Saving for Retirement

Many people can’t rely solely on the State Pension to give them the income needed to for their desired standard of living in retirement.

One way of potentially increasing your retirement incoming is by making regular contributions into a personal pension.

One of the main benefits of saving money in a pension plan is the tax relief you will enjoy on contributions made. Pension providers claim the tax back on your behalf from HMRC at the basic rate of tax currently 20%.

This means that for every £80 you pay into your pension, you end up with £100 in your pension plan. Higher rate and additional rate taxpayers can claim the difference through their tax returns.

Whilst the State Pension age is being gradually increased to 68, you can take the benefits from a personal pension as early as age 55 (increasing to 57 in April 2028), or later if you prefer. Up to 25% of your pension fund can be taken as a tax-free lump sum from age 55 (increasing to 57 in April 2028), onwards.

The remainder can then either be used to buy a regular income or you can access the rest of your pension pot, which would be taxed as if it were income. Alternatively, if you don’t need all the money, you can leave it invested until you do, by taking out draw down plan.

When making pension contributions it is vital to ensure that they are invested in a pension plan that is suitable for your requirements. At One Stop Finance we can arrange a plan for you that will be invested in funds that match your attitude to risk and investment objectives.

So, whether you would prefer to err on the side of caution, or take more investment risk with your pension savings, we have a solution that will suit your needs. We will also review your pension on a regular basis to make sure that the choice of investment is still meeting those objectives.

Reviewing existing pension plans

Do you have any existing Personal Pensions, or have you worked for more than one employer? If so, you may have built up many different pension pots. These are likely to have different investment strategies, and charging structures, leaving you with little control over your eventual pension.

It’s essential that you regularly review all your retirement plans. If you don’t, you could be:

  • paying more charges than you need to
  • investing in funds that don’t suit your goals or attitude to risk
  • paying less than you need to fund your retirement, as it’s difficult to work out what you’ll get if your pensions are paid from several pots

We offer a Pension Review service that will research whether, or not, your existing plans can be improved in terms of charges, investment approach and ongoing advice and reviews.

At Retirement planning:

The decisions you take at retirement could be some of the most important you will make in your life. What’s more, with most annuities, once you’ve made your choice you can’t change your mind.

Since April 2015, when clients reach the age of 55 (increasing to 57 in April 2028), regardless of the size of their money Purchase pension pot, they can access these funds any way they choose, subject to income tax at the appropriate rate.

This flexibility enables advisers and their clients to consider more sophisticated retirement strategies such as arranging to take lump sums over several years to avoid paying higher rate tax or setting up a phased retirement where tax free cash is used to provide income each year.

What type of pension do you have?

A defined benefit or DB pension (also known as a final salary pension) is a special type of workplace pension. Instead of building up a pension pot over time, it provides you with a guaranteed annual income for life, based on your final or average salary (hence the name). Because of the implications on an employer of providing this guarantee many DB schemes have closed, or barred new workers from joining an established scheme, and instead opened a Defined Contribution (DC) scheme.

Defined contribution (DC) schemes are occupational pension schemes where your own contributions, and your employer’s contributions, are both invested, and the proceeds used to buy a pension and/or other benefits at retirement.

Traditionally annuities where the standard way retirees with DC pensions took their benefits. Annuities remain the most secure method of guaranteeing a life-long income. There are a range of options available from index-linking to widows provision so seeking professional advice at retirement is essential. None of us know how long we are going to live, and annuities ensure we don’t outlive our retirement savings.

Although your pension provider might offer you an annuity it may not provide the highest income available, and you don’t have to buy it from them. Don’t throw money away by accepting their offer without investigating the whole market. We will carry out the research to identify the funds that provide the maximum income. By shopping around, you could increase your income by hundreds or even thousands of pounds.

More recently Drawdown has come to the fore as an alternative method of drawing an income from one’s pension pot. Income drawdown is a way of getting pension income when you retire while allowing your pension fund to keep on growing. Instead of using all the money in your pension fund to buy an annuity, you leave your money invested and take a regular income direct from the fund.

Tax treatment varies according to individual circumstances and is subject to change.
Tax planning is not regulated by the Financial Conduct Authority.

For more information on pensions,
please call us on 020 8441 2605 or 01442 232 272.

Alternatively, for our enquiry form,