Tag Archives: Pension

Are you missing out on money you’re entitled to? 1

Bicknell Business Adviser, Free Things • Tags: , , , , , ,

Pot of gold coins isolated on white

You could be missing out on money that is owed to you:

UK Benefits https://www.gov.uk/benefits-adviser

The benefits adviser checks if you’re eligible to claim:

  • Attendance Allowance
  • Bereavement Allowance
  • Bereavement Payment
  • Carer’s Allowance *
  • Carer’s Credit
  • Child Benefit *
  • Child Tax Credit *
  • Constant Attendance Allowance
  • Disability Living Allowance
  • Employment and Support Allowance *
  • Guardian’s Allowance
  • Housing Benefit *
  • Incapacity Benefit
  • Income Support *
  • Industrial Injuries Disablement Benefit
  • Jobseeker’s Allowance *
  • Maternity Allowance
  • Pension Credit *
  • State Pension
  • Statutory Adoption Pay
  • Statutory Maternity Pay
  • Statutory Paternity Pay
  • Statutory Sick Pay
  • War Widow’s or Widower’s Pension
  • Widowed Parents Allowance
  • Working Tax Credit *

(*) – For these benefits, you’ll also get an estimate of how much you might get.

Lost Pensions https://www.gov.uk/find-lost-pension

The Pension Service will help you track down any lost pensions, if you’re not retired you might be able to consolidate all your pensions to get a better return.

Unclaimed Assets and Forgotten Funds http://www.unclaimedassets.co.uk/

Assets are considered dormant when contact with the owner is lost – typically due to a name change after marriage or divorce, an unreported change of address or expired postal forwarding order, and incomplete or illegible records.

It’s important to note millions of family members remain unaware they’re entitled to collect unclaimed assets owed deceased relatives, who passed on without leaving updated financial records for their heirs.

The majority of this lost money comes from dormant bank accounts, orphan pensions, unknown windfalls, missing shares and abandoned dividends, forgotten life insurance policies, National Savings Certificates and Premium Bonds which have not been redeemed; but also included is £300 million in unclaimed National Lottery winnings!

Lost Savings and Bank Accounts http://www.mylostaccount.org.uk/

If you think you may have lost touch with your account or savings, this website will guide you through some simple steps to help reunite you with your money. This is a FREE service and is brought to you by the British Bankers’ Association, the Building Societies Association and National Savings and Investments.

steve@bicknells.net

 

Pension Liberation – Don’t do it Reply

Accounting, Bicknell Business Adviser • Tags: , , ,

Taking money

If you have a pension fund you could be targeted by companies offering you ways to access your pension fund before you are 55, this is known as ‘Pension Liberation’.

How pension liberation arrangements work

Typically, pension liberation arrangements involve transferring your pension savings from your existing pension scheme to another pension scheme to allow you to access funds early. The schemes are offered through companies, who make money by charging you a fee to do this or by taking money direct from your savings. Company representatives or advisers may be pushy and may say they can offer you a loan or advance or cashback from your pension. They may even offer to share their commission for doing this.

Sometimes representatives suggest that because of the excellent returns their new scheme supposedly offers, you’ll get an upfront reward or dividend. Whatever way it’s presented, if you end up getting cash you’re likely to be involved in pension liberation.

Converting a pension pot into cash can sound very attractive to people who urgently need money. However, don’t be tempted, as there are big tax consequences of accessing your pension early. If something sounds too good to be true, it usually is.

Very often the advisers say there is a legal loophole to get round the rules to give you money by transferring your pension pot to a different scheme. There is no legal loophole. Very few people can take money out of their pensions before they’re 55. If you can, it’s usually because you’re retiring on ill-health grounds such as a terminal illness and you must meet strict rules to do this.

If you liberate your Pension you personally will have to pay tax at a special fixed rate of 55% on the funds liberated. The 55% rate isn’t reduced if you are a lower rate tax payer or pay no tax at all.

