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Your pensions questions answered

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We wanted to answer some of the most popular pensions questions we get asked by new clients. Of course we can only give general guidance in a short blog, so if you would like to discuss your own specific circumstances, please call the office and make an appointment with one of our advisers. Our first meeting is at no cost to you and we will be able to work out the next steps to help you achieve your perfect retirement.

When should I start saving into my pension?

The short answer is – now! Simply the longer you save for your retirement, the longer your investment will have to build up and the more you will have.

How much should I save?

This will depend on how old you are, how many years there are until you want to retire and how much disposable income you have. We can help you forecast how much you might achieve in your pension pot with different levels of savings, but remember that investments such as pensions can go up as well as down. So any long term figures we calculate will be for guidance purposes only.

I’ve got a company pension from an old job, can I transfer it into another pension?

Some pension funds can be transferred, depending on the type of pension it is. If you are able to give us the details we can take a look. You may be better off leaving the funds where they are, again, if we have specific details we can advise you on the options.

I’m getting divorced, what happens to my pension?

Your pension will need to be included in the financial settlement calculations. If your partner has a significantly greater pension pot than you do, or if they have greater property assets, you may be entitled to a pension sharing order. We have more information on this here, and we recommend you talk to your solicitor about the potential options.

Can I retire early?

If that is your ultimate aim, then we can take this into account when planning your pension arrangements. Remember that the point at which you can claim your state pension may have changed, so check that here

It’s likely that you will be able to claim any personal or occupational pension earlier than your state pension. These days many of our clients choose to reduce their working hours while starting to claim on their pensions until they retire completely. There are many different ways to structure your income as you approach retirement. We can talk through these options depending on your personal circumstances.

What happens to my pension if I die, can I pass my pension on to my children?

You can’t pass on the right to your State Pension to your children or grandchildren after your death. But in most cases any personal pensions you have can be passed to your spouse, children or to anybody else. Occupational pensions can normally provide benefits from your financial dependants, which is often your spouse or partner or young children. Pensions are normally outside of your estate and won’t be subject to Inheritance Tax. You need to ensure that you have completed the appropriate paperwork naming the right people as your desired beneficiaries.

I have another question, please can you help?

Yes of course, we love answering pension questions. Please get in touch with us by calling 01543 410512 and let us see how we can help you.

Pension sharing: what is it and how we can help

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When a marriage ends in divorce, one of the key parts of the legal process is to come to a financial settlement between both parties. In order to achieve this, they will need to declare all their assets. Aside from property, pensions can be one of the biggest financial assets that either party has, especially if couples have been together a long time. If there is significant difference in financial assets between each person, one option the court has is to make a pension sharing order. This is a court order for one party to transfer a specific percentage from their pension funds to the other person.

Pension share legislation was introduced in December 2000 to ensure provision for those who had reasonably been expecting their spouse to support them in retirement and therefore had minimal retirement provision. It is a very common consideration of many divorce proceedings.

We work with many local solicitors to support their clients once the pension sharing order is made. This is often, but not always, a female client acquiring pension funds from her former husband. Our adviser Paula Crawford is a specialist in this area. She works through the process from start to finish with the client and their solicitor.

How does a pension sharing order work?

Once divorce proceedings are underway both parties must submit documents regarding all existing pension arrangements. Sometimes the parties will agree or the courts may direct parties to arrange for an independent pension sharing report to be prepared where the pension assets for both parties are included and an indication of pension sharing to equalize assets is given. This is then used to ascertain how much should be transferred from one person to the other and to consider the options available to the parties.

The pension sharing report

When working with a client we receive the pension sharing report, which reviews the pensions of both parties. Often the report will provide options as follows:

1) To equalize the capital values of the pension funds, so both parties are left with a similar capital sum
2) To equalize the income from the pension, so both parties are left with a similar income in retirement.

There are a number of considerations on which legal advice should be sought in considering the options. This includes the type of pension or pensions, the transfer values, the age of each party and the length of the marriage.

Implementing the pension share

The report will include different options to achieve the pension share. Paula will work with clients to advise which is the best option. For example, if the pension in question is a defined benefit scheme often former partners will not be allowed to join the scheme. The scheme rules may mean they have to transfer their share into a pension of their own. We can arrange that for you. Alternatively the member may be able to join the scheme under their own name.

Other types of pension are generally more straightforward to split, and normally a share would be moved into a scheme of your own.
In some circumstances, the partner may wish to access a lump sum. This is quite common where the couple is over 55. In this case one partner may need cash to help buy a new house as part of the divorce process. Paula regularly advises on the best way to draw funds for house purchases.

