Category

Pensions

Get the most from auto-enrolment

By | Pensions

Workplace pensions have changed in recent years. Traditionally, the responsibility was on the employee to join their workplace pension scheme. Today in 2021, however, most employees are automatically placed onto their employer’s scheme under the UK’s “auto-enrolment” rules – although you can choose to opt out. The amount that you pay in depends on your salary, since contributions are a percentage of your pay. The higher your pay, the more you automatically pay in. However, given that the rules have changed a lot over the years, many people are still not getting the most from auto-enrolment. Below, we explain some ideas showing how to do this.

Read More

How to avoid pension poverty

By | Pensions

Will you have enough money to sustain you in retirement? According to the UK Poverty 2019/20 report, over 2m people live in pension poverty. This refers to when “A person’s resources (mainly their material resources) are not sufficient to meet their minimum needs (including social participation)” in retirement. The biggest subsets seem to be in London (23%) and Wales (20%), but it also affects people across the whole UK.

Read More

Side-step this key pension trap

By | Pensions

Pension rules in the UK are notoriously complex. Not only are there multiple types of pensions to deal with, but drawing from them needs to be planned carefully. For instance, did you know that the State Pension is accessible from your State Pension age – 66 in 2021 – but you can only access your defined contribution pension(s) from age 55 (under the 2015 Pension Freedoms)?

Read More

How good are final salary pensions?

By | Pensions

There are many types of UK pension – with final salary pensions often referred to as “gold plated” ones. Also sometimes called defined benefit pensions, final salary pensions pay you a lifetime, guaranteed income in retirement – similar to a state pension.

Read More

How to make the most of the state pension

By | Pensions, Retirement Planning

If someone offered you an investment opportunity with “guaranteed, high returns”, you would be right to question their claim. Whether it’s bonds, stocks or property – all investing has an element of risk. Yet perhaps there is one “investment” which gets fairly close to being an exception. The UK state pension offers individuals a lifetime income in retirement, rising in line with inflation via the “triple lock” system. You do not need to worry about your state pension income falling due to a crash in the stock markets, or the rising cost of living eroding its spending power. Of course, government policy could change the state pension rules down the line – a distinct possibility, but highly unlikely to become a reality any time soon.

Read More

Lifetime allowance: how to save tax if you’re near £1m

By | Pensions

Did you know that there’s a limit to how much you save into a pension? In 2020-21, this “lifetime allowance” is set at £1.0731 million – with 55% tax levied on any withdrawals which exceed this amount (or 25% when taken as income). Unfortunately, many people in the UK are unaware of this limit throughout their careers, only to face difficult and costly decisions as retirement nears and the realisation dawns. Here at WMM, our aim is to help people avoid these kinds of errors and enjoy their hard-earned wealth once their careers wind down. Below, you’ll find some ideas about how to avoid breaching the lifetime allowance – as the rules currently stand.

Read More

Pension options for over-55s retiring within 12 years

By | Pensions

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

Coronavirus has been a particularly stressful time for those looking to retire in the next 10-12 years. Many pensions have lost value since December 2019 as stock markets (which pensions tend to be heavily invested in) have taken a hit from the pandemic, lockdown and the resulting change in consumer behaviour and levels of concern.

Fortunately, equities have been steadily rising again across the developed world since the first quarter of 2020. The other good news is that there is still plenty of time to prepare for retirement for those who may be looking to finish work within 12 years. Below, our Oxford-based financial planning team here at WMM offers a handful of pension options for over-55s. Make sure you seek professional advice before acting on any of the below.

 

Leave your pension(s) invested

In 2020-21 the UK’s pension rules allow you to start taking money from a defined contribution pension once you reach age 55. You can withdraw up to 25% tax-free, for instance. However, just because you have this choice does not mean you should take it. You could leave the fund invested, allowing it to grow further so that you can enjoy a more comfortable lifestyle when you do eventually retire. However, it may be worth speaking to your financial planner about whether you could invest in lower-cost, better-performing funds to increase your real returns. It can also be wise to re-evaluate your contributions. Increasing them, for instance, could result in more money saved in retirement – allowing your pension(s) to stretch further.

 

Buy an annuity

In light of the pandemic, many people are attracted to an annuity. This is because it can provide a guaranteed, inflation-linked income throughout retirement. Some will be attracted to the financial stability and predictability this offers. Yet it’s important to consider that you may not get as much future monthly income from an annuity compared to income drawdown. In 2020, moreover, annuity companies have been affected by the pandemic. It may be wise, therefore, to consider ways to spread out your pension risk.

