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News and Insights

Retirement Options

What can you do with your pension pot?

When the time comes to access your pension, you’ll need to choose which method you use to do so, with options including: buying an annuity, taking income through (flexi-access) drawdown, withdrawing lump sums or a combination of all of them.

There are advantages and disadvantages to each method, and in some cases your decision is permanent, so it’s important to ensure that you obtain professional financial advice when considering your different options. This is a complex calculation that must take into account the growth rate your investments might achieve, the eroding effects of inflation on your savings, and how long your savings will need to last.

Annuities – Guaranteed Income for Life

Annuities enable you to exchange your pension pot for a guaranteed income for life. They were once the most common pension option to fund retirement. But changes to the pension freedom rules have given savers increased flexibility.

You can normally withdraw up to a quarter (25%) of your pot as a one-off tax-free lump sum, then convert the rest into a taxable income for life – an annuity. There are different lifetime annuity options and features to choose from that affect how much income you may receive. You can also choose to provide an income for life for a dependent or other beneficiary after you die.

Flexible Retirement Income – Pension Drawdown

When it comes to assessing pension options, flexibility is the main attraction offered by income drawdown plans, which allow you to access your money while leaving it invested, meaning your funds can continue to grow.

This option normally means you take up to 25% of your pension pot, or of the amount you allocate for drawdown, as a tax-free lump sum, then reinvest the rest into funds designed to provide you with a regular taxable income.

You set the income you want, though this might be adjusted periodically depending on the performance of your investments. You need to manage your investments carefully because, unlike a lifetime annuity, your income isn’t guaranteed for life.

Small Cash Sum Withdrawals – Tax-Free

This is an important consideration for those weighing up pension options at age 55, the earliest age at which you can take up to 25% of your pension pot tax-free. You should ask yourself whether you really need the money now. If you can afford to leave it invested until you need it then it has the opportunity to grow further.

For each cash withdrawal, the remaining counts as taxable income and there could be charges each time you make a cash withdrawal and/or limits on how many withdrawals you can make each year. With this option your pension pot isn’t re-invested into new funds specifically chosen to pay you a regular income and it won’t provide for a dependant after you die.

There are also more tax implications to consider than with the previous two options. So, if you can, it may make more sense to leave it to grow so you can enjoy a larger tax-free amount in years to come. Remember, you don’t have to take it all at once – you can take it in several smaller amounts if you prefer.

Combination – Mix and Match

Of all the pension options, if appropriate to your particular situation, it may suit you better to combine those mentioned above. You might want to use some of your savings to buy an annuity to cover the essentials (rent, mortgage or household bills), with the rest placed in an income drawdown scheme that allows you to decide how much you can afford to withdraw and when.

Alternatively, you might want more flexibility in the early years of retirement, and more security in the later years. If that is the case, this may be a good reason to delay buying an annuity until later in life.

The Value of Retirement Planning Advice

There will be a number of questions you will need answers to before deciding how to use your pension savings to provide you with an income. These include:

• How much income will each of my withdrawals provide me with over time?
• Which withdrawal option will best suit my specific needs?
• How much money can I safely withdraw if I choose flexi-access drawdown?
• How should my savings be invested to provide the income I need?
• How can I make sure I don’t end up with a large tax bill?

How much are you saving for your retirement?

We can advise on your retirement planning whether you are in the process of building your pension pot or getting ready to retire. Working closely with you, we will identify what you want from your pension and develop a structure that meets your requirements. To find out more, contact us to discuss your options.

A pension is a long-term investment not normally accessible until age 55 (57 from april 2028). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation which are subject to change in the future. You should seek advice to understand your options at retirement.

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means-tested benefits and is not suitable for everyone. You should seek advice to understand your options at retirement.

Grandparents, Grandchildren and Money

Sharing Your Wealth During Your Lifetime Can Make A Big Difference

With all of us leading longer lives, you might be considering how you can help your family when it matters most. Sharing your wealth during your lifetime can make a big difference and bring you a lot of joy, particularly when helping younger generations who are dealing with rising house prices and university fees.

After you’ve determined how much you can afford to give, there’s a simple starting point. What exactly do your grandchildren need, and when do they need it?

The right way to give presents for your grandchildren can vary depending on how old they are, and whether you’re concerned about turning over a sizeable amount of money to a child who may still be impressionable.

