated retirement savings market with its different types of pension products coupled with the access to 30,000 funds to choose from ensures you have many difficult decisions to make. The decisions are made easier by a specialist who will assess your needs, your affordability and your attitude to risk taking before making a recommendation on which plan, fund and contribution level is good for you. The newly installed Automatic Enrolment 2012 legislation means that if you are working and are earning above the lower earnings level you have to be enrolled into a pension by your employer. This significant change heralds a new era of pension saving and gives us an idea of how important it is to save for your later life.

Although not popular Pensions are a valuable tax efficient means of building an income for your later life and unlike property that constantly needs attention, bank accounts that pay paltry interest a reasonable retirement account will give you the income you need to enjoy your time off. What’s more is it now possible to take the whole fund out in retirement (NOTE: This is not freely available and subject to other income levels.)

We at Romilly Financial offer advice and planning on building the pension fund, using pensions for tax mitigation, buying annuities and organising drawdown income from your plan at retirement.

We will provide focus on the retirement income you need to give a comfortable and enjoyable later life. This includes retirement forecasting using all of the investment methods noted above and taking the time each year to ensure you are on track to reach those targets. We also assess whether each product remains suitable to you as well as managing down the risk exposure as you draw near to the magic retirement date.

For those looking to reduce the annual tax bill, investing into a Personal Pension or Sipp can be a fantastic way of reducing the amount you pay to HMRC. You can invest up to £60,000 per annum (from 6 April 2014) or the equivalent of your annual earnings, getting tax relief at the highest rate! An offer that is just too good to be missed. A contribution of say £10,000 would only actually cost £6,000 after higher rate tax relief.

The first step is to always consider your options. With the help of a financial planner at Romilly you can begin to make the decisions you need to make to secure a comfortable financial future.

If you are due to retire you have a number of key decisions to make concerning your pension income. Normally you should start to consider these within 6 months of the retirement date. Traditionally an annuity has been the primary option and is in many cases the lowest risk.

So, what is an annuity? An annuity is a guaranteed income for the rest of your life which has been bought by all or part of your pension fund. This amount of money can be paid at a level amount, an increasing amount, with a widow’s clause or with a fixed term guarantee. In the main once the money is invested it remains with the annuity provider and you receive your income. It is not subject to market fluctuations and you do not have to worry whether you will receive that payment each month. Although there are many positive sides to an annuity, recent low interest rates have affected the return you can expect to receive for your money and of course once the money has gone into the annuity pot it cannot be returned to you.

A large percentage of the retiring populous will buy an annuity with their current pension provider unaware that the open market could possibly give them a greater income for the same investment amount. Most notably if you have an unusual lifestyle or are not in full health you could qualify for an enhanced annuity meaning your payments are higher again than that of the current market.

At Romilly Financial we examine your options, discuss your requirements and then research the market on your behalf making sure we secure the best possible rate for your annuity investment.

In the latter stages of your working life you will begin to consider your pensions options. Investing the fund into an annuity is the more traditional method for retiring but increasingly, a more common route is the pension drawdown facility. Within 6 months of your retirement date you will need to examine whether a drawdown contract is the right retirement option for you. A drawdown plan is simply the continuation of your pension whereby your fund remains invested in the market but is then used to pay an income predetermined by the Government Actuary Department (GAD). This income is taxable in the normal way and can be paid monthly, yearly, 6 monthly in advance or arrears. The benefits of drawdown are that the fund can pass onto your spouse or in some cases your family members and with careful investment planning could increase in value over the long term. It is widely accepted that the death benefits for a drawdown contract make this option more appealing than annuities however the recent reduction in GAD rates has opened the debate of whether these plans are truly suitable.

Discussing a drawdown contract with Romilly Financial will assist you in making the right decision. The benefits of this method of retiring are huge but you need to ensure that they are suitable to you and your investment requirements.