What happens when there are several different pensions?

This is a common situation where a couple have been together a long time. It also happens where one person has worked for a number of different employers. It can make the pension sharing process more complex. However, Paula is able to review all the pensions and advise on the most straightforward way to access the share.

Can we help you with pension sharing ?

This is a very complex area. We feel you should have the benefit of separate and specialist financial advice together with your legal advice. If you are in the process of getting divorced and you need some independent financial advice please contact Paula Crawford. She is happy to speak to you and your solicitor about any aspect of pension sharing.

Peace of mind for our clients

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When we work with clients we know that helping them with their financial situation is about more than just money. Having finances in order enables clients to achieve their goals, whatever they are. They can support their families and have the peace of mind to be able to focus on other things.

We were really pleased to be able to support a lady who has been a client for about 5 years.

She has had a very challenging year. She was diagnosed with a serious illness and needed to spend significant amounts of time in hospital.

We manage her pension and were pleased to be able to tell her that it has grown by over £30,000 in the last twelve months. To use her own words, she knew that her pension was one of the things she did not need to worry about. She knew she could concentrate on her health and recovery in the coming year.

If you would like us to help you achieve financial peace of mind please get in touch.

An update on pension changes

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The pension market is ever changing, and this year has seen more changes than most as the Covid-19 pandemic affects the financial services industry. Here is an update on some key changes to help you plan your pension arrangements.

Has my pension changed in value?

At the start of lockdown, stock markets fell considerably and while they have regained much of their value pre-March, they are likely to remain volatile for a while. Pension funds are often mainly invested in stock markets, so these fluctuations can impact directly on the value of pension funds. If you track the value of your pension closely, you may have seen sharp changes in your fund this year, and you may be concerned about its value.

Do I need to change my pension?

As a general guide, if you have many years to go before you retire, we would advise that you don’t need to take specific action. Pensions are a long-term investment and over the life time of your investment, this is a short-term fluctuation. Markets should hopefully recover any short-term losses over time, and markets have already risen strongly since the falls in March.

Do you have a plan?

We always discuss with clients their long-term plan aims. This should not just be ‘I want as much money as possible’, a proper plan should have a proper aim to be meaningful. You may want to retire early, but why? This could be to spend more time with your grandchildren, or to go travelling, for example. Having a deliberate aim in mind should help you to plan more effectively in the meantime. Don’t let short term fluctuations or changes derail your plan, but let us help you achieve it with you.

If your pension isn’t being managed speak to us and we will be able to make specific recommendations based on:
– Your aims
– The length of time you have before you retire
– The amount you have in your pension pot
– Whether your funds are invested appropriately for you personally
– How much you need to save

(The state pension is unaffected by fluctuations to the stock market.)

Minimum age for drawing a personal pension

The government recently confirmed again that the minimum age for drawing a personal pension in the UK is to rise to 57. Currently savers who pay into a personal pension can access their money at 55. This comes as no surprise as the minimum pension age was set to be 10 years below state retirement age – currently 67.
We have no timetable for this legislation yet, but if you would like to understand the potential impact, please give us a call.

Changes to pension tax relief

We mentioned in February that we were anticipating changes in pension tax relief for higher rate tax payers. This change didn’t take place in the Spring budget. However after the financial impact of Covid-19 the government will be looking to ways to balance the books. One way or another they will have to raise a large amount of money in the future.

Many industry commentators are once again speculating that this change will be announced. If you are a higher rate tax payer, talk to us about the most efficient way to save for your future. Please get in touch and arrange a meeting with one of our independent financial advisers.

 

Pensions are a very personal investment and any articles we write can only ever give an overview. To talk in detail about your personal circumstances, your pension pot and the right course of action for you, please call us on 01543 410512 for an appointment with one of our Pensions Advisers.

Case study: Drawing funds from an occupational pension

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The client

Our client approached us as she had received a pre-retirement pack from an old company occupational pension scheme, from a well known high street name.

This was for a relatively small plan value, and the pension offered was only £70 a year. Our client asked if we could arrange for her to draw the whole fund as cash. Alternatively she wondered if we could transfer the fund to add to her existing sizeable pension benefits that we manage.

Our solution: drawing funds from an occupational pension

We examined the data and advised that it was in her best interests to draw the fund. There was quite a sizeable penalty on making a transfer, but not on drawing the funds directly from the scheme. The latter option was clearly preferable. The transfer would only be a last resort.