Younger Grandchildren

Junior Individual Savings Account (JISA)

If your grandchild is under the age of 18, you might put money into their JISA account. While you won’t be allowed to open one on their behalf, you will be able to donate up to their annual JISA limit, which is £9,000 for the 2021/22 tax year.

The benefit of the JISA is that they can’t touch the money until they turn 18 – after that, it’s theirs to use as they choose. The funds may be stored in cash, invested in securities, or a mixture of both. Investment growth is tax-efficient in a Stocks & Shares ISA, while a Cash ISA’s interest is tax-free. If you put money away for 18 years, it might grow into a sizeable amount, but the value of any investment will go up and down.

Child’s Bank Account

Alternatively, a child’s savings account is a convenient and easy place for families and friends to deposit money for smaller presents.

Keep in mind, though, that savers’ rates have been poor in recent years and over time, inflation can reduce the value of the savings, because prices typically go up in the future.

Older Grandchildren

Lifetime Individual Savings Account (Lisa)

If your grandchild is 18 or older, a LISA will be able to assist them in saving for their first home. If they turned 40 on or before 6 April 2017 they won’t be eligible. Only first-time buyers can use a LISA to buy property under age 60.

For every £4 saved, the government will add £1 (worth up to £1,000 every tax year until they turn 50 years old). Up to £4,000 a year is eligible for the 25% bonus (they can add more but it won’t receive a government contribution).

The bonus is paid every month, so they benefit from compound growth. They can invest in either cash or stocks and shares and this forms part of their overall annual ISA limit, which is £20,000 in tax year 2021/22.

Would you like the reassurance of some control?

It’s understandable to be concerned about giving too much money to grandchildren too young.

You might like to have a say in where your moneyis spent and where it is spread. Putting a gift into trust will alleviate concerns over giving substantial sums to grandchildren before they have reached financial maturity and it can provide grandparents with the leverage they want.

You maintain some control of the assets and to whom and where they are paid as a trustee, and gifts to the trust will lower the estate for IHT. Giving money to your grandchildren may eventually affect the way your estate is taxed, so it’s important to obtain professional advice before doing this.

Plan Ahead for a Brighter Future for All

There’s a lot grandparents can do today, with a little extra thinking and forward planning, to ensure that the money donated goes towards ensuring a brighter future for your loved ones – when you’re still alive to enjoy it.

Giving your Loved Ones Financial Gifts

If you’re unsure about the best approach, talk to us to discuss your options. Please contact us for more information.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. The value of investments and income from them may go down. You may not get back the original amount invested.  Past performance is not a reliable indicator of future performance.

Will your pension run out early?

Impact On People Opting For Early Retirement As A Result Of The Pandemic

An increasing number of people have been forced into early retirement due to the economic impact of the coronavirus (COVID-19), with many worried about how they’ll make ends meet in the future. Because of the pandemic, we are currently in a challenging economic period. The global economy has taken over ten years to recover from the shock of the last financial crisis.

In a recent survey, the findings showed that 3% of people in the 55-64 age group have taken early retirement due to the coronavirus pandemic. And 4% of people in this age group have had to access some of their pension savings to cover living costs because their income has dropped due to redundancy or reduced pay. These percentages may seem small, but they represent hundreds of thousands of people.

Risks Of Early Retirement

While early retirement may sound like a dream come true, for those with insufficient pension savings it can be a ticking time bomb. Every year of early retirement will have an impact on your pension, in that it represents both a year lost for saving and a year added for spending. Simply put, you’ll need to make less money last longer. Unless you’ve budgeted carefully and are sure you have enough savings, you could run the risk of your pension running out in your later years. This is an expensive time for many people, due to the cost of financing care, and that can result in unexpected hardship.

Planning For Early Retirement

If you’re planning early retirement, you should consider the following steps:

1. Calculate all your savings in different pension pots to find out what your total is.

2. Track down any lost pensions from previous employers and add these to your total.

3. Check how much of the State Pension you can expect to receive, and from what age.

4. Create a budget for your retirement spending, making sure to include any additional future costs you’re aware of and a little extra for future costs you’re unaware of. Be honest about how much you’ll need.

5. Make sure that the total you have in pension savings, when combined with the State Pension you’ll receive, is sufficient to cover all your future costs.

