pension fund Archives - Pension Adviser Nottingham

How to live off your Pension fund in Retirement – Pension Advice Derby

bflindall — Mon, 11 Jul 2016 11:20:45 +0000

Pension drawdown allows you to keep your fund invested in retirement as opposed to buying a miserly and restrictive annuity.

The issue is that while many individuals detest the possibility of an annuity, the alternative means keeping your money invested which brings its own worries and pitfalls.

Credencis give a step by step guide of what can be done to allay any fears.

Post Retirement Products

Income Drawdown allows you to take lump sum out of your pension fund while the rest remains invested. A lot depends on the fund managers you choose and how well they perform.

In a nutshell your fund needs to produce growth so you can take an income so you don’t run out of money before you die.

You can also choose to buy a fixed-term annuity – which allows you to defer a decision on how you fund retirement. The length of the annuity is normally between 1 to 5 years which means they don’t run for the rest of your life.

There are also pension drawdown plans which offer underlying guarantees. This might guarantee to pay you for example 5 per cent of your pension fund per annum. The income level varies with your age and gets higher as you gt older.

If your pension fund grows above 5 per cent per annum you can also receive the potential extra gain.

Of course any guarantee will come with an extra cost.

Recently the pensions market is now offering a hybrid annuity-drawdown option.

You can buy an annuity that provides enough guaranteed income to cover your basic expenses, then invest the other 50 per cent into drawdown scheme to try to grow your retirement savings further.

Unfortunately these schemes are also less flexible and carry more costs.

Don’t overpay the taxman

You can only take 25 per cent of your pension fund whilst the remainder is taxed at your marginal rate.

After you have taken the first 25 per cent, you should withdraw your pension savings in small amounts over a number of years to avoid hitting a higher tax threshold.

Occasionally an investor might be prepared to pay extra tax, for example to get hold of your entire pot and use it to purchase a buy-to-let property.

Income Tax is something to bear in mind when you are deciding how much income to withdraw each year, you don’t really want to take that much income in a single year that you get pushed into a higher bracket.

Interest Rates

For people with a pension fund invested in retirement, it’s important to keep an eye on what’s going on with interest rates because expectations about them can move stock markets, and because of their impact on government and corporate bonds.

Bonds are commonly held in investment portfolios as a ‘safer’ alternative to shares, and as a way to diversify risk.

However, once central banks start to normalise policy and raise interest rates again, many investors could decide they overbought bonds and dump them in a hurry. Warnings have been sounded for years and despite occasional corrections bonds have remained popular so far, but a crash could well occur eventually.

If interest rates were to rise this would lead to better annuity deals and make them a more attractive option again.

Final Salary Pensions

It is rarely a good idea to move from a safe environment like a final salary pension into a drawdown plan.

The FCA have made it compulsory that any final salary pension which is worth more than £30,000, Independent Financial Advice must be taken.

In certain cases some people are happy giving up a comfortable final salary pension and investing in an income drawdown plan. This may be if they are single, and do not have to provide a spouse/or dependents pension. The death benefits can also be much bigger moving into drawdown which might be important for inheritance purposes.

Income Levels

One rule of thumb, is to say you can withdraw 4 per cent of your fund a year without financial implications.

With recent volatility in stockmarkets and Brexit, what do you do if your fund plummets?

Lets say you have a pension fund of £100,000 fund and you lose 10 per cent in one year and you also withdraw out £4,000 as retirement income, that means your fund has dropped to £86,000.

You now have a smaller fund, which means the income you receive will probably have to be lower. If you keep on taking income in the early years it can take time to potentially rebuild your fund and the income you want to receive.

If your fund falls maybe consider using your other assets like cash, and not relying on the natural income

Also consider using an Independent Financial Adviser like Credencis, and giving your investments a revamp.

Diversification of your Investments

Usually as you reach retirement the consensus is to move out of risky investments and into safer assets.

This was normally done in preparation for buying an annuity. You wouldn’t want a big drop in its value before purchasing an annuity. However, if you are planning to stay invested in pension drawdown, although a drop in value at is a big deal, you still have time for markets to recover, and there is the potential for higher returns.

Recent pension changes and low annuity rates have stopped people buying annuities. If you want to stay invested, it is more sensible to stay in a diversified portfolio.

A diversified portfolio will spread your money across many asset classes such as cash, shares, commercial property, corporate bonds, government bonds, and other investments such as private equity and hedge funds.

The diversified portfolio will also be spread between different geographies and different industries.

Your decision would be based on your Attitude to Risk, your Age, and other factors like your income needs.

Annual Review

Credencis recommend you review your investments once a year. Too many reviews per se can receive in your chosen fund managers not implementing their philosophy. You also need to be with a company that allows you unlimited free switches between fund managers.

State Pension Forecast

Credencis recommend you obtain a State Pension Forecast as early as possible when considering your Retirement Planning.

Also consider voluntary contributions to the State Pension if you are not going to receive the full amount.

Inheritance

If you die before Age 75 the beneficiary will pay no death tax and receive the whole fund. If the owner dies after Age 75 the pension fund will be taxed at their normal marginal rate.

The capital is normally lost with an annuity, although there are some available which can be passed on, and final salary pensions which tend to work in a similar way.

Please contact Credencis if you are considering bespoke pension advice with your retirement options.

We are situated between Derby and Nottingham, and visit clients nationwide.

Contact Credencis

“Live for today, invest for tomorrow”

If you would like advice on your pension options, or how to increase your annual pension income contact us to discover what we can do for you.