The retirement paperwork gave options for drawing the fund as a one-off payment under the triviality rules. However our client did not qualify to use these as her overall pension savings were too high.

We therefore considered drawing the benefits under the small pot rules, where you can draw plans of up to £10,000 as one off payments. There are various versions of these rules depending on the type of scheme, but they are quite straightforward for occupational schemes.

The challenge: changing the rules

There was no option for this in the paperwork, so we contacted the scheme administrators to ask for this.

The administrators confirmed our understanding that we could use these rules, but they then advised that the scheme have chosen not to adopt the rules that actually allow this. They also advised that they thought the scheme had a lot of members in a similar situation, with small pots, who would probably prefer, or have preferred, to draw the funds as cash.

We thought this was worth challenging, as it would actually cost our client quite a sum of money if she transferred her benefits instead. We drafted a letter for her to send to the scheme trustees to ask them to change their stance.

The occupational pension administrators then advised us that they had reviewed our data. As a result they chose to adopt the rules which would benefit our client.

This decision meant our client was better off. But crucially it also opened up this option for other members of the scheme.

Please note though, drawing a cash payment rather than a pension is often not the right choice. Advice is important, as shown by this case, where we were able to provide an option our client would have not known was even available.

 

If you would like advice on your occupational pension please contact us on 01543 410 512 or email us on enquiries@acuityfinancial.co.uk

Financial resilience: how would you cope with a life changing event?

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According to Scottish Widows, in the UK up to six million people each year suffer a life changing event that causes a sudden loss of income. Many more experience events that cause a sudden rise in outgoings. Examples include:

  • Loss of a job
  • Sickness leading to absence from work
  • Becoming a carer to a relative
  • The end of a relationship
  • Bereavement
  • Becoming a parent

Many of these events happen without warning, leaving individuals with little or no choice but to face them, but the impact can be substantial. The inability to pay essential bills and meet mortgage payments can lead to huge financial stress.

While many people have faced these challenges this year, the government support has enabled the majority to continue meeting their financial obligations. However, in more normal times, individuals need to find their own way through the new situation, coping with the stress of the event as well as the financial impact.

The ability to cope financially when faced with a sudden fall in income or unavoidable rise in costs is known as financial resilience. Not everyone has the financial resources to cope if they are unable to work. A poll of more than 2,000 adults by Zurich UK suggests as many as one in eight would have to sell their home to make ends meet if that ever happened. In the survey a third of respondents said they did not feel financially resilient.

How would you cope?

When asked how they would cope with a sudden significant loss of income:

  • 40% would rely on savings for the short term (i.e. less than 6 months)
  • 39% would find a second job that I could do with my illness/ injury
  • 26% would sell other possessions (e.g. any valuables, etc.)
  • 23% would rely on savings for the long term (i.e. 6 months or longer)
  • 18% said their partner would start work/ increase their hours
  • 17% would sell their car
  • 16% would move in with friends or relatives
  • 14% would find a cheaper place to rent
  • 13% would sell their home
  • 11% would get a lodger

These are all major decisions, and have a significant impact on you as well your partner and any family. Being financially resilient can and does help cushion the blow of these income shocks.

How can a financial adviser help?

Working with a financial adviser can help you look at alternate ways to cope with the impact of a life changing event or a major financial blow on your existing income. We take a long-term view with you, and take time to understand your financial situation, including the levels of savings or other financial support you have access to. We can then look at ways to protect your income that can help you in times of sudden change, to protect you and your family.

When you decide to insure your income, or your life, what you are really insuring is the financial stability of yourself and your loved ones. There are many options to explore depending on your circumstances and priorities, and it is our job as independent advisors to guide you through to achieve financial resilience for you and your family.

If you want to be more financially resilient and need professional advice to help you, please get in touch. Call us on: 01543 410512 or email enquiries@acuityfinancial.co.uk

3 financial steps to take to protect the important things in life

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In the last few months have you stepped back to consider what is important? Have you been reviewing your future plans and finances? Have you realised the importance of ensuring your family and future are protected? After three months of lockdown, we are starting to see shops and businesses opening up. We are all getting used to a new way of working. Now is the perfect time to take some simple steps to ensure your finances are arranged in the best way to support your family. Here are our 3 steps to financial planning.

Step 1: Getting your finances in order

For most of us our mortgage payment is the biggest item of monthly household expenditure. You may have applied for a mortgage holiday in recent weeks. If you haven’t, the option is still available. However, if you can avoid this, we would suggest you do so. Some lenders are saying they think this should affect your ability to borrow in the future.