Alternatives To Early Retirement

If your financial situation is forcing you to withdraw from your pension but you’re not ready yet to stop saving, there are ways to access your pension that do not affect your annual allowance and therefore allow you to continue contributing at the same rate in the future.

These include:
Taking up to 25% of your savings as a tax-free lump sum (from a defined contribution pension)
Accessing a defined benefit pension (if you have one)
Withdrawing a pension pot worth under £10,000 in its entirety under ‘small pots’ rules
Buying certain types of annuity

Can You Afford To Retire Early?

We know that you work hard for your money, so you should be able to enjoy it as much as
possible. When planning for retirement, there are now more choices available than ever before. By understanding precisely what you’ll need to get to where you want to be, you can ensure you’re prepared for the future. So when working out if you can afford to retire early, your starting point should be to think about whether your savings and investments will be enough to cover all your outgoings, as well as all your essential living costs and any regular debt repayments you may have to make.

Answering All Those Big Questions

We can give you more information on any of these options and help you to choose the ones that are best for you. We’ll answer all those big questions you might have: When can I retire? How can I make my money last? Should I take a lump sum? To find out more and discuss your options – please contact us.

 

Sustainability Matters

Plan For A Better Tomorrow, Today

Responsible investment is a catch-all term to broadly describe funds that invest to make a positive change, either to the environment or for society. Within this umbrella term there are four broad investment approaches: ethical exclusion; responsible practice; sustainable solutions; and impact funds.

Increasingly more pension savers are asking where their funds are invested. Many are no longer just concerned about getting the best returns – they also want their money to be used in a way that helps society and the planet. The Department for Work and Pensions (DWP) is currently consulting on improving the governance, strategy and reporting of occupational pension schemes on the impact of climate change.

The growth of Environmental, Social and Governance (ESG) issues – from an increasing awareness of climate change, global responsibilities and social issues to investing in companies that act responsibly and prioritise making the economy cleaner, safer and healthier – is an important consideration for many investors.

Considerations Within Retirement Portfolios

While ESG concerns have been gaining profile in the investment world for many years, there is reason to believe that there will continue to be a big shift toward these considerations within retirement portfolios and the coming transfer of wealth to sustainability-minded Millennials.

Eight out of ten people (83%) think global warming will be a serious problem for the UK if action is not taken, and there is a lack of awareness about the extent to which pension funds are working to reduce the impact of climate change. In the survey, around half (51%) say global warming is ‘extremely’ or ‘very’ important to them.

Categories Of Criteria Used To Assess Companies

However, there remains a lack of understanding among some savers as to how pension schemes are taking action against climate change. Three-fifths of workplace pension holders (59%) say they don’t know if schemes are taking any action; just one in seven (15%) workplace pension holders think schemes are.

ESG refers to the three categories of criteria used to assess companies when investing responsibly: ‘E’ stands for ‘environmental’ factors, such as carbon emission and water management; ’S’ stands for ‘social’ factors, such as employee welfare, diversity and inclusion; ‘G’ stands for ‘governance’ factors, such as business ethics and corruption.

Percentage Of People’s Wealth In Their Pensions

The concept of ESG investing has existed for decades but has grown enormously in popularity over the last five years. While early adopters of this practice were often driven by moral or ethical concerns, over time the financial benefits of ESG investing have become clearer, which has encouraged mass adoption.

ESG investing is becoming increasingly popular, and many investors are choosing ESG funds for their Individual Savings Accounts (ISAs) and general investment portfolios. However, these accounts usually hold a lower percentage of people’s wealth than their pensions.

Greater Transparency Around Climate Impact

The survey also found a number of people don’t understand what pension schemes do with their money. Little more than two-thirds (68%) of the general population understand that pension schemes invest in a range of companies and other investments, and only one in five (22%) pension holders say they know the types of companies that their pension invests in.

Despite these knowledge gaps, when it comes to pensions there is still strong support for greater transparency around climate impact, in terms of the investments that are made and the way firms operate. Six in ten (62%) people think that pension schemes and other investors should hold those in charge of the companies they invest in to account for their efforts to minimise their impact on climate change.

