Retirement Planning

Personal Pensions

A personal pension is a way of making future provision for your retirement. They are available through pension providers, e.g. insurance companies banks, who will invest your funds.

When you retire the fund you have built up will be used to generate a regular pension income for the rest of your life. This is commonly achieved by purchasing what is known as an annuity with the pension fund. In some circumstances you can get part of the pension fund as a tax-free lump sum. This pension is received as well as any State Pension you have built up.

Should I get a personal pension?

Before you take out a personal pension plan, you should think about all the options open to you. As Independent Financial Advisers we would consider your individual circumstances before making our recommendation. As a result of our service it may transpire that you can also use a personal pension to top up the income from any other pensions you might have.

Income Drawdown

Income drawdown is a way of providing a regular income from the proceeds of a personal pension without buying an annuity immediately on retirement. The main attractions are that it delays the requirement to buy an annuity until your are aged 75 or over and has better death benefits if you die before you reach the age of 75. The main disadvantage is that drawdown is generally suitable only for investors with larger pension funds of £100,000 and more.

Drawdown is a temporary arrangement, which enables you to draw an income before ultimately securing a lifetime income through purchasing an annuity by the age of 75. In essence if you buy an annuity you are insuring yourself against investments doing badly and against the possibility that you are long-lived. If you take income drawdown you are taking those risks yourself. Whilst it is more likely that a person using income drawdown would purchase an annuity at 75, this is not the only option available.

Stakeholder Pensions

Stakeholder Pensions are another way to save for your retirement. Using your own money, combined with tax relief and investment returns, you could potentially build up a healthy pension fund which, as you get older, can be used to buy a pension.

Stakeholder pensions are subject to minimum Government standards regarding charges, flexibility and the regular information you must be provided with. They are meant for people who currently don't have the right available pension options in order to save for their retirement, in particular people who are not able to join an occupational pension scheme that would otherwise have been set up by their employer.

The Financial Services Authority does not regulate taxation and trust advice, will writing, school fees planning and certain off-shore investments.

Group Personal Pensions

A group pension is an alternative to the occupational pension scheme that some employers may run. The employer can arrange for a personal pension provider to offer their employees the chance for a personal pension. The charges will, in most cases, be higher, mainly because of the number of people involved, and the employer can also agree to pay extra contributions into the scheme on top of what the employees are already paying in.

Annuity

In simple terms an annuity is a type of investment designed to provide an income on terms agreed by the purchaser and the insurer for a set price. From the clients point of view annuities often have many advantages. They are usually as follows:

Annuities are very attractive to many clients. Indeed had the concept of annuities not been designed 200 years ago there is no doubt that a launch today of this new 'annuity fund' would be exceedingly popular. Annuity investments are irreversible, the investment will continue at the terms agreed at the outset and usually, if the customer dies soon after purchasing the annuity, the investment will be costly. Annuities may be linked to stock-market performance and therefore the level of benefits may vary throughout the life of the investment.

Annuities are available on a variety of terms, the suitability of which will depend on the customer's personal needs and circumstances.

Further Information

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