Pensions & Retirement planning

Before retirement

How much? We can help you to decide how much you should be putting in to your pension. We can also help you to ensure that your pension contributions are tax efficient; remember, the Government provides income tax relief on contributions you make to your pension.

Several pensions? Most people have several different jobs in their lifetime and therefore their pensions can be scattered around with different companies. We can review your existing pension arrangements to establish how much you have got saved and what they will provide you with when you retire. Then, if it looks like your pensions will fall short of what you will require, we can help you correct this. Find out more about our Pension tidy-up service below.

Can my pension work for me? You may not want to retire yet but instead require capital for a business venture. You can use your pension to help you fund a particular project and this is something we can help you with.

At retirement

We know that if you are at retirement age now, pension companies can provide you with a lot of paperwork about the pension they are offering you, which might be difficult to understand. You might be able to get a better deal elsewhere if you shop around, especially:

• If you are a smoker
• If you enjoy a drink
• If you regularly take 2 or more medications
• Even if you live in a particular postcode area

We can help you to establish the best option when you are looking to retire. Request a no obligation call back from us to see if there is a better deal available for you.

You should also be aware that you can take some of your pension as a tax free lump sum. This could be used for any number of things, paying off your mortgage for instance, or scaling back your working hours.

For more complex pensions you may require SIPP advice (see below). Whatever your situation is, we can help.

Self-Invested Personal Pension (SIPP)

Niche are specialists in complex pension matters and a key area for many of our clients is the ability to utilise a Self Invested Personal Pension or SIPP in order to widen their investment options.

A SIPP has the ability to invest its assets into an array of different solutions namely:

• Stocks and shares quoted on an HMRC recognised Stock Exchange
• Securities listed on the Alternative Investment Market (AIM) - High risk investments, there may be no market for the shares should you wish to dispose of them. You may lose your capital.
• Deposit accounts
• Trustee investment bonds
• Fixed-interest securities
• Unit trusts & investment trusts
• Commercial property (though not residential property)
• Land
• Open-ended investment companies, including hedge funds
• Intellectual property
• Unlisted shares - High risk investments, there may be no market for the shares should you wish to dispose of them. You may lose your capital.

We have a vast experience in using SIPPs to provide innovative solutions for small businesses and experienced investors.

A key area of the use of SIPPs is the ability to purchase Commercial Property. This allows pension investors a unique way of raising funds to purchase a commercial property without the need for bank lending or at least a reduction in the amount required from your typical high street lender whilst dramatically reducing the risk to your business. Investment in a commercial property produces a rental income and in addition, often benefits from growth due to the increasing value of the property in question therefore offering a novel yet very tangible investment option.

Find out how we could help you to make better use of your pensions.

Annuity advice

Open Market Option

The annuity market changed considerably at the 2014 Budget, however an annuity may still be the best product for many clients.

By shopping around the whole of the annuity market we could help you to get over 40% more income than that offered to you by your current provider.

You undoubtedly have spent many years saving for your retirement trying to build a reasonable pot of money in order to maintain your lifestyle in retirement. But it must not be forgotten that in order to maximise your retirement income you should always research the whole of the market to ensure that you get the very best income from this pot.

In the lead up to your retirement, it is highly likely that you’ll receive lots of marketing material from your current pension provider, encouraging you to purchase your annuity with them. In many cases, people assume that it is compulsory to take your annuity with your pension provider, but this is simply not the case.

It is your right to exercise the Open Market Option, and we can help you do exactly that.

Enhanced Annuity

Most people do not realise that they could receive more income from their pension annuity if any aspect of their health or lifestyle could reduce their life expectancy.

And you don't need to have a major health complication in order to qualify for an enhanced annuity rate.

• Do you smoke?
• Do you drink alcohol?
• Do you take any prescribed medication?
• Are you overweight?
• Do you have any medical conditions?

If your answer is YES to any of the above, you may be eligible for an enhanced annuity! If not, let us check your postcode as this could still allow you access to a better income in retirement.

Occupational Pensions

If you have an old occupational/final salary pension, you may have been informed that you cannot retire before age 60 or even 65 without a considerable reduction. However it must be noted that you can retire anytime after the age of 55 and even if your current provider does not allow you to do so, we may be able to help you to take your pension now. By purchasing an annuity with another provider you may be able to access your tax free lump sum and begin taking a pension income now.