Behave In A Way That Helps Tackle Climate Change

Two-thirds (66%) think investors have a responsibility to encourage the companies they invest in to behave in a way that helps tackle climate change. A similar proportion (65%) think that financial services firms should report on the impact the companies they invest in have on climate change.

Around seven in ten people (68%) say that pension schemes should be transparent about the extent to which they invest in a climate-aware way. Seven in ten (69%) also want financial services firms to be transparent about the impact of their own operations on climate change.

Looking For More Freedom Over How Your Pension Is Invested?

Pension holders now have far more freedom over how their pension is invested than many realise. If you would like to ensure your pension is invested according to your preferences, including a preference for ESG investments, contact us for more information.

Minimum Pension Age to Increase

Age Change To When People Can Start Taking Pension Savings

The government has confirmed that it plans to increase the minimum pension age at which benefits under registered pension schemes can generally be accessed, without a tax penalty, from age 55 to age 57 commencing 6 April 2028.

The Treasury is consulting on how best to apply its decision to increase the age when people can start taking their private pension savings. The Normal Minimum Pension Age (NMPA) will increase in line with increases to the State Pension age.

Unqualified Benefits Right

Members who currently have an ‘unqualified right’ to access their benefits under a registered pension scheme before age 57 and members of the armed forces, firefighters or police pension schemes will be permitted to retain their existing minimum pension age. The government is planning to introduce a protection regime which would mean that an individual member of any registered pension scheme (occupational or non-occupational) who has an unqualified right – for example, without needing the consent of their employer or the trustees – under the scheme rules at the date of the consultation to take pension benefits at an age below 57 will be protected from the increase in 2028.

Protected Pension Age

A member’s protected pension age will be the age from which they currently have the right to take their benefits. The protected pension age will be specific to an individual as a member of a particular scheme. So an individual could have a protected pension age in one scheme where they have a right to take pension benefits at an age below 57, but for schemes where no such right exists the new NMPA of 57 will apply from 2028. It will also apply to all the member’s benefits under the relevant scheme, not just those benefits built up before April 2028. Individuals with an existing protected pension age under the 2006 or 2010 regimes will see no change in their current protections.

Associated Pension Schemes

In recognition of the special position of members of the armed forces, police and fire services, the government is proposing that, where members of the associated pension schemes do not already have a protected pension age, the increase in the NMPA will not apply to them. Individuals who do not have a protected pension age who access their pension benefits before age 57 after 5 April 2028 would be subject to unauthorised payments tax charges.

Pension Tax Rules On Ill-Health

There will be no need for individuals or schemes to apply for a protected pension age. This is in line with the approach taken under the existing protected pension age regimes. The government is not proposing to make any changes to the current pension tax rules on ill-health as part of this NMPA increase. Unlike the protection regime introduced in 2006, where individuals are entitled to a protected pension age in relation to the increase in NMPA from 2028, they will be able to draw benefits under their scheme even if they are still working.

Scheme Benefits Crystallised

In addition, currently, if an individual wants to use their protected pension age, then all their benefits under the scheme must be taken (crystallised) on the same date. However, considering the pension flexibilities introduced in 2015, the government proposes that this requirement will not be a condition of the 2028 protected pension age regime. This would mean, for example, that an individual with a defined contribution pension with a protected pension age of 55 would be able to allocate some of their pension to a drawdown fund, and at a later date use the remainder to purchase an annuity, without losing their protected pension age.

Normal Minimum Pension Age

The government’s position remains that it is, in principle, appropriate for the NMPA to remain around ten years under State Pension age, although the government does not intend to link NMPA rises automatically to State Pension age increases at this time.
The announcement means that there is the potential for some people to be caught in the middle, being able to access their pension at 55 prior to April 2028, but having to wait until they turn 57 to access any untouched pension funds after this date where they don’t qualify for protection.

Planning For The Retirement You Want

This announcement may, in particular, have an impact on the timing for taking your pension benefits. It’s never too early to be planning ahead. To discuss how we can help you plan for the retirement you want, please contact us.

It’s Good to Talk

Getting Financial Help During The Coronavirus(Covid-19) Pandemic

The coronavirus (COVID-19) pandemic has not only dealt a blow to the UK economy, many people and families have unfortunately experienced financial hardship. According to a recent survey, 31% of the population say they are struggling with their finances due to the effects of the pandemic.

