State Pension changes on the horizon

Over half of the UK population are unaware of government plans

Over half of the UK population are unaware of government plans to reform the State Pension and the impact that will have on them, according to recent research[1]. Among the 55 to 64-year-old age group, 32% are unaware of the changes. Continue reading…

Pension freedom

The most radical reforms this century

In Budget 2014, Chancellor George Osborne promised greater pension freedom from April next year. People will be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax-free. Continue reading…

Educating investors

Six years after the start of the financial crisis, what lessons should we have learnt?

1 Plan for the unexpected
Many believe that markets are much safer today than they were six years ago, thanks in large part to the numerous regulations and safeguards put in place to avoid a repeat of the financial crisis. Continue reading…

Care fees burden

It’s a fact THAT more of us will require specialist care in our later years

Today, the cost of care is a major concern for many people, with the average level of pension savings unlikely to be enough to cover any long-term care requirements in addition to providing a retirement income. Continue reading…

New intestacy rules aim to make things simpler and clearer

Why the consequences could be far-reaching for you and your loved ones

Significant changes to existing intestacy rules came into force on 1 October 2014 in England and Wales, with the aim of making things simpler and clearer. The consequences could be far-reaching for you and your loved ones, and while there are increasing entitlements for surviving spouses and registered civil partners, the changes highlight the importance of making a Will to ensure your wishes are carried out. Continue reading…

Safeguarding your family’s lifestyle

The numbers show a significant protection gap exists for families in the UK

W e all want to safeguard our family’s lifestyle in case the worst should happen. But only a quarter (24%) of adults in the UK with children under 16 have any form of financial protection, a significant drop from 31% in 2013, according to the latest research from the Scottish Widows Protection Report. With over half (54%) of this group admitting that their savings would last just a couple of months if they were unable to work, a significant protection gap exists for families in the UK. Continue reading…

Locating a lost or forgotten pension

The best chance of being reunited with a lost scheme

People change jobs and employers change their names, but, more importantly, we all forget things from time to time. With that in mind, it is easy to lose track of pensions that you have paid into over the years. If you do not actively look for your lost pensions, then you take
the risk of relying on them looking for you! This can be difficult for them to do if, for example, you have changed
your name through marriage or moved home yourself.

To locate a lost or forgotten pension, you can contact The Pension Tracing Service, part of The Pension Service. They have details of more than 200,000 personal and company pension schemes and will search through these free of charge on your behalf.

For the best chance of being reunited with a lost scheme, you need to provide as much information as possible. This can include the type of scheme; the name of the employer, and any new name it may have, and the nature of its business; the name of the pension company; and when you belonged to the scheme.

Once located, they will provide you with the latest contact details to help you track it down and take full control of your retirement savings.

Got a question or not sure how to apply?
Contact The Pension Tracing Service – call FREEPHONE 0845 6002 537. Operator service is available between 9am to 5:30pm Monday–Friday.

Pension consolidation

Bringing your pensions under one roof

Most people, during their career, accumulate a number of different pension plans. Keeping your pension savings in a number of different plans may result in lost investment opportunities and unnecessary exposure to risk.

However, not all consolidation of pensions will be in your best interests. You should always look carefully into the possible benefits and drawbacks and, if unsure, seek professional advice.

Keeping track of your pension portfolio
It’s important to ensure that you get the best out of the contributions you’ve made and keep track of your pension portfolio to make sure it remains appropriate to your personal circumstances. Consolidating your existing pensions is one way of doing this.

Pension consolidation involves moving, where appropriate, a number of pension plans – potentially from many different pensions’ providers – into one single plan. It is sometimes referred to as ‘pension switching’.

Pension consolidation can be a very valuable exercise, as it can enable you to:

– bring all your pension investments into one easy-to-manage wrapper

– identify any underperforming and expensive investments, with a view to switching these to more appropriate investments

– accurately review your pension provision in order to identify whether you are on track

Why consolidate your pensions?
Traditionally, personal pensions have favoured with-profits funds – low-risk investment funds that pool the policyholders’ premiums. But many of these are now heavily invested in bonds to even out stock market volatility, and, unfortunately, this can lead to diluted returns for investors.

It’s vital that you review your existing pensions to assess whether they are still meeting your needs – some with-profits funds may not penalise all investors for withdrawal, so a cost-free exit could be possible.

Focusing on fund performance
Many older plans from pension providers that have been absorbed into other companies have pension funds which are no longer open to new investment – so-called ‘closed funds’. As a result, focusing on fund performance may not be a priority for the fund managers.

These old-style pensions often impose higher charges that eat into your money, so it may be advisable to consolidate any investments in these funds into
a potentially better performing and cheaper alternative.

Economic and market movements
It’s also worth taking a close look at any investments you may have in managed funds. Most unit-linked pensions are invested in a single managed fund offered by the pension provider and may not be quite as diverse as their name often implies. These funds are mainly equity-based and do not take economic and market movements into account.

Lack of the latest investment techniques
The lack of alternative or more innovative investment funds, especially within with-profits pensions – and often also a lack of the latest investment techniques
– mean that your pension fund and your resulting retirement income could be disadvantaged.