Aside from this, it can be a good idea to check if you are on the best mortgage deal. We may be able to find a better rate or a better option to help you reduce that monthly payment. There has been a change in the mortgage market, with lenders trying to keep their borrowers more actively, rather than borrowers having to change lender every time their mortgage product ends. However, your existing lender won’t do a thorough review of the market for you! We will review what they have to offer and advise you on the alternatives, for example whether a 2 year or a 5-year fixed rate might suit you best. When we find the right product – whether this is with your current lender or a different lender – we can arrange a transfer for you on your behalf, often at no charge to you.

Step 2: Planning for your future

Are your pension arrangements well planned? If you have been working for any length of time, it is likely you have a number of different company pension schemes and maybe a personal pension which needs reviewing. Now is a good time to ask, are you in the right plan, are you investing in the right funds and are you paying too much in fees?

We can help you identify what plans you have, and check that they are still suitable to support you in retirement. A quick check can also reveal who stands to gain any death in service benefits, which you can change.

For our small business owner clients, we can help you plan a personal pension scheme to support you in the future. Even if your business finances are under pressure right now, starting a pension is an essential step.

Step 3: Supporting your family

Whenever we see a client, we always check to see if they have made a will. So many financial arrangements are set up to benefit you in your lifetime. But did you know they can also be structured to support your family after your death? If you would like us to recommend a solicitor to help you with this, or if you need us to work with your solicitor, please let us know.

We can also ensure that you have arrangements in place to support your family after your death or if you can’t work because you are ill. If we have learnt anything in 2020 it is that life can take some very unexpected turns. We can find the right type of plan at the right monthly costs with cover levels that are right for your needs. We can check any existing plans you have to make sure they are still suitable for you.

Hopefully our 3 steps to financial planning were helpful. If you would like to speak to us about any aspects of your financial planning, get in touch. We are booking appointments either in the office in Lichfield or via video call. Call us to make an appointment 01543 410 512

Changes on pension tax relief for higher rate tax payers

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What is pension tax relief?

When we are advising clients on their pension options, we often need to explain pension tax relief. Tax relief is the biggest advantage that pensions have over ordinary investments. This is an incentive set by the government to encourage you to pay into your pension pot. When you pay money into a pension, the government refunds the tax that you paid on this this part of your income meaning the amount is immediately boosted by tax relief. Usually you don’t need to worry about this. Your pension provider will claim it as tax relief on your behalf and add it to your pension pot. You get relief at source in all personal and stakeholder pensions, and some workplace pensions.

What are the current rates?

As it stands, when you pay into a pension, you receive tax relief at the highest rate you pay income tax. Basic rate taxpayers receive 20% pension tax relief and higher rate taxpayers 40%. So if you are a basic rate tax payer you only need to pay £80 to save £100. Higher rate tax payers only need to pay £60 to save £100.

What are the potential changes to pension tax relief?

However, many people within the financial services industry  are speculating that the budget on 11 March may see reforms in this area. There is a suggestion that we may see changes for higher rate tax payers, with a reduction in the tax relief rate from 40% to 20% tax relief. If this is the case, higher rate tax payers would do well to make any pension deposits before the budget. There is unlikely to be any change for basic rate tax payers.
Of course, this is likely to be a highly unpopular move. The Chancellor may decide not to make this change at this time. However, it is a significant change that has been discussed for several years. If it does not happen in this budget, it is still likely to happen in the foreseeable future.
If you are a higher rate tax payer and would like to talk to us about the most efficient way to save for your future, please get in touch and arrange a meeting with one of our independent financial advisers.

What other pension changes may be announced?

We might also see an announcement in the budget about pensions dashboards. This would help people keep track of their retirement savings by displaying all of their pension pots, including the state pension, in one place online. This has been promised in previous budgets, but the December Queen’s Speech announced the Pensions Schemes Bill which should include this change.

Your financial resolutions for 2020

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Have you resolved that 2020 is the year you get your financial situation organised? You may have been thinking about looking at your pension or starting a savings plan for your children? Perhaps 2020 is the year you buy a bigger house for your growing family, or downsize as they leave the nest? Maybe 2020 is the year you will retire and make a start on all your big life goals. Whatever your financial resolutions for this new decade, we can help you achieve them.

1) I want to review my pension

If you are self-employed, you may have no pension provision at all, so this should be a priority. The sooner you start, the more you can save before you retire. Even a small amount saved regularly will mount up over a long period. We can review the market and find the right product for you.