With the pandemic causing many workers to lose working hours or their jobs, it’s more important than ever to know what financial options you have.

Under-35s Are Most Likely To Borrow

But the survey shows that the impact is not spread evenly. It appears that people aged 18-35 have experienced the most financial difficulty and are most likely to seek help from others. During the pandemic, 18-35s have been four times more likely than any other age group to receive financial support from their family or friends. They’ve also been twice as likely as other age groups to take out a loan to make ends meet.

People Aged 35-55 Have Been Impacted Less

Those in the 35-55 age group have been less likely to need to borrow than the under-35s, and also less likely to report a worsening of their financial situation than those aged 55-65. But that’s not to say that they have it easy. Nearly one in three people in this age group say their finances are worse now.

People Aged 55-65 Have Their Retirement Plans Disrupted

Many people in the 55-64 age group have had to change their retirement plans. Income from work for one in four of these people has fallen 40%. A rise in unemployment has led to increasing numbers of people taking early retirement, with some relying on their property wealth to fund this.

Over-65s Are Supporting Their Families

Over-65s have been less affected than the general population, with 17% reporting that they are struggling financially. This is likely due to their pension income, which, in a lot of cases, will have remained level. More than one in ten of those aged over 65 say they have offered financial support to family members, which is the highest of any age group.

Before providing help to younger family members, it’s important to make sure that you can afford to without affecting your standard of living. Consider how your costs might rise later in life and ensure that you retain enough wealth to cover these additional expenses.

Support Is Still Available If You, Your Family Or Your Business Need It

In response to the impact of coronavirus, the government agreed a raft of measures with providers across a range of sectors to ensure struggling consumers are treated fairly. For those still worried about paying utility bills or repaying credit cards, loans or mortgages due to the impact of coronavirus, support is still available. Visit www.gov.uk.

People struggling to pay essential bills are encouraged to:

Contact providers: if you think you might have a problem paying bills, contact your providers to explain the situation and receive help Ask for help if it is needed: if you are struggling with your bills or credit commitments, free advice is available. Coronavirus has affected the entire nation and many people need support now, even if they never have before Explore payment options: if you are struggling with bills, it is better to agree a payment plan with your provider/s and keep making regular instalments, rather than cancelling direct debits and letting debt build.

Help And Financial Support

Even though the government has relaxed some of the COVID-19 restrictions, this is still a particularly difficult time for many households across the UK, with some struggling to keep up with bills, loan payments and mortgages. If you would like to discuss your situation, please contact us for more information.

Conscientious Investor

Investing Today to Help Make a Better Tomorrow

In a fast-changing world, sustainability is a growing concern for investors. Sustainable investing funds position investors to manage the risks associated with environmental, social and governance (ESG) factors, capture the opportunities and contribute to positive change.

The tremendous toll of the coronavirus (COVID-19) pandemic crisis – on health, economic wellbeing and everyday activity – has precipitated a widespread reassessment of the way we live our lives. For governments, businesses and investors, an essential question has been to understand the sources of resilience during this past year and how to build on them to prepare for any future crises.

Influencing Positive Changes

If you’re someone who wants to make a positive difference, you might be interested to know how you, your money and the things you care about could all benefit from sustainable investing. At its core, ESG investing is about influencing positive changes in society by being a better investor. Investment into ESG funds has been growing at an accelerating pace over the last five years. Recent research suggests that 9% of investors currently hold ESG investments™, with 12% of investors saying they don’t currently hold ESG investments but plan to in the next year. 17% say they are likely to make their first ESG investments in 2022 or later. These numbers suggest a snowballing rate of ESG investing adoption over the next few years.

Resistance To Future Crises

As the nation emerges from the COVID-19 pandemic and begins to rebuild the economy, there is the opportunity to rebuild based on new principles. ESG concerns can be embedded in the recovery, to create an economy with more resistance to future crises. Companies are also under growing pressure to report transparently on their ESG-related practices.

More people today understand the increasing importance of responsible investing in investment decisions and it’s arguably the most important investment trend of recent decades. ESG strategies factor environmental, social and governance considerations into the investment process, with the goal of generating long-term, sustainable returns for investors.

Responsible investing is about ‘doing the right thing’, encouraging sustainability and contributing to positive, lasting change.