In addition to the tax the Pension Advisory Service say that on average you will be asked to pay a fee of at least 20% by the company liberating your pension.

steve@bicknells.net

Is it time to transfer out of your final salary pension scheme? Reply

Accounting, Bicknell Business Adviser • Tags: , , , , , , , ,

Pension Scheme

Transfer values from final-salary schemes are at an all-time high (because 20 year gilts have fallen to 3% whereas in 1990 they were 11%), in fact transfer values are 80% higher than 6 years ago according to Investors Chronicle and they give 6 reasons to leave final salary schemes:

  1. You have other assets to fall back on
  2. You have a scheme from an ex-employer and don’t trust your former employer to keep funding the scheme
  3. You think you former employer is in trouble
  4. Your pension will not be fully covered by the Pension Protection Fund if you former employer becomes insolvent (the cap at age 65 for 2012-13 is £34,000 annual income)
  5. You are in bad health and won’t likely see an average length pension
  6. You are happy not to ever buy an annuity and want more flexible benefits

At December 2012 the FTSE 100 companies had a combined deficit of over £50bn and only 13% of final salary pension are open to new joiners.

How transfer values have out grown scheme benefits
This example would be a for a typical final salary scheme paying 3% benefit increases to deferred pensioners over the last six years and are based on a member who was 50 in 2006.

  Deferred pension
  Typical transfer
  value offered
Benefit in 2006   £50,000 pa   £1,000,000
 Benefit at end-2012   £59,700pa  £1,800,000
 % increase   19% 79%

 
Read more: http://www.ifaonline.co.uk/retirement-planner/feature/2244829/time-to-review-deferred-defined-pension-benefits#ixzz2MU35ToaN
IFA Online – News, blogs and analysis for IFAs. Visit the website now.

The Financial Services Authority (FSA) are in general against transfers out of final salary schemes and on the 28th February 2013 issued proposals to change the basis of calculation for transfer values:

The FSA estimates that the changes to the way TVAs are performed will prevent an undervaluation of benefits of up to £20bn. In other words, the changes mean that transfer values may have to increase before an adviser recommends a transfer.

Consultations close of 27th March 2013

Transferring out should be done with extreme care as its irreversible.

Charities have Pension Deficits too

In the Financial Director Magazine in February 2013 it was reported that Baker Tilly had resigned as auditor to Citizens Advice Bureau over a disagreement on pensions.

Citizens Advice’s pension pot has a growing deficit, which leapt from £19.4m in 2006 to almost £36.5m by March 2010. The defined benefit scheme closed to new entrants in 2008.

The charity insists “it is not possible to separately identify assets and liabilities relating to Citizens Advice”. For this reason, it cannot make provision under FRS12.

However, Baker Tilly disagrees and last year gave a qualified opinion on the accounts, calling for a provision of £8,305,000 to be made at 31 March 2010.

Read more: http://www.accountancyage.com/aa/news/2109706/baker-tilly-quits-citizens-advice-accounts#ixzz2MU8XpC7A
Accountancy Age – Finance, business and accountancy news, features and resources. Claim your free subscription today.

 

steve@bicknells.net

Using Income Drawdown – how much pension will you be paid? 2

Bicknell Business Adviser • Tags: , , , , ,

Basically when you want to retire you could buy an annuity

http://www.ft.com/personal-finance/annuity-table

But personally I am not keen on annuities because when you die (or when you and your spouse die) the fund is lost

So if you have a SIPP or similar Pension, Income Drawdown might be better but unless you have a guaranteed income of £20,000 (in which case you can do Flexible Drawdown – meaning you have a lot more freedom over how much pension you can be paid) your pension is capped based on GAD tables.

http://www.hmrc.gov.uk/pensionschemes/gad-tables.htm

I have found an online calculator that makes it easier

http://www.hl.co.uk/pensions/income-drawdown/income-drawdown-calculator

steve@bicknells.net

Employer v’s Employee Pension Payments (Net Relevant Earnings) 1

Accounting, Bicknell Business Adviser • Tags: , , , , ,

Currently the maximum pension payments allowed per year are £50,000 this for Employee and Employer payments, however, if your net relevant earnings (NRE) are below £50,000 your personla payments will be capped at the higher of your employment income or £3,600. (Carry Forward may be available)

NRE excludes Dividends and if your personal pension payments exceed the NRE then you will need to declare the over payment on your self assessment return and pay tax on it.

This can be a big issue for company directors-shareholders who often take a large part of their income in dividends.

The solution to this is for the company to make employer contributions. Employer contributions count towards the £50,000 limit but are ignored for the NRE cap.

The attached link is useful article on this subject

http://www.scottishlife.co.uk/scotlife/web/site/Adviser/TechnicalCentralArea/Informationguidance/Contributions/Employercontributions.asp

But there are further explanation on Accountingweb, Skandia, Indicator Tips & Advice Tax (4 October 2012)

steve@bicknells.net

What is the minimum Pension Fund you will need to retire? £400k? 2

Bicknell Business Adviser • Tags: , , , , ,

Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.