We can help you to establish the best option when you are looking to retire. Contact us to see if there is a better deal available for you.

Pension tidy-up

Multiple pensions?

Many people have several pensions scattered about, usually of varying sizes, types and with different providers – simply as a result of changing jobs.

It can be hard to know exactly what you have, and in some cases, people lose track of old pensions completely. We can help you to get your pensions organised and to keep on top of them.

We will review all of your pension arrangements, even those you are unsure about. We can help you trace lost pensions, and also look at any ‘frozen’ pensions.

We will then compile a simple report, giving you a clear breakdown of all your pension plans. It will outline:

• All the pensions that you have
• What they are worth
• Which provider each one is with
• The type of pension each one is
• A summary of each plan's previous growth
• Your predicted retirement income.

We will also let you know whether you would benefit from transferring your pensions into a single plan, which providers offer the best deals, and how much better off you would be if you went ahead with our recommendations.

It could be beneficial to transfer multiple pensions into a single plan, allowing you to keep track of them more easily and also potentially pay less in charges. However, in other cases it is better to leave your pensions in multiple small pots.

Even if you choose not to go ahead with our recommendations, the report will give you a useful overview of your plans without the hassle of having to hunt through all your paperwork. You have nothing to lose, and perhaps a lot to gain!

Can you benefit from the 2015 changes?

As introduced by the Budget in March 2014, the Government unveiled plans to completely overhaul the UK’s pension system.

Since April 2015, from age 55 (increasing to 57 from 06/04/2028), whatever the size of a person’s defined contribution pension pot, they can take it however they want, subject to their marginal rate of income tax in that year. Some products may not offer the full range of flexibility options.

25% of their pot remains tax-free and individuals can benefit from increased flexibility. People who continue to want the security of an annuity will be able to purchase one and people who want greater control over their finances can draw down their pension as they see fit. Those who want to keep their pension invested and draw down from it over time will be able to do so.

Since then, savers have had freedom to do as much or as little as they want with their pension. But what do these freedoms mean in practice?

What are the main changes?

• Allow all of the funds in a money purchase arrangement over and above the tax free lump sum to be taken as an authorised taxable lump sum, removing the higher unauthorised payment tax charges.
• Increase the flexibility of the income drawdown rules by removing the maximum ‘cap’ on withdrawals and minimum income requirements for all new funds from 6 April 2015;
• Enable pension schemes to make payments directly from pension savings with 25 per cent taken tax-free (instead of a tax-free lump sum);
• Ensure that individuals do not exploit the new system to gain unintended tax advantages by introducing a reduced annual allowance for money purchase savings where the individual has flexibly accessed their savings;
• Increase the maximum value and scope of trivial commutation lump sum death benefits;
• Enable persons other than dependants to inherit unused drawdown funds and provide that where the death occurred before age 75, lump sum death benefits and drawdown pension from these funds can be paid tax free, subject to the member having sufficient available lifetime allowance;
• Allow annuities paid to a beneficiary on the death of the member before age 75 to be paid tax free.
  
  

What does this mean in practice?

Savers have always had the freedom to take 25% of their pension as a tax-free lump sum, but have then generally been herded into buying an annuity with all of the rest of the money. Since April 2015, from age 55, whatever the size of a person’s defined contribution pension pot, individuals have been able to take it however they want, subject to their marginal rate of income tax in that year. 25% of their pot remains tax-free and individuals can benefit from increased flexibility. People who continue to want the security of an annuity are able to purchase one with some or all of their pension pot and people who want greater control over their finances can drawdown their pension as they see fit using flexi-access drawdown (and, in some cases, capped drawdown). Those who want to keep their pension invested and drawdown from it over time are now able to do so.

In addition, savers over the age of 55 who don't wish to use flexi-access drawdown are given the option of taking a number of smaller lump sums, or one single big lump sum, and in each case, 25% of the sum is tax-free. These are known as 'Uncrystallised Funds Pension Lump Sums' or 'UFPLS'. However, as pension advisers are saying, this change was widely anticipated as an essential part of the new pension freedoms, and was actually already in place in the form of “phased retirement” or “vesting” under the old system.

How does this benefit me?