The post How to live off your Pension fund in Retirement – Pension Advice Derby appeared first on Pension Adviser Nottingham.

Take Advantage of the new Lifetime ISA to boost savings – Pension Advice Nottingham

bflindall — Wed, 23 Mar 2016 11:41:41 +0000

The government recently unveiled plans for a new lifetime ISA, which will be launched in April 2017.

The new ISA addition was designed to help younger people save for both a house and their retirement.

So for anyone between the ages of 18-to-40, you can basically save up to £4,000 a year and receive a government bonus of 25%, up to £1,000 a year, until age 50. This means that for every £4 saved, the government gives you £1. Great news!

The money can be accessed tax-free to either buy a property worth up to £450,000, or at age 60 for retirement. If the money is accessed before age 60 and not used to buy a home the government bonus will be removed and a 5% charge will be levied.

Lifetime ISAs are being heralded as an alternative to saving into a pension but of course pensions still remain available and dedicated savers can save into both if they wish, receiving the tax relief on their pension contributions which they would have done previously.

If you save your money into a lifetime ISA until age 60, up to the limits allowed, and then transfer the fund into a pension, you will get the top-up into the lifetime ISA, and the 25% tax-free lump sum available through the pension.

The ISA fund transferred into a pension would then receive tax relief at your highest marginal rate of 20%, 40% or 45%.

You can then access the pension fund including the tax relief – with the first 25% taken from the fund being a tax-free lump sum.

Investors are currently able to save £40,000 Gross each year into a pension, known as the annual allowance. They can also utilise any unused allowance from the previous three years, known as ‘carry-forward’

However ‘money recycling rules’, stop you from making large pension contributions, getting tax relief, and then taking out the 25% tax-free cash right away.

Please bear in mind the tax relief available to savers could change in the future, and also the annual allowance contribution level could change.

For bespoke advice on your Pension’s and Investment’s contact Credencis.

We are situated between Derby and Nottingham, but visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

The post Take Advantage of the new Lifetime ISA to boost savings – Pension Advice Nottingham appeared first on Pension Adviser Nottingham.

Release up to 25% of your pension funds tax free – Pension Advice Nottingham

bflindall — Tue, 12 Jan 2016 13:50:44 +0000

If you are over 55, you can access up to 25% of your pension funds tax free and what’s more, you can do with it whatever you wish.

One of the big benefits of pensions has always been the tax free cash lump sum you can take when you retire. In general you can take up to a quarter (25%) of your pension pot tax free and until recently, you would have expected to start taking an income with the rest of your money at the same time.

The government has now changed the rules, you can still have the tax free cash lump sum but you no longer need to start taking an income with the remainder, you can just leave it to use at a later date. You still need to be at least 55 years of age but you don’t need to have retired from work.

What do we do

One of our qualified advisers will work through a series of questions with you to better understand your needs and objectives and after reviewing all the options will make a personalised recommendation.

What could you do with the tax free lump sum?

For many people, a tax free cash lump sum offers a great opportunity to help put their financial affairs in order.

Most common uses are typically:

Help pay off a mortgage or other debts, such as credit cards and loans
Paying for a holiday, a new car or just making life a little easier
Help the children with a loan or to get them on the housing ladder
Investing the lump sum to generate more income

For bespoke pension drawdown advice on releasing money from your pension fund contact Credencis.

We are situated between Derby and Nottingham, and visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

The post Release up to 25% of your pension funds tax free – Pension Advice Nottingham appeared first on Pension Adviser Nottingham.

Transferring Final Salary Pension a gamble? – Pension Advice Nottingham

bflindall — Mon, 31 Aug 2015 16:09:59 +0000

The new Pension Freedom rules allow members of final salary pension schemes, or defined benefit (DB), to switch into defined contribution (DC) arrangements and take advantage of the changes.

This allows members of defined contribution (DC) schemes to access their entire pension pot from the age of 55 without incurring heavy tax penalties. Up to 25 per cent can be taken tax-free and the remainder is now taxed at the saver’s marginal rate.

The pension income provided by DC schemes is variable, being based on factors such as the amount paid in, charges and investment performance. DB schemes, in contrast, pay a guaranteed pension income based on earnings and length of service.

The problem is that while DB scheme members are often attracted to the flexibility offered in the new environment, many fail to appreciate the value of their guaranteed arrangements.

The number of people cashing in their DB pensions was on the rise even before the reforms, as employers sought to reduce their pension costs by offering members cash incentives to transfer out.

Usually the critical yield, the return that the alternative arrangement must achieve year-on-year just to match the DB pension, potentially could be high.

The current cash equivalent of the transfer value, providing a detailed breakdown of the calculations, is also important. This is where interest rate expectations might come into play.

The current cash value can fluctuate significantly and right now, due to low gilt yields, there are increasing inquiries about a potential window of opportunity to act before interest rates increase and currently high transfer values are likely to fall.

There are plenty more factors to consider, including objectives, other assets and income, and the individual’s health and family history.

There are some scenarios in which transferring out might be the best course of action. They include cases where health issues may curtail the individual’s retirement, or where there’s no-one to inherit the pension at death.

“I would advise most DB members to stay put and benefit from a guaranteed income in retirement that they’d be unlikely to get from any other arrangement”

“The thought of being able to turn an income stream into a large capital sum can often appear attractive at first glance, but you have to think about the returns and the risk associated with the alternative arrangement”

For bespoke final salary pension transfer advice contact Credencis.

We are situated between Derby and Nottingham, and visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

The post Transferring Final Salary Pension a gamble? – Pension Advice Nottingham appeared first on Pension Adviser Nottingham.