But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension.

And it doesn’t sound like you can rely a on state pension or credit either, article below from Investors Chronicle…

A pensioner couple needs a weekly budget of £231 to meet a minimum income standard (£12,000 a year) that allows them to participate fully in society, according to the Joseph Rowntree Foundation. That £12,000 will enable them to eat out once a month and holiday away from home once a year on a half-board coach-tour package.

This may seem quite a modest amount. In fact, the income level guaranteed for pensioners by Pension Credit in 2012 is just over what is needed to meet the minimum income standard, and the proposed universal pension will be more. But don’t let that lull you into complacency.

The universal pension is just a proposal at the moment, and if you have investments, you are unlikely to qualify for the current Pension Credit, meaning £12,000 becomes a significant ball-park figure on which to base your investment plans.

http://www.investorschronicle.co.uk/2012/07/12/comment/smart-money/the-price-of-a-decent-retirement-MAnT9XzYoD1yOO5Xg4wr2N/article.html

Breakdown of minimum income standard for pensioner couple

 

Item £ per week
Food £60.46
Alcohol £8.67
Tobacco 0
Clothing £12.09
Water rates £6.44
Household insurances £1.82
Fuel £13.72
Other housing costs £4
Household goods £13.56
Household services £8.23
Personal goods and services £20.33
Other travel costs £13.51
Social and cultural participation £49.53
Total £213.48

Source: Joseph Rowntree Foundation, July 2012

 

steve@bicknells.net

 

 

 

10 things you need to know about Pension Auto Enrolment 2

Accounting, Bicknell Business Adviser • Tags: , , ,

Almost 70% of workers in Britain have little or no knowledge of the government’s plan to automatically enrol people in their company pension scheme from 1 October 2012. The change to pensions legislation means millions of people who have so far not been saving for their retirement will begin putting money aside for the first time.

Up to 10 million people will be placed into schemes from this autumn, under government plans to tackle the pension savings crisis, beginning with larger companies.

http://www.guardian.co.uk/money/2012/may/02/workers-unaware-auto-enrolment-pensions

Here are 10 things that you need to know:

  1. A Worker may include Agency workers and Self Employed workers depending on the their contracts
  2. One Person companies are not subject to Auto Enrolment however, if the company takes on a second worker and the director and new employee have contracts of employment then both could become workers under auto enrolment.
  3. Eligible Job holders are aged between 22 and state pension age and earn over £8105 and are automatically enrolled however Non Eligible Job holders could opt to join
  4. Employer contributions will start at 1% from October 2012 till 2017 (2% total contributions), then 2% till 2018 (5% total contributions), then go to 3% (8% total contributions)
  5. The employer must register their scheme www.tpr.gov.uk/registration
  6. The scheme is being introduced over a 5 year period starting in 2012, to find out when it applies to your business click on this link http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx
  7. Employees can opt out but new Employment Rights will prevent employers from offering inducements to opt out and prohibit employers from anti pension recruitment policies and unfair dismissal relating to pension enrolment
  8. If the employee opts out the employer must automatically re-enrol them every 3 years
  9. The Pensions Regulator will have powers to issue compliance notices and fixed and escalating penalties increasing on a daily basis. Employees who blow the whistle on their employer will be protected under the Public Interest Disclosure Act 1998
  10. The following types of scheme will qualify
    • Defined Benefit Schemes
    • Defined Contribution Schemes
    • Hybrid Schemes
    • Contract Based DC Schemes
    • Stakeholder Pension Schemes

steve@bicknells.net

Is Gold good for your Pension? Reply

Bicknell Business Adviser • Tags: , , , ,

Gold has always been about wealth preservation – it does well in a time of crisis.

