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If you are a senior executive
or employee, then you could be missing out on a remarkably
tax-efficient and flexible retirement planning opportunity
simply because most company pension scheme officials
either do not know about it or are reluctant to discuss
it.
Tax-efficient environment
At retirement, instead of taking your fixed pension
from your scheme - usually a proportion of your final
salary - you have the right to transfer your fund
to a phased income withdrawal plan if appropriate
to your situation. This allows you to keep your fund
in a tax-efficient environment and, at the same time,
withdraw a flexible income.
'A withdrawal plan can offer
considerable scope for inheritance tax planning.'
Tax planning
A withdrawal plan also offers considerable scope for
inheritance tax planning. For example, if your company
pension is worth £80,000 a year, the value of your
fund is likely to be over £1m. If you die, your scheme
would provide a surviving spouse with an annual pension
of approximately £40,000. But under a withdrawal scheme,
your spouse would have the option of taking the entire
pension fund as cash, less a tax charge of 35%.
| Pension
fund withdrawal might be worth considering if
you fit the following profile:
- Your company pension
fund is worth at least £500,000.
- You have other sources of income - for example,
an investment portfolio, property and/or share
options.
- You have a speculative attitude to investment
risk for reward.
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Changing times
The Inland Revenue has changed the rules that govern
transfers from occupational schemes to personal pensions.
This is likely to make it more difficult for higher
earners who want to take advantage of this facility.
Self-investment
A self- invested version of the plan would allow you
to run the fund yourself or via an investment manager.
The investment choice includes collective funds (investment
trusts, unit trusts and insurance company funds),
direct equities, bonds and commercial property.
It's also worth remembering
to plan your annuity purchase well in advance so that
you have time to consolidate your fund and are ready
to convert to an annuity when rates are favourable.
Advice is essential with
this type of retirement planning, as it can prove
very costly if you get it wrong. If you would like
us to review your situation, please e-mail
or contact us for further information.
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