Significant equity exposure
Lifestyling is a concept whereby investment risk within a pension is managed according to the length of time to retirement. ‘Lifestyled’ pensions aim to ensure that, in its early years, the pension benefits from significant equity exposure.

Then, as you get closer to retirement, risk is gradually reduced to prevent stock market fluctuations reducing the value of your pension. Most old plans do not offer lifestyling – so fund volatility will continue right up to the point you retire. This can be a risky strategy and inappropriate for those approaching retirement.

Conversely, more people are now opting for pension income drawdown, rather than conventional annuities. For such people, a lifestyled policy may be inappropriate.

As well as whether the total size of your pension funds make consolidation viable, issues to take into account include whether your existing pensions have:

– loyalty bonuses
– early termination penalties
– guaranteed annuity rates
– integrated life cover or other additional benefits
– final salary pension benefits

Consolidating your pensions won’t apply to everyone
The potential benefits of consolidating your pensions won’t apply to everyone, and there may be drawbacks to moving your pension plans – particularly so for certain types of pension. It is therefore vitally important to carefully consider all aspects of your existing pensions before making a decision as to whether or not to consolidate.

Self-Invested Personal Pensions

Taking control of your money

Some people don’t want a pension company deciding how their pension savings are invested – they want to control where their money goes and how it grows. In this scenario, a Self-Invested Personal Pension (SIPP) offers a solution. Very much a do-it-yourself pension, you choose what investments you want to
put your savings into and keep control of your savings.

More accessibility
A SIPP is a personal pension wrapper that offers individuals greater freedom of choice than conventional personal pensions. However, they are more complex than conventional products, and it is essential you seek expert professional advice.

SIPPs allow investors to choose their own investments or appoint an investment manager to look after the portfolio on their behalf. Individuals have to appoint a trustee to oversee the operation of the SIPP but, having done that, the individual can effectively run the pension fund on his or her own.

Investment institution
You can typically choose from a large choice of funds as well as pick individual shares, bonds, gilts, unit trusts, investment trusts, exchange traded funds, cash and commercial property (but not private property). Also, you have more control over moving your money to another investment institution, rather than being tied if a fund under-performs.

Once invested in your pension, the funds grow free of UK capital gains tax and income tax (tax deducted from dividends cannot be reclaimed).

Tax relief
SIPPs, like all pensions, have unrivalled tax benefits. If you aren’t using a pension to save for retirement, you could be missing out on valuable tax relief. In the current 2014/15 tax year, you could receive up to 45% tax relief (dependent on your marginal rate of tax) on any contributions you make and pay no income or capital gains tax on any investments returns inside your SIPP.

Other considerations
You cannot draw on a SIPP pension before age 55, and you should be mindful of the fact that you’ll need to spend time managing your investments. Where investment is made in commercial property, you may also have periods without rental income and, in some cases, the pension fund may need to sell on the property when the market is not at its strongest. Because there may be many transactions moving investments around, the administrative costs are higher than those of a normal pension fund.

The tax benefits and governing rules of SIPPs may change in the future. The level of pension benefits payable cannot be guaranteed, as they will depend on interest rates when you start taking your benefits. The value of your SIPP may be less than you expected if you stop or reduce contributions, or if you take your pension earlier than you had planned.

A SIPP could be a suitable option if you:

n would like to have more control over your retirement fund and the freedom to make your own investment decisions, or prefer to appoint investment managers to do this for you and are prepared to pay a higher cost for this facility

– would like a wide range of investments to choose from
– want to consolidate your existing pension(s) into a more flexible plan
– need a tax-efficient way to purchase commercial property

Dividends received within a SIPP do not come with a 10% tax credit, so basic rate taxpayers are no better off receiving dividends within a SIPP than receiving the dividends directly. Investors in a SIPP need to be comfortable making their own investment decisions about their retirement. Investments go down in value as well as up, so you could get back less than you invest. The rules referred to are those that currently apply; they could change in the future. You cannot normally access your money until at least age 55. Tax reliefs depend on your circumstances. If you are unsure of an investment’s suitability, you should seek professional advice.

Workplace pensions

Saving for your retirement that’s arranged by your employer

Millions of workers are being automatically enrolled into a workplace pension by their employer. A workplace pension is a way of saving for your retirement that’s arranged by your employer.

A percentage of your pay is put into the pension scheme automatically every payday. In most cases, your employer and the Government also contribute money into the pension scheme for you. The money is used to pay you an income for the rest of your life when you start receiving the pension.

You can opt out if you want to, but that means losing out on employer and government contributions – and if you stay in, you’ll have your own pension that you get when you retire.

New legal duties, from October 2012, now require employers to automatically enrol their eligible employees into a qualifying pension scheme. The reform will be ‘staged’ over a six-year period, depending on the size of the employer.

This is called ‘automatic enrolment’. You may not see any changes if you’re already in a workplace pension scheme. Your workplace pension scheme will usually carry on as normal. But if your employer doesn’t make a contribution to your pension now, they will have to by
law when they ‘automatically enrol’
every worker.

If you are an employer, you need to make sure that your business is prepared as workplace pension reform becomes applicable to you.

When it comes to making contributions, there are two main things to consider, namely:

– the level of contributions you wish to make
– the definition of pay you wish to use