The main beneficiaries of this are those who have built up relatively large pension pots, who will be using this freedom to avoid paying 40% tax when they draw it down under the new freedoms. For example, if you have a £200,000 pot, you could cash it in and have £50,000 tax-free, but the remaining £150,000 would be liable for tax. This means that, depending on the individual’s personal allowance and other earnings, a lot of it will be swallowed up by 40% tax.

But if the person decides to take the pension instead as £50,000 each year for four years (either as UFPLS or using phased drawdown), then each year he or she will receive £12,500 tax-free and be liable for income tax only on the remaining £37,500, which could be as low as £5,000. So instead of paying more than £50,000 in tax, the person pays around £20,000.

I only have £40,000 in pension savings. What does it mean for me?

A £40,000 pension pot is actually about average for those people in the UK who have “defined contribution” schemes. If you take the lot immediately on retirement, and have no other income, then you would receive a £10,000 tax-free lump sum and then be liable for tax on the remaining £30,000 – which would be around £3,500 in 2019/20.

If you take it at £10,000 a year over four years, then each year you could get a tax-free lump sum of £2,500, while the remaining £7,500 will be liable for tax. Given that the personal allowance is £12,500, that would suggest you’d be getting your hands on the cash entirely tax free. But remember, if you have reached state pension age, HMRC will also be including your State Pension in the calculation. If you are drawing that as well (and you don’t have to, you can defer it if you wish) then that income will be added into the tax equation.

Can I effectively use my pension as a bank account?

Yes. The money you have saved will sit in a pension pot for you to access whenever you want from age 55, subject to your marginal tax rate. The costs of doing so however are quite high, and there are likely to be charges to pay.

When can I start doing this?

These changes came into force in April 2015.

What age do I have to be?

Currently you have to be 55 or over to access your pension. If you try to take the money before that age, the old tax rules apply – which mean that a minimum 55% is taken by HMRC - and in most cases, the pension provider wouldn't allow that anyway. Younger workers, though, should watch out for a rise in the 55-year-old threshold for accessing their money. The thinking in pension circles is that the government will tie pensions freedom to within 10 years of retirement age – which as it rises to 67 and 68, would suggest you won’t be able to access the money until 57 or 58. But there is no formal announcement on this.

Do I have to retire to take the money?

No. You can be 55 years old and in work, receiving a salary, and be allowed access to your pension. So if, for example, you have a small DC pension pot from a former employer and you want the money, you can take it as a single lump sum or draw it down over several years, even if you are in work and paying into your company’s pension scheme. The same rules apply – 25% of each drawdown will be tax free, with the rest liable for tax at your marginal rate. Or the full 25% tax-free cash could be taken at outset and all further withdrawals will be taxable. So if you are earning £50,000 a year, then it’s not that great, as each bit of money will be taxed at 40%, but if you are, say, working part-time, and pay 20% tax, then it could be a useful boost to your income.

Can I pass on my pension to others without paying any tax?

Yes. People who die under 75 with defined contribution pensions can from April 2015 pass on any unused pension as a lump sum or income to a person of their choice tax free.

Payments from certain kinds of annuities that pay out income after you die (joint life and guaranteed annuities) are also tax-free when paid to a beneficiary, if the original policyholder dies below age 75.

For people who die over the age of 75 with unspent defined contribution pension funds, they can pass these on to a person or persons of their choice who will be able to take them as a lump sum or as income subject to their normal rate(s) of income tax. If the funds are paid into a trust on death after age 75, a 45% tax deduction is made initially but this can be offset against any payments made to beneficiaries in future (and tax reclaimed if applicable).

Will my pension pot run out?

Pension drawdown historically has been deemed as a high risk strategy, reserved for higher risk tolerances and people with significant sums of money. The flexibilities offered have not changed the risks involved, only allowed more people to access their pensions. As you are drawing directly from the pension pot, there is a chance that you could withdraw more per annum than any growth can account for and your pension will go down in value, it could even be exhausted completely. However, this is deemed to be an acceptable option in certain circumstances. If you simply need a one off lump sum, then you can take the entire pension in a single lump sum (subject to tax, apart from the tax free element) and your pot will have no value after.

Planning the flow of cash I require is quite important then?

Without a doubt, if you access your pension flexibly, cash flow planning becomes the foremost concern and will help you to understand your requirements for the future and how decisions made today can affect tomorrow. We use a client-friendly cashflow planning tool designed to help clients understand how their cashflow may look in the future which can be reviewed annually to keep on top of your income needs.