Environmental – Renewable energy, lower carbon emissions, water management, pollution control.

Social – Labour practices, human rights, data protection, selling practices, corporate supply chains.

Governance – Board makeup, corruption policies, auditing structure.

Approach Responsible Investing

There’s no single, universal way to be a responsible investor, but these factors will enable the growth of ESG funds by giving investment managers more options to invest in, and improved ways to assess and monitor, the ESG rating of an investment.

While ESG investing is an opportunity you might be eager to explore, there are some considerations. Your investments must align not only with your values but also with your growth expectations and risk appetite. As with any approach to investing, you should choose the funds that are right for you and obtain professional financial advice to understand the market you want to invest in.

Looking To Boost Portfolio Performance

It’s a common misconception that investing responsibly means accepting lower returns but, increasingly, evidence says otherwise. Adding an ESG criteria could help boost portfolio performance. This investment ethos also delivers benefits beyond the bottom line and recognizes that modern-day investment should be a matter of long-term ownership and sound stewardship. Speak to us for more information or to discuss your requirements.

Steps Towards A Better Financial Future

Grow, Protect And Transfer Your Wealth

Financial planning is a step-by-step approach to ensure you meet your life goals. Your financial plan should act as a guide as you move through life’s journey. Essentially, it should help you remain in control of your income, expenses and investments so you can manage your money and achieve your goals.

Life rarely stands still. Priorities shift, circumstances change, opportunities come and go and plans need to adapt. But regular discussion and reviews are the key to keeping on top of things. This means adapting your plans when things change, to keep you on course.

What Are My Financial Goals?

Generally, people’s financial goals change as they progress through different life stages. Here are some themes which might help you consider your own goals:

• In your twenties, you may want to focus on saving for large purchases, such as a car, wedding or your first home
• In your thirties, you may be planning for your family, perhaps school fees or your children’s future
• In your forties, your focus may move to retirement planning and growing your wealth
• In your fifties, paying off your mortgage and feeling financially free is likely to be a priority
• In your sixties, it is usually about making sure you have enough money to retire successfully
• In your seventies, your attention may turn to inheritance planning and later-life care

Other plans may also include starting your own business, buying a second home or travelling the world. Of course, everyone is different, so you might have a goal in mind we haven’t mentioned.

Are My Goals Short, Medium Or Long Term?

You are likely to have a mixture of short-term (less than three years), medium-term (three to ten years) and long-term (more than ten years) goals. Moving to a larger property might be a short-term goal, while saving for your children’s university fees might be a medium-term goal and retirement planning a long-term goal (depending on your life stage). You’ll need different strategies, and different saving and investment risk levels, for each of these goals.

Time To Look At The ‘Big Picture’

Discovering Emotional Benefits Of Financial Advice

No two individuals share the same goals or ambitions. Each person is unique, with their own needs, targets and budgets. So when it comes to managing your money, building wealth, securing your future and, above all else, drawing up an effective plan for fulfilling your investment objectives, professional financial advice should be tailored to your unique specific needs.

A recent survey has identified that around 17 million™ UK adults have sought financial advice and, as a result, many reports experiencing emotional, as well as financial, benefits.

With many people currently coping from rapid changes to their financial circumstances due to the coronavirus (COVID19) pandemic leading to reduced income or redundancy, let’s look at how financial advice can improve your financial situation and your wellbeing.

Feeling Less Anxious

Having access to financial advice is strongly linked to feeling more secure and less anxious about money. According to the survey, around 3175 people who have received financial advice report that they feel financially more secure and stable, compared with under half of those who have not received any advice.

Only 1 in 3 people who have received financial advice report feeling anxious about their household finances, compared with over 40% of those who haven’t.

Feeling More Confident

One of the key practical benefits of financial advice is that it gives you access to expertise on topics that are complex. This provides you with more confidence and increased peace of mind. People who have received financial advice report feeling three times more confident about their understanding of financial matters and products than those who haven’t.

For example, areas that some people find confusing concern retirement planning and understanding their life insurance and critical illness options. Among those who have not received advice, around 1 in 4 people say they would not know where to start when it comes to the different options available to them. Among those who received advice, that number is fewer than 1 in 12.

Feeling Able To Cope In A Crisis

The COVID-19 pandemic has left many people feeling less stable in their financial situation. 35% of those who have not received financial advice report feeling anxious about their finances, while 65% see the value in being more prepared for unpredictable events in life.