 

Take everything out at once

Of course, you may be tempted to empty your pension from the age of 55. Yet most financial planners would caution against this, since it’s likely to result in you not having enough money later in retirement. There are only specific circumstances in which this may be wise – e.g. if you have been diagnosed with an illness certain to result in death within the next 12 months.

 

Transfer your pension(s)

Pensions come in different shapes, types and sizes. Some involve building a pension pot over time with your employer, for instance (i.e. a workplace defined contribution pension). Others, such as final salary pensions, grant you an income in retirement from your employer based on criteria such as your years of service and salary in employment. There are advantages and also disadvantages to each of these pensions, so it may make sense to transfer from the latter to the former in certain cases (e.g. if you want to leave your pension as an inheritance one day). Bear in mind, however, that this is a big decision that cannot be reversed once made. You can also only move from a final salary pension to a defined contribution scheme – not vice versa.

 

Invitation

There are many other options available for over-55s who are thinking about retiring within the next 12 years or so. Above, we’ve outlined an overview of just some of the possible options. The important thing to remember is that your decision(s) regarding your pension is likely to have significant repercussions on when you retire, and what that retirement will look like. As such, it’s always worth considering professional advice to make sure you make the best decision.

Interested in finding out how we can optimise your financial plan and future income prospects? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469

 

Pension options for WASPI women in light of the court’s decision

By | Pensions

A fierce battle has been going on in the Court of Appeals recently. Many women born in the 1950s have been fighting for compensation after seeing their state pension age gradually rise from 60 to 65 in the past ten years. The case has recently concluded with a ruling that the state pension rise does not discriminate against WASPI women (Women Against State Pension Inequality), and so the Court has upheld the law. Given this decision, what options might now be available for women in the 50s who are looking to develop their retirement plan?

Read More

Why Pension Awareness Day 2020 Matters

By | Pensions

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

Did you know that the UK celebrated its Pension Awareness Day on the 15th September 2020? If it skipped past you, then you are not alone. Much of the media attention on COVID-19, trade disputes and other matters have largely obscured this important day from the public. Yet it has arguably never been more vital to hear the message of Pensions Awareness Day, namely: “Are you saving enough money for retirement?”

The sad answer to this question is that many people are not. Here at WMM, our Oxford-based financial planning team is striving to be part of the solution to this problem. In 2020 and in the years ahead, it is now likely that an individual’s retirement will span more than 30 years (as opposed to perhaps less than a decade in the 1900s – when the state pension was introduced). This means that people’s pensions will likely need to stretch further. Yet a UK government report suggests that as many as 12m people have little or no pension savings at all.

 

People and pensions are changing

Many people in the UK seem to assume that the state will simply look after them when they get old – much like the NHS is expected to provide free care when they get sick. Unfortunately, this assumption is not correct. In 2020-21, the full new state pension provides £175.20 per week – a sum which most cannot reasonably live on by itself.

Another complicating factor in all of this is the fact that the pensions landscape is changing. In the recent past, many workers would have access to a defined benefit (or “final salary”) pension which paid a guaranteed income in retirement until death. This – in combination with your state pension – was often enough to live on comfortably, indefinitely. In 2020, however, this kind of pension is increasingly rare. More commonly, workers now have a defined contribution pension which involves building up a pot of money for retirement. Whilst this offers advantages over a defined benefit pension, it does leave open the possibility that you might run out of money without careful retirement planning.

 

Lack of awareness and understanding

One of the big challenges that financial planners must help people overcome is the complexity of pensions. Many people feel intimidated by the subject and so delay the decision to start thinking seriously about it (by which point, much valuable time for saving has been lost). One survey by the ONS, for instance, suggests that only a minority of 35-44 year olds agree with the statement: “I feel I understand enough about pensions to make decisions about saving for retirement”. Older survey respondents also showed disturbing results, with one-fifth of 45-year olds saying that they thought their pension would not meet their expense requirements when they retired. Around 10% said they were unaware if they had saved enough, or not.

 

Financial planning for everyone

Retirement planning and pensions is not simply for the “super rich”. Everyone needs to think about how they will meet their financial needs in their 50s, 60s and beyond. Some will want to keep working, yet most will want to retire in some fashion. Here, the message of Pension Awareness Day invites you to reach out to a financial adviser/planner and to take early steps to prepare for your future. At worst, you spend some time discussing some of your options with a professional during a free consultation and then go on your merry way. At best, you chart a course together which moves you towards an inspiring set of financial goals in retirement.

 

Invitation

Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469