What is a personal pension scheme?
All personal pensions work on a defined contribution ‘money purchase’ basis. This means that the money you save into your personal pension plan is invested (typically in investment funds) and is then used at retirement to provide you with pension benefits. So, in theory, the more you save, the better your pension should be at retirement.
Your level of risk is unique to you
Eastcote Wealth Management’s investment experts can provide you with personalised pension advice. We have a long-term view when it comes to retirement, aiming to give your pension the best chance of realising your financial ambitions over time. Pensions, like many investments, carry a level of risk and that’s why we’ll talk to you about the level of risk that you’re comfortable with and be realistic about the returns.
Pension legislation has changed
There have been a number of changes recently in the legislation surrounding pensions, making them much more flexible and presenting a tax-efficient method of saving for your retirement. It’s important that you take care of your hard-earned retirement funds and seek professional financial advice.
If you are in a company pension scheme that isn’t final salary based, then it is likely you are in a form of personal pension arrangement. There have also been recent changes to company pension legislation regarding Workplace Pensions (including auto enrolment) and the principle that your pension pot can follow you from employer to employer (pot follows member). The majority of us are now subject to the personal pension rules for our retirement income and final salary schemes are now less common.
Tax relief
Personal pensions are very flexible and provide tax relief on your contributions where an individual can contribute up to the greater of £2,880 (£3,600 gross) per annum for those that have no earnings, or up to 100% of earnings subject to a maximum of £40,000 per annum which is the current annual allowance (2017 / 2018 tax year). Furthermore, these plans can be set up for non-working spouses and even children and grandchildren. You can contribute to a personal pension if you have no earnings for up to £2,880 per annum, topped up by the government with tax relief of 20% to £3,600.
At Retirement
On reaching retirement, you use the money that has built up in your personal pension either as cash (up to 25% of which is normally tax-free), income or a combination both.
A personal pension is really just a long-term savings plan (albeit a very tax efficient one) that is designed to provide you with savings at retirement. The value of these pension savings will be dependent upon how much money you’ve paid in, how long you have had your money invested and how well the fund has performed.
At retirement, provision can protect your pension from the effects of inflation or provide income in the event of your death, so it provides valuable benefits for your spouse or dependents. Benefits can normally be drawn from age 55 (57 from 2028) onwards.
The importance of seeking professional advice
Eastcote Wealth Management has years’ experience in this area and can help you to access the pension options available to you and help you to maximise your pension on retirement. Please be careful with your hard-earned pension savings and think very carefully before cashing them in or moving them. If you’re offered a scheme which seems too-good-to-be-true, it probably is. For further information, see www.pensionsadvisoryservice.org.uk/pension-problems/making-a-complaint/common-concerns/pension-scams.
Please do not hesitate to contact us if you would like to discuss your retirement options in more detail. Remember, we offer a free no obligation consultation and will be happy to help if we can. We take a holistic and long-term approach to wealth management, opting to build a lasting relationship with you and provide a tailored solution for all of your investments.
A pension is a long-term investment. The fund value may fluctuate and can down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Occupational pension schemes are regulated by the pensions regulator.