Financial advice helps you prepare, plan and navigate any future shocks or crisis. And while you can experience the benefits of advice after just one meeting, it’s essential to receive ongoing advice over the long term as your situation and life goals change.

This means your adviser gets to know you and your background and can help you adjust to whatever life has in store. Those people who have an ongoing relationship and receive regular financial advice are twice as likely to report feeling in control of their finances as people who do not.

Time To Discover More About Your Finances?

If you’d like to feel more confident, able to cope and less anxious when it comes to your finances, start that journey today by speaking to us. We look forward to hearing from you.

Retirement Clinic

Answers To The Myths About Your Pension Questions

If you are approaching retirement age, it’s important to know your pension is going to finance your plans.

Pension legislation is extremely complex and it’s not realistic to expect everyone to understand it completely. But, since we all hope to retire one day, it is important to get to grips with some of the basics. It’s particularly helpful to become aware of the things you may have thought were facts that are actually myths. Here are some examples.

Truth About Government Pensions

Myth: The Government Pays Your Pension

Fact: The government pays most UK adults over the pension age a State Pension, which is currently:

Retired post-April 2016 – max State Pension of £179.60 a week

Retired pre-April 2016 – max basic State Pension of £13760 a week (a top-up is available for some, called the Additional State Pension)

Not everyone is eligible for the full amount, which requires you to have at least 35 qualifying years on your National Insurance record. If you have less than ten qualifying years on your record, you’ll receive nothing. Even if you receive the full amount, you’ll usually need to supplement it with your own pension savings.

Truth About Employer Pensions

Myth: Your Employer Pays Your Pension

Fact: Most people are automatically enrolled into a workplace pension. Your employer is usually required to pay a minimum of 3% of your salary into it and you must also pay a minimum of 5% of your salary.

If you keep your contributions at the minimum level, it might be difficult to save enough for retirement. As life expectancies grow longer, your retirement can be almost as long as your working life. It’s therefore important to put aside a portion of your earnings to create a pension pot that will enable you to receive the income and live the lifestyle you want during retirement.

Truth About Life Time Allowance

Myth: You Can’t Save More Than Your Lifetime Allowance

Fact: There is a lifetime allowance on the benefits you can access from your pension, which is currently £1.073100 (tax year 2021/22). That doesn’t mean that you can’t withdraw any more after that, but it does mean that you’ll pay a tax charge of up to 55%. However, there are ways of withdrawing the money with a tax charge of 25%.

Truth About Provider’s Default Fund

Myth: Your pension provider’s default fund is suitable for everyone

Fact: Most pension default funds will start out with a high-risk strategy and steadily move your capital into lower-risk investments, such as bonds and cash, as you get closer to retirement. This is to reduce volatility in the value of your investments so that you can have a higher degree of confidence in how much you’ll eventually end up with.

If you don’t plan to purchase an annuity, you don’t necessarily need to reduce volatility before retirement. You may be leaving some of your money invested for several more decades, in which case a higher risk strategy may be more appropriate.

Truth About Annuities

Myth: Annuities Are Outdated

Fact: There was a time when almost everyone bought an annuity when they retired, and that time has passed because there are now alternative ways to access your pension savings. But annuities still have a useful role for generating a retirement income and can be an appropriate product for some people. Unlike other pension withdrawal methods, such as drawdown, an annuity offers a fixed income for life, so there’s no risk of your money running out. That’s a crucial benefit for many pensioners.

Truth About Passing On A Pension

Myth: You Can’t Pass On A Pension

Fact: If you’ve used your pension savings to purchase an annuity, the income from this will usually cease when you die. But if you have pension savings that you haven’t used to buy an annuity or example, if you’ve been taking an income through drawdown), what’s left can be passed on to a loved one.

If you die before the age of 75 there will usually be no tax to pay by the beneficiary. Otherwise, they will need to pay Income Tax according to their tax band.

Look After Your Future

There’s a whole lot to think about when you’re planning for retirement. Is it worth paying into private or workplace pension? Are you saving enough? Which investments should you choose? All these unanswered questions can make planning feel a little overwhelming. To review your situation or consider your options, please contact us – we look forward to hearing from you.

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