It goes without saying that we
should all have provision in place for retirement, but
choosing the most appropriate option can be a real headache.
With the plethora of pension schemes available, it is
best to take independent advice to analyse your individual
situation.
No company scheme?
If you don't have a company pension scheme, you can
choose between taking out a personal pension plan and
saving in a stakeholder scheme. There are other schemes
that could be useful for company directors and those
who want total control over where their pension fund
is investing all their hard-earned cash.
Payments you make into a personal pension plan or stakeholder
scheme attract tax relief at the highest rate you pay
- either 22% for standard rate taxpayers or 40% for
higher-rate taxpayers.
Maximum funding
The Inland Revenue limits the amount you can pay into
a personal pension in any one year. It is calculated
as a percentage of your annual earnings, and as you
get older (and therefore nearer to retirement), the
percentage increases.
Since April 2001 when the new Stakeholder rules came
into effect you can now invest up to £3600 per annum
into a Stakeholder plan without any relevant earnings.
A bigger pension
If you are in a company pension scheme and want to
top up your pension, an Additional Voluntary Contributions
plan (AVC) may be for you. This is particularly useful
if you're not getting the maximum benefit from your
company scheme because you've only recently started
working there. The contributions qualify for tax relief
providing those contributions do not exceed 15% of
annual earnings.
Alternatively, if appropriate you could take out a
Free Standing Additional Voluntary Contribution plan
(FSAVC) offered by an independent provider.
Under the new concurrency rules, even if you are a
member of an occupational pension scheme you can contribute
to a Stakeholder scheme as a top up to a company pension.
Investment control
A self-invested personal pension (SIPP) gives you
control over where your money is invested. Investments
can be made in a wide range of areas.
High flyers
Executive personal pensions (EPPs) are often used
for high-earning executives or directors. They are
run under the usual occupational pension rules, but
give the investor the flexibility to build up a bigger
pension fund than would be possible with an ordinary
personal pension. Non executives are also eligible
for EPPs
SSAS schemes
Small self-administered pension schemes (SSASs) are
related to EPPs. They are also run under occupational
pension rules with a maximum of 11 members allowed.
Like SIPPS, SSASs can invest in a wide range of assets,
including commercial property, which means they can
be used to buy business premises.
Choices at retirement from your personal pension
You can take benefits from your pension fund any time
after the age of 50. When you retire, you can use
the pension fund in one of two ways. You can either
use all the money to fund an income until you die,
or you can take a proportion of the fund's value as
a tax-free lump sum and use the rest of the money
to fund your income. The income paid to you may come
from an annuity, purchased using the cash from the
your fund.
Deferring your annuity
After you retire, you have until you are 75 to buy
an annuity. If you choose not to buy an annuity immediately,
but still need an income from your pension fund, you
could look at another option, known as 'pension fund
withdrawal'.
Don't let planning a successful retirement strategy
give you a headache. Allow us to review your situation
and help ease the pain. Please e-mail
or contact
us for further information.
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