RETIREMENT PLANNING AND PENSIONS

Retirement planning becomes increasingly urgent as we go through life but the earlier you start the easier it is. It’s all the more important once you realise that regardless of which party is in power the state pension is likely to be reduced, paid later in life and be insufficient to provide a comfortable lifestyle.

Retirement planning is an exercise in thinking about the future, your objectives and all the different elements of a strategy to achieve them. Nevertheless, there are some fantastic tax advantages to pensions that ensure they remain a key component in most retirement plans, in conjunction with several other elements.

You may already have one or more pensions, be wondering how to get started, or wondering how best to use your accumulated funds. We can help with all of this and more.

We cover all aspects of retirement planning so whether you need to make a financial plan, review existing pension arrangements, set up a personal pension scheme, or assess pension requirements for your employees, we can offer comprehensive advice.

We offer a range of services to help you meet your investment and/or retirement objectives. We provide independent investment advice which we will discuss with you as described in our important information about our services document.

We provide advice on the following range of products:

  • Personal Pensions
  • Stakeholder Pensions
  • Self-Invested Personal Pension Schemes (SIPPs)
  • Trustee Schemes
  • Drawdown Plans
  • Annuities
  • Small Self Administered Schemes (SSASs)*
  • Transfer Plans (including Section 32s)

Whatever your pension needs, contact us for help and advice.

A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Occupational pensions are not regulated by the Financial Conduct Authority

Review existing

PENSIONS

For those who already have pensions in place we can assess your progress towards your retirement goals.

Starting

PENSION PLANNING

Do you believe the state pension will be sufficient to keep you comfortable in your old age? Pension planning is best started early in life because it allows you to put your money to work for longer but however late you leave it doing something is better than doing nothing. If you have not started, then now is the time.

Monitoring pension funds

PERFORMANCE

In our experience the majority of people with a company pension leave their money invested in the default options, never switching and never monitoring it. There is an annual statement but it is unclear to you what it means for your retirement. If you are in this camp, then you need a pension review.

Approaching retirement

ADVICE

You may be planning to retire but can you answer this question: will you run out of money in retirement?

If that question is worrying you, don’t let it. We will help you answer this and the many other questions that we are regularly asked by people approaching retirement. You will either get the peace of mind that you are on track or we will help you to improve your situation.

Increasing your

annuity income

An annuity is essentially insurance that entitles you to a certain amount of money each year until you die. You are basically insuring against the possibility that you live longer than your money lasts.

Alternatives to

an annuity

There are alternatives available, such as Income Drawdown, where your funds remain invested. We can help you decide what’s best for you.

Free retirement planning

CONSULTATION

Speak to an adviser who will assess your objectives, current position, and help you plan a course of action. It’s also an opportunity for you to get to know us before deciding to engage our services. You can ask as many questions as you need. Your first meeting with us where we will discuss the ways in which we might help you is free of charge. Contact us today to book an appointment.

We will use your name, email address and contact number (‘personal information’) to contact you about the services you have requested or respond to an enquiry you have submitted, which will require us to share your personal information with TenetConnect Ltd. For further information on how your information is used, including disclosure to third parties, how we maintain security of your information and your rights in relation to the information we hold about you, please see our Privacy Policy.

Financial Review
We review everything you have at the same time so that we can see how it all fits together and where there might be pieces missing.

Review existing pensions

For those who already have pensions in place we can assess your progress towards your retirement goals.

Starting work is often the trigger to begin contributing to your pension but every time you change job you may be faced with a decision – leave the pension where it is, or move it to the new employer scheme. If it is a final salary scheme and you are moving to a money purchase scheme you could be giving up benefits in return for a cash value to be invested in the new scheme but what is a fair value for those benefits? Even if they are both money purchase schemes you need to consider the different levels of charges, features and investment options in each. This is a complicated area, which is why people often do nothing, collecting a range of different company pensions over the years, many of which they have lost track of or never monitor.

