Pension Planning

Lets get one thing clear straightaway....

Pensions are one of the best forms of saving that anyone can make. There are no pension plans that have failed or performed badly simply because they are pension plans. If you are disappointed with your pension it will be primarily because of the poor investment performance of the pension funds you have within it. No problem, it is a relatively simple process to review and make changes to your pension funds to get the plan back on course.

Anyone who tells you not to bother with pensions almost certainly does not know what they are talking about.

Anyone in our industry who has expert knowledge will almost certainly have chosen to contribute to at least one and possibly more pensions....why is that if they're not worth doing?

Some figures......

You invest £1000pa into the stockmarket using an ISA for 25 years and you choose well and switch funds where you should along the way achieving an average return of 9%pa. You will obviously have paid in £25,000 and have a pot of money at the end of £69,422. Not bad. You can now draw an "income" from it of 5%pa.

Your best friend also has £1,000pa to invest for a 25 year period and we determine it's best to invest in a pension. We help him manage this over the 25 years and make some fund changes along the way. He, like you,  pays tax at 40%.  On the same 9%pa growth rate his pot of money will amount to £89,003, almost 30% higher. However as he is a 40% tax payer he will also have had a tax rebate of £230pa which he also invests - this time in an ISA. On the same 9%pa growth this will give him an extra £15,967.06. Your friend has invested the same amount as you but has made £104,970 against your £69,422.

Aha you say but you can cash in your £69,422 tax free at the end of the 25 years and what would you then do with it?  Your friend can cash in 25% of his pension pot i.e £22,250.75 plus the £15,967 from his ISA giving him a total of £38,217.75 and he still has £66,752.25 invested which can then be used to provide him with income. 

These figures are based on an assumed growth rate of 9%pa before charges. The charges are assumed to be 5% initially on each premium paid and 1.5%pa on the investment. These are high charges and not indicative of what can be achieved!

We have experience of all different forms of pension planning - ranging from personal pensions for the self-employed through to large company pension schemes (Final Salary, Defined Benefits), to specialist offshore pensions for expatriates.

The Government is determined to make the pensions market even more confusing. The introduction of Stakeholder Pensions in April 2001 meant that all employers with five or more employees, had to offer some form of pension scheme, but which one and should the employer contribute? The State Earnings Related Pension Scheme (SERPS) has been replaced by a State Secondary Pension. The fact that pension funds are now taken into account for a divorce settlement means that what seems to be adequate provision now may quickly transpire not to be anywhere near sufficient in this unfortunate circumstance. There is also a new National Pension Savings Scheme (NEST) being proposed .

There have been many changes to pensions in recent years. Some of these have been good some have not. You should know what these are and how they affect you.

Did you know for example that you can conceivably get back more in tax relief on pensions than you have paid in tax. We'll show you how.

It is also important to realise that planning for your retirement is not just about pensions. We take an overall view in helping you plan, incorporating all of your investments and savings.

Once again this means we may well use WRAP ACCOUNTS where there is a clear benefit to you to enable us to take this overall view. This will allow us to help you formulate a strategy for your retirement that takes into account everything you have.

PLANNING FOR YOUR RETIREMENT IS TOO IMPORTANT TO LEAVE UNTIL LATER

Further it is now possible to plan for your childrens (grandchildrens) retirement by investing now for them.

If you paid £500pa into a pension plan for a child aged 5 it would have tax relief added to bring it to £641.03pa. Now let's assume this grew by 7.5%pa.  At age 55 (currently the earliest time they could access it) your child would now have a pension fund worth £309,314.07 for an initial outlay in total £25,000.

Of course you may not be around to pay premiums for the whole 50 years but they could always carry this on when they are earning and able.

Worried about inflation - increase  the amount you save  each year and ensure your child continues to do this when they are earning.