There are lots of ways to invest in Gold:

  • Gold Bars
  • Gold Funds
  • Gold Shares

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/8635523/How-to-invest-in-gold.html

The chart below shows how Gold Prices have increased over the last 10 years

Gold has been one of the best performing asset classes over the last few years, with annual returns averaging around 17% each year for the last 11 years.

http://www.goldmadesimple.com/

Have you got any in Gold in your pension?

steve@bicknells.net

Why invest in a Pension? Because of Tax Relief! 3

Accounting, Bicknell Business Adviser • Tags: , , , ,

 

I have been looking at the Tax Relief impact on Pension Investments

Lets say you invest £10,000 per year of earned gross income, increasing each year by 3% for inflation and see the effect of tax relief at 40% and 20%, assuming a return on the investment of 7% (which you should get with Commercial Property Investment)

40% Tax Rate 20% Tax Rate
Year Pension No Pension % Diff Year Pension No Pension % Diff
1 £10,700 £6,252 71% 1 £10,700 £8,336 28%
2 £22,470 £12,954 73% 2 £22,470 £17,272 30%
3 £35,395 £20,131 76% 3 £35,395 £26,841 32%
4 £49,564 £27,808 78% 4 £49,564 £37,078 34%
5 £65,077 £36,013 81% 5 £65,077 £48,017 36%
6 £82,036 £44,773 83% 6 £82,036 £59,698 37%
7 £100,555 £54,119 86% 7 £100,555 £72,158 39%
8 £120,754 £64,081 88% 8 £120,754 £85,441 41%
9 £142,761 £74,692 91% 9 £142,761 £99,590 43%
10 £166,715 £85,987 94% 10 £166,715 £114,649 45%
11 £192,765 £98,000 97% 11 £192,765 £130,667 48%
12 £221,070 £110,771 100% 12 £221,070 £147,694 50%
13 £251,801 £124,337 103% 13 £251,801 £165,782 52%
14 £285,140 £138,740 106% 14 £285,140 £184,987 54%
15 £321,285 £154,024 109% 15 £321,285 £205,365 56%
16 £360,445 £170,233 112% 16 £360,445 £226,978 59%
17 £402,846 £187,416 115% 17 £402,846 £249,888 61%
18 £448,731 £205,621 118% 18 £448,731 £274,161 64%
19 £498,358 £224,901 122% 19 £498,358 £299,868 66%
20 £552,006 £245,309 125% 20 £552,006 £327,079 69%

Even when you consider:

  • Your money is locked up till you are 55
  • You pay tax when you take money out of the pension
  • You can get 25% out of the pension tax free

The difference in growth is massive

If you do salary sacrifice you can increase the tax effect by saving national insurance too.

So why aren’t more people investing in pensions?

steve@bicknells.net

Borrowing money from a SIPP or SSAS 4

Accounting, Bicknell Business Adviser • Tags: , , , , , ,

Final Salary schemes have pretty much ceased to exist, Stakeholder Pensions never really caught on, so the majority of us have one of the following:

Personal Pension Plan – most people have or have had one of these, its the kind of scheme where your IFA comes along every year, asks you how much risk you want to take and then invests your pension in a Managed Fund or similar.

SIPPs – Self Invested Personal Pensions – these are a little more expensive but you have a lot more control and you can invest directly into Commercial Property, borrow money to buy Property and you can make loans to unconnected parties

SSAS – Small Self Administered Scheme – these are generally a little more expense than both Personal Pensions and SIPPs but you have even more control and you can lend to your own company

http://www.jameshay.co.uk are great for SIPPs and SSASs, there many other great providers too

You could have a combination of the above and its possible to transfer money between pension plans (but there is normally a fee for the transfer)

When you pay earned money into you pension you will get tax relief at either 20% or a higher rate but its limited to a maximum of your earnings.

Your employer can pay in too, maximum contributions are now £50k

http://www.hmrc.gov.uk/incometax/relief-pension.htm

You can also carry forward unused allowances

http://www.hmrc.gov.uk/pensionschemes/annual-allowance/carry-forward.htm

SIPPs and SSASs can lend money at market rates to unconnected parties without too many restrictions a great explanation of this is given on this link

http://www.curtisbanks.co.uk/assets/downloads/guides/guide-loans.pdf

Alternatively you could use http://www.thincats.com/ or http://www.fundingcircle.com/ or I am sure there are others too

Lets say you are 40% tax payer, you pay in £100k out of earned income, the tax man gives the tax back of £40k, so you have £140k to lend, because its short term lending against assets you will probably be paid interest at 10% to 15%, thats a pretty good return (I appreciate there are risks, as there are with everything in life and of course you should always take professional advice before doing anything).

If you are a business looking for funding perhaps borrowing from a SIPP or SSAS may be the solution, it certainly seems to be catching on. But just be careful who you choose to lend to and against what assets.

steve@bicknells.net

Correction – if you pay in £60k it will be topped up by £40k to £100k if you are a 40% tax payer