For self-employed clients it is even more important to regularly review pension arrangements. There is no occupational pension scheme to fall back on and it is easy to get so involved in your business that you do not really take the time to manage your own finances effectively. There may well be serious financial planning and tax saving opportunities that you are missing out on. Let us take a look at your existing arrangements to spot the opportunities and bring everything into line with your financial objectives.

However complex it may be, contact us and we will review your entire position before creating a tailored, holistic plan to make the best, most cost-effective use of your pension funds.

Starting pension planning

Do you believe the state pension will be sufficient to keep you comfortable in your old age? It has been called the pensions time bomb, the demographic time bomb and, no doubt, many other creative names but it amounts to this: we are all going to have to take responsibility for ourselves now.

Pension planning is best started early in life because it allows you to put your money to work for longer but however late you leave it doing something is better than doing nothing. If you have not started, then now is the time.

If you are employed you will likely benefit from an occupational pension scheme with employer contributions. You may want to give consideration to any opportunity to gain additional contributions from your employer, if they are available to you, as part of an overall retirement plan. 

The self-employed do not benefit from the usual occupational schemes so it is even more important to make your own provisions to avoid reliance on the basic state pension. The often heard line “my business is my pension” is in fact hazardous. Even if your business is doing well it is advisable to segregate some of your wealth into a pension where it is independent of your business and the risks it is exposed to. Don’t forget the tax advantages either – they are worth having.

If you don’t know where to start we can help you. There are some common questions people have that we can help you answer:

How much money do you need to retire with the lifestyle you want? At what age can you retire?

Let us create a retirement plan with you and put in place suitable pension arrangements to ensure it is something to look forward to and enjoy.

Monitoring pension funds performance

In our experience the majority of people with a company pension leave their money invested in the default options, never switching and never monitoring it. There is an annual statement but it is unclear to you what it means for your retirement. If you are in this camp, then you need a pension review.

Are you happy with your pension fund performance? Do you know what your pension performance has been?

Those of you who have gone to the effort of making your own arrangements – perhaps some years ago – probably did some research at the time but may have been slightly less vigilant about monitoring the performance. Did you base your investment decisions on factors which are no longer relevant or even detrimental in the current climate? You may have picked star funds at the time but they could be dogs by now. Even if you took professional advice at the time, if the funds have not been monitored you may benefit from a review.

Some of you may be looking at your pension fund performance with disappointment. This could be a sign that you have been, and possibly still are, taking more risk than you thought you were taking.

We perform comprehensive pension reviews in order to assess how much risk you are taking, how well your funds are performing and whether or not you look set to achieve your goals. Based on this we are able to advise you on a suitable course of action – sometimes no action will be required but you will have the peace of mind that your pension funds are properly invested.

Put your mind at rest and know that your retirement funds are being looked after.

Approaching retirement advice

You may be planning to retire but can you answer this question: will you run out of money in retirement? If that question is worrying you, don’t let it. We will help you answer this and the many other questions that people approaching retirement ask us on a regular basis.  You will either get the peace of mind that you are on track or we will help you to improve your situation.

Options for taking income

There is more flexibility these days about how you draw your pension, so we can arrange things to suit you. You might be considering taking a tax-free lump sum on retirement, but have you considered what effect will this have on your pension income later in retirement?

For those not in final salary schemes, it is quite likely that your income from employment or self-employment will be replaced by income from an annuity. An annuity is purchased by your pension fund from an appropriate annuity provider, securing you an income for life, no matter how long you live. You should never simply accept the standard offer from the pension provider but instead exercise your right to shop around – prices vary considerably. Read more about how to increase your annuity income.

You might also consider drawdown where your money remains invested rather than purchasing an annuity straight away. Since this is likely to be a decision that affects the rest of your life we strongly suggest that you consult with us before you take any action. We can explain your options so you make informed choices.

Other planning considerations

We can assess whether it would be worth plugging any gaps in your National Insurance payments – often relevant to parents who have spent some years away from work looking after children.

