RETIREMENT OPTIONS AND RISKS

If you are over 55 and wish to take your pension benefits, you should consider the various choices and what the risks are. Annuity rates are continuing to fall as people live longer and there are also items of legislation which are affecting annuity rates such as the EU Gender Directive which requires annuity provides to offer the same rates to men and women, even though women statistically live longer than men. Some pension options include ongoing investment risks while others face risk of inflation.

We would be happy to assist you to understand more about these various options so you can make an educated decision. Do remember that past performance is no guarantee of future performance and the value of your investments can go down as well as up.

LIFE ASSURANCE – LOOKING AFTER THOSE WHO DEPEND ON YOU

Life assurance is generally an inexpensive way to cover your commitments – whether that be a young family or business associates. Like Buildings Insurance or Car Insurance, it is a vital way of protecting assets (what more important asset is there than you yourself!). We can search the market for you to find the most inexpensive options available. Just give us a ring.

SAVINGS – SOME BASICS

Saving and investing money is a very important part of personal finances. Here are some tips:

1. For money you hold on cash deposits, keep watch over the interest rate. Banks and Building Societies, unfortunately, will not necessarily remind you when that lovely introductory rate that attracted you in the first place, drops considerably.
2. Take advantage of tax efficient savings. Your cash savings generally should be in Cash ISAs (Individual Savings Accounts) for both a good rate and so you do not lose part of the interest to the Tax Man.
3. Don’t use credit cards for long term borrowing. Take out a personal loan instead.
4. If you are saving for your children (or grandchildren), find out about the Junior ISA, and also look at the selection for children at the National Savings and Investment website.

WHEN THERE ISN’T ENOUGH PENSION

Equity Release is a term referring to a set of options for taking a lump sum or an income from your property if the pension income needs to be supplemented. Options are available as early as age 55 but these options are really only available for those with little or no mortgage commitment on their property. We can quickly advise you on what your options are.

TAKING PENSION BENEFITS

Pension rules are changing regularly as regards how and when you can take your pension benefits. Currently the earliest you can take pension benefits is age 55. Because we are now living longer, we need to consider how best to take the benefits to service us for a long retirement. Living longer and the current economic conditions are combining to give us less pension income than in the past. Here too it is important to take advice.

In the past there used to be only one choice – to take the income offered by the pension provider you had saved with. Now there are many more choices:
1. You can shop around for the best income (annuity).
2. You can take your Tax Free Cash and leave the rest invested until later with the option to take an income from the pension fund.
3. And, most recently, there are Fixed Term Annuities. These allow you to take one’s Tax Free Cash and take a guaranteed income for a specified term, with the certainty of a cash sum waiting at the end of the fixed term which you can then use to set up another Fixed Term Annuity or a Lifetime Guaranteed Income. Since the rates on offer for pensions (annuity rates) have been poor and have continued to fall, this approach keeps your options open.

It is important to make the right choices when you take your benefits, as they will affect your income for the rest of your life. We will be pleased to help advise on all the retirement options open to you.

PENSIONS - THE END OF CONTRACTING OUT

For many years people who were employed had the option to take an annual payment into their pension instead of notching up qualifying years in what was called SERPS (State Earning Related Pension Scheme) and is now called the State Second Pension. This payment represented a return of some of their National Insurance contributions for the year in question, so it was not a gift from the Government. From the 6th of April 2012 the Government is ending this option. From that date forward the only option for the employed will be to build up entitlement year by year for the State Second Pension. The self-employed never had this option. The self-employed and employer alike are entitled to the full Basic State Pension if they pay the required number of years of National Contributions. The Basic State Pension has nothing to do with Contracting Out.

PENSIONS – NOT TO BE IGNORED

We are in a time of change as regards pensions. Those retiring in the next 5 or 10 years will benefit from something of a Golden Age of works pensions and State benefits. Those who are younger face an uphill battle to acquire sufficient monies to give them a meaningful income when they hit retirement age. Pensions require forward thinking now, as for most of us they are not automatically part of our jobs, as they used to be. Factually those in their 20s and 30s should already be putting at least 15% of their earnings into long range savings like pensions. Even that is only really a very basic level of savings. It is particularly hard with the extra pressures of rising costs and the goal of buying a property. Take advice and ensure you are looking ahead as well as coping with present situations.