Types of Pensions
The current pension market offers an extensive range of products including Occupational, Personal and Stakeholder Pensions. In addition to these, there are SIPPS (Self Invested Personal Pension Schemes), SSAS (Small Self Administered Schemes), SERPS (State Earnings Related Pension Scheme) (Superseded by the State Second Pension) and State Pensions.
With so many options available how do I know which pension is right for me?
To help you with your decision, we have provided you with a brief simple explanation of each option:
1. Occupational Pension
An employer sometimes offers an Occupational Pension Scheme. You are not obliged to join the scheme but as the employer will be responsible for any of the costs for setting up the scheme, it is usually advisable to join.
2. Personal Pension
This option is ideal for people who are self-employed or whose employer does not have a company pension scheme in force. With a Personal Pension the individual will have charges to pay as opposed to the occupational pension scheme where the employer has to pay them. The level of this pension depends on the amount of money that is paid into the fund, the annuity rate (for more information see “WHAT ARE ANNUITIES?”), how well the money has grown and the tax status (decided by the government).
3. Stakeholder Pensions
A Stakeholder pension plan is a low cost pension as the charges are limited to 1% annually of the fund value; unlike other pension plans there are no transfer or exist penalties. This type of pension is on a similar basis to the personal pension as the amount in the fund depends on the amount of money paid in to it.
4. SIPPS (Self Invested Personal Pensions)
A Scheme to enable you to possess assets within a tax-free environment. As a result of A-day the amount a SIPP can borrow for a property purchase is now limited to 50% of the value of the Fund.
5. SSAS (Small Self Administered Scheme)
In short this is a scheme that has been designed mainly for controlling directors of companies. These are often used fore lending money back to the employer for business reasons. The loan must be secured on an asset of equal value.
6. SERPS (State Earnings Related Pension Scheme)
This scheme benefits those who are employed and have earnings higher than the minimum amount which National Insurance contributions should be paid. The final amount received at retirement though, does depend on the amount earned and the length of time you have worked.
7. State Pensions
State Pensions are perhaps the most well known type of pension. They are described as a regular income from the state for retired people who have made full national insurance contributions.
What are Annuties?
An Annuity is the name given to a pension once you have started to take a regular income from the fund. The amount of income your receive depends on the several factors including the amount invested, your age, health, Your sex and annuity rates at the time you invested.
There are two main types of annuity:
- CPA’s (Compulsory purchase annuities) these are only purchased with the bulk proceeds form schemes such as a personal pension or proceeds form an employer’s scheme.
- PLA’s (Purchased Life Annuities) unlike CPA’s these can be brought by anyone with spare capital.
Risks
As we all have different attitudes to risk it is important you decide for yourself what level of risk you are personally willing to take.
There are three levels of risk associated with any type of investment or pension:
- Low including national savings and building society accounts.
- Medium fixed interest and properties and managed funds with diversified portfolios
- High Investment trusts, Specialized unit trusts and portfolios of shares.
A full explanation of the risks associated as well as the best type of fund for your circumstances can be discussed with one of our Independent Financial Advisers.
When you are about to retire there are many factors you need to consider
If you have pension arrangements, then you will probably need to consider an annuity.
The biggest investment decision you are ever likely to face is what to do with the money you have built in your pension fund.
You will need to ask yourself a number of important questions, the answers to which will affect how you proceed.
For example: -
- Q. How much income do I need to live on?
- Q. What will the level of inflation be during my retirement?
- Q. How long am I going to live?
- Q. What will happen to my dependants when I die?
- Q. What if I become ill and need local authority care?
- Q. What is my risk strategy?
You must also take into account the value of annuity rates at the time you retire and your tax position.
Why you need help from All Counties Financial Ltd.
We can investigate the different options available to you and provide unbiased, non-pressured advice on the best way forward.
Today’s extensive range of annuities offer you a wide choice of ways in which you can provide yourself and your dependants with an income in retirement.
For most people such a choice will seem like a maze. This is why you are likely to need our independent expert help to find the right annuity for you at such a vitally important stage in your life.
Our qualified independent advisers can give advice aimed at:-
- People coming out of occupational pension schemes
- Personal pension holders
- The self employed
- Retirees with lump-sum capital to invest
After finding out about your personal circumstances and understanding your financial needs we research the markets to find the best annuity available to fit your criteria. Then acting on your behalf we ensure the annuity purchase is efficiently transacted by co-ordinating the arrangement between the pension company (ies) and the chosen annuity provider.
In today’s highly competitive annuity market a differential of up to 30% can exist between the best and the worst annuity rates.
Also in response to a decline in annuity rates, product providers are continuing to innovate with a host of new products which are now available from a wide range of providers, many of whom will not deal direct with the public, only through intermediaries such as ourselves.
Divorce
During this time it is vital that both parties involved understand fully the options available to them. As a result a significant amount of stress can be avoided.
Questions answered include:
- What will happen about the mortgage?
- How can I survive financially?
- What will happen to our life cover or protection of the mortgage loan?
- What will happen to our investments or endowments?
In the majority of cases we can provide solutions to your financial worries with impartial friendly advice.
Wills
- Do you have a Will?
- If so, is it up to date?
- If you have young children, have you appointed Guardians to care for them in the event of your premature death?
- Are you aware of the problems that can be caused for your family if you die without having made a will?
- Do you know that if you die Intestate (without a Will) and have children, your spouse is only entitled to £125,000 and income from half of the residue?
- If you do not have a spouse but have a Partner, are you aware of your entitlement in law?
For advice on Wills; Enduring Power of Attorney and Probate contact us on 0121 585 9321. |