For those with 10 years to go is your current growth rate enough? And if you have just a few years left have you made sure that your pension funds are invested in something less volatile? A stock market fall just before retirement could see you with a long wait for those funds to recover their losses or having to retire on significantly less than you were expecting.

Are you concerned about your legacy? There are steps we can take there too.

We can tailor a solution specifically to your requirements. 

Increasing your annuity income

An annuity is essentially insurance that entitles you to a certain amount of money each year until you die. You are basically insuring against the possibility that you live longer than your money lasts.

The insurance company that sells you the annuity estimates how long you will live and then uses this as a basis for the amount it will pay you. So, if you had £100,000 pension fund and the insurance company offer to pay you £5,000 per annum then we would say that the annuity rate was 5%.

So the size of your pension pot X the annuity rate = your annual income.

 

The lower your life expectancy, the higher the annuity rate you can obtain:

  • The younger you are the less income you will receive.
  • Those with medical conditions and/or unhealthy lifestyles can get better rates.

Unless you have a defined benefit or final salary pension you are likely to end up buying an annuity at some point in retirement.

Unlike the example above which is a level annuity, some annuities are designed to increase each year in an attempt to protect against inflation. These are known as escalating annuities.

If you want to protect your pension against inflation you have to pay for it. A level pension income might be much higher than a pension that escalates with the Retail Price Index (RPI), for example. There is always a temptation to take the short term view and have the higher starting pension. At low levels of inflation, it can take many, many years for an escalating pension to break even with a level pension but, should inflation suddenly hit 10% and stay there you really want to have the escalating annuity instead. There are ways you can hedge your bets though – you may have the option to split your pension pot and do half level and half escalating. We can guide you through your options.

An impaired life annuity pays a higher income to those suffering from certain medical conditions on the basis that they have a reduced life expectancy.  Medical conditions such as high blood pressure, diabetes, heart conditions, kidney failure, certain types of cancer, and other conditions result in higher annuity rates because the annuity provider expects to pay your income for a shorter period of time.

Most providers will require a report from your doctor to substantiate your condition.

Whereas Impaired life annuities are based on existing medical conditions, enhanced annuities are lifestyle based. In other words such things as smoking, drinking excessively, or your height/weight ratio can lead to an increased annuity income. There are many factors to consider and we can explore your options together.

The net result is that the annuity provider again believes that they will pay you for a shorter period of time as your life expectancy is, statistically, lower.

Many people do not realise that they can shop around for their annuity whether or not you qualify for enhanced or impaired annuities. You do not have to take the first offer received from your pension provider. We search the entire market for you and help you choose what sort of annuity suits you best.

“…between an estimated 55% and 65% of those retiring might have conditions that qualify them for an enhanced or impaired life annuity… Over 1,500 conditions count towards an enhancement.”
Just Retirement, 2010

Example based on real life situation: a client, we will call him Jim, came to us with his pension fund and an offer from the pension company of £5,000 per annum for life. Little did he know that the quote was automatically based on him living to age 83. Because of Jim’s ailments, his life expectancy was far less than average, and we were therefore able to double his income to £10,000 per annum. He was delighted. He now goes on extra holidays that were otherwise not possible.

By exercising the Open Market Option you force annuity providers to compete for your business. If you fail to consider it then the annuity provider has a captive market and may provide you with a lower income as a result.

In the past an annuity was for life but these days it is possible to opt for a fixed term annuity.  You might consider this if you felt your health would suffer during the fixed period, giving you the option to get a better annuity rate after the fixed term. You might even take a fixed term because you think annuity rates in general might improve during that time. Whatever the reason, it allows for a review in the future when you expect or hope your circumstances at the time to offer a better result.

NEWSLETTER

Radcliffe & Newlands Ltd is an appointed representative of TenetConnect Ltd which is authorised and regulated by the Financial Conduct Authority. TenetConnect Ltd is entered on the FCA register (www.fca.org.uk/register) under reference 149826. Radcliffe and Newlands Ltd Registered Address: 1st Floor, 50 Featherstone Street, London, EC1Y 8RT. Registered in England and Wales, No. 5681687

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