If you have a personal pension that hasn’t been reviewed for a while, it would almost certainly benefit from changes to the investment funds.

And if 2020 is your planned retirement year (lucky you!) we can help you decide what to do with your pension pot. There is a huge range of annuity products available for you to invest in and we can advise on those. And of course the new pension freedoms mean you can withdraw it and spend it in any way you choose (sensibly of course!).

2) I want to change my mortgage

If your mortgage product is due for renewal this year, it is worth reviewing the market to see if there is a better deal for you. There has been a change in the mortgage market, with lenders trying to keep their borrowers more actively, rather than borrowers having to change lender every time their mortgage product ends. However, your existing lender won’t do a thorough review of the market for you – we will! And if we find a better product, we can arrange a transfer for you on your behalf, often at no charge to you.

If 2020 is the year for moving house, we can also help you. We start with understanding your current position, the amount you want to borrow and your employment circumstances. Once we know what you are looking for, we can do a thorough search, calling on our up to date knowledge of the market. Using industry recommendations and our specialist software we find the right product from the thousands of mortgages available. We can particularly advise if you have unusual financial circumstances, you need bridging finance or need to borrow large sums.

3) I want to ensure my family is provided for

This is an area where many of us bury our heads in the sand. But sadly many of us know someone who has died young, or who has had a serious illness. A lack of protection planning can have a massive impact on family finances. It is worth considering how your money might run out, if anything happened to you as a result of long-term sickness or injury. This tool from Legal & General is helpful to help you work out how many weeks’ breathing space you could have. A relatively small amount of money saved each month can give significant peace of mind.

4) I want to save for the future

Maybe 2019 was the year you became a parent, or a grandparent and want to start a fund to help them in the future. Maybe you have inherited a significant amount and are wondering how best to invest it. Perhaps you are just looking at your bank account and wondering how to make your money work a little harder. There is a staggering array of savings and investment products on the market. We can help tailor investments to your own needs.

Whatever your financial resolutions we are best placed to give you totally independent advice which focusses on you and your needs. Take a look at the comments of our clients and let us see if we can help you.

Get in touch

We can help you keep your 2020 financial resolutions. Book an appointment by calling us on 01543 410512.

We do not ask for a fee for an initial meeting, where we can meet to check whether we can offer what you need. Any business that we conduct on your behalf will be subject to a fee. We will always advise you of the fee up front before we start any work for you.

Financial planning when going through a divorce

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Divorce is stressful. We can at least help in taking part of that stress away for you.

Sometimes our services are needed most when our clients are going through a stressful change in their lives. Recently Paula has been advising several clients who are going through the divorce process, working with them and their solicitor. Here she offers some key financial issues to think about when you are going through a divorce or separation. She also covers what information you may need to provide for us and your solicitor to advise you appropriately.

Mortgage planning for divorce

If your separation means you need to sell your home – what your solicitor will refer to as the matrimonial home – you will need to consider whether you need a mortgage in order to buy a new property. You will also need to have an idea how much you may need.

In order to help you with this, you will need an idea of what the matrimonial home is worth, the amount of any existing mortgage and an indication of how any equity may be split between you and your ex-partner. Proof of earnings will be needed to help you obtain a new mortgage. You will also need an idea of the value of any property you are looking to buy. We are happy to talk to you about getting a mortgage in principle so you can have that conversation with your solicitor.

Pensions considerations

The value of your pension and your ex partner’s pension will be taken into account with any financial settlement. You will need to supply your solicitor with the Cash Transfer Value of any occupational and private pension schemes. We can obtain that information for you if you wish, to help you to fill in form E.

If you are allocated a pension sharing order as part of the settlement, you will need some idea of where you are going to invest that money. If you have a private pension plan it may make sense to invest it here. We can look at the amounts involved, and consider how close you are to retirement age before we advise you.

You may need to access some capital in the short term for example when you are waiting for your matrimonial home to sell. If you are over 55, you may be able to release a tax free cash sum from your pension pot to help you.

 

We do understand that considering your financial affairs while going through a divorce is stressful. Our aim is to help you consider all the possibilities to help you make the right decisions. We want to ensure the financial aspects of the divorce go as smoothly as possible for you.

If you would like to book an appointment with Paula to discuss any of these issues, please call us on 01543 410512. We do not ask for a fee for an initial meeting, where we can meet to check whether we can offer what you need. Any business that we conduct on your behalf will be subject to a fee. We will always advise you of up front before we start any work for you.

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