PENSION TIPS

If you are employed, do take advantage of the Workplace Pension your employer is required to offer – even if you will be working only a few years. Currently you are required to contribute 5% of your pay and your employer must contribute a further 3%. The Government also adds an additional amount in the way of a tax rebate. For a person paying the 20% basic rate of tax, for every £4.00 they put into their pension, they end up with approximately £8.00 in their pension pot. In other words they have doubled their money – not a bad deal! For a person paying higher rate tax, the return is even better. The Workplace Pension is, effectively, a pay increase and should not be ignored.

Besides being a pot of money to use from age 55 onwards, a pension policy also provides a useful source of life assurance. Should you die before you take your pension benefit, the value will be paid to whomever you have nominated as the beneficiary. If your death is before age 75, the beneficiary will receive the value of your pension fund free of all taxes. If you die age 75 or older, the beneficiary will receive the pension fund value subject to the beneficiary’s level of tax. Note: do remember to fill out a Nomination of Beneficiary form for any pension you have so that the money goes to whoever you really want it to go to!

Do keep in mind your options from age 55 (currently): 25% of the pension fund is available as tax-free cash; the balance is available as an annuity (guaranteed income) or can be left invested with the option to take an income from it whenever you choose. The annuity can be a lifetime annuity which pays out as long as you live, or a fixed term annuity which pays an income for a fixed number of years and then provides a guaranteed lump sum at the end of that term. Note: the income from an annuity will be taxed in the same way as if you had earned the income. And if you leave it invested, any money you withdraw from it subsequently, whether as occasional lump sums or a regular income, will also be treated as earned income and taxed accordingly.

UNDERSTANDING YOUR STATE PENSION

The State Pension Age is the age at which you can start drawing your State Pension. While the State Pension is not a fortune, it is still a useful guaranteed income and worth playing for. To get the maximum under the current rules you will need to have worked, and paid National Insurance, for 35 years. To help with your planning in this regard use the State Pension Forecast facility the Government provides. This will tell you when you can expect to receive your State Pension, how much it is likely to be and what you can do to catch up any missed years.

Go to www.nidirect.gov.uk/article/check-your-state-pension.

And do remember that you can delay taking your State Pension. Those still working on a significant salary when they reach their State Pension age, could minimise tax by postponing taking their State Pension until their income decreases. For each year you delay taking your State Pension, the amount you receive when you do start taking it will have increased by 5.8% for each year you have postponed it. Generally, however, most people are probably best advised to take their State Pension as soon as they are entitled to do so.

LIFETIME MORTGAGES – INCREASING NUMBER OF OPTIONS

The number of options available for Lifetime Mortgages continues to increase. The money withdrawn can be taken as a single lump sum, as an initial lump sum with the option to take further drawings later, or as an income over an agreed number of years.

And you can choose to allow the interest to roll up without making a payment, or to pay the interest monthly as with a standard interest-only option, or to make lump payments annually for up to 10% of the amount owed. The interest rates have also moved downward over the last year or two. If you are over 55, these options will be open to you. Do feel free to ring us to discuss what may be possible.

MORTGAGE STRATEGIES

If you have a mortgage, or need one, you will find that the mortgage market

currently is more flexible than it probably has ever been. The interest rates are

also very competitive.

First: If you have a mortgage, make sure that you have the best interest rate you can achieve. Unfortunately it is a general failing that most people are inclined not to search out a change unless something really does motivate them. The least one can do is to speak to their existing lender and see if they have an option to switch to a better rate for little or no cost. And once you have done that it is not too much more trouble to speak with a mortgage broker to see how that compares with what is available on the mortgage market. A saving thus achieved could amount to hundreds of pounds a year.

Second: If you feel you are disadvantaged by your age, think again. Lenders generally are now much

more flexible in lending to those in their 60s and 70s and even 80s. And there are also now RIOs

(Retirement Interest Only mortgages) as well as Lifetime Mortgages with various options.

Third: While generally we strive to have our mortgage paid off as soon as we can, it is worth  thinking outside the box as well to see how you might be able to utilise the value you have built up in the property. This might be to act as “Bank of Mum and Dad” to help children get on the property ladder. It also might be a way of making later life more enjoyable.

Fourth: You may feel trapped in your present mortgage arrangements, perhaps an interest-only

mortgage where the original plan to pay it off has not come off as expected.

Give us a ring.

We would be happy to work out your options.