The Importance of Pension Planning
Derby District & Law Society (D& DLS) magazine – December 2010
The Importance of Pension Planning
At the sheer mention of the word Pension, I see most eyes glaze over. All too often, Pensions are perceived to be complicated and uninspiring and for most people, retirement seems like a long way off, so why worry about it now?
However, as retirement approaches, it is amazing how interesting Pensions suddenly become, not least when you consider the current level of the State Pension.
The current State Pension for someone with a full National Insurance record is £97.65 per week (£5,077.80 per annum). If you have little or no savings or other sources of income, you may receive the Pension Credit to increase your State Pension to a maximum of £132.60 per week (£6,895.20 per annum). If you have some savings or other sources of income, you may get a small additional income through the Pension Savings Credit.
If this was your only source of income in retirement, could you afford to live on this?
The State Pension is currently payable at age 65 for men and between ages 60 – 65 for women. From April 2020, both men and women will receive the State Pension at age 66. For those retiring between April 2024 and April 2046, the State Pension age will be gradually increased to age 68 - and there is still talk of increasing the State Pension age beyond this!
If you harbour any plans of retiring earlier than this, then your own personal Pension provision and other savings for retirement are a necessity!
Many people use a lack of understanding of Pensions, poor past performance or a perceived lack of security to put off saving for retirement through a Pension. However, even if Pensions are just not your cup of tea, you should still be saving somewhere!
For most, a Pension is the most suitable way of saving funds for retirement due to the tax advantages and crucially, the inaccessibility of a Pension before age 55 (all too often those saving for retirement through alternative means such as ISA’s find them just a little too easy to access and spend in their younger days).
One thing is for sure - when it comes to retirement, the chasm of difference between those who have saved for retirement and those that haven’t is very evident. Unfortunately there is too small a percentage of people who have given themselves a big enough cushion to fall back on in their retirement years, which for someone reaching 65 now, could be a further 30 or 40 years!
In a bid to engage the masses on the importance of pension planning, we are going to cover a few of the Pension planning issues that we deal with for Solicitors and their clients in the next few issues.
Below is an overview of the topics I intend to cover in this series, but if there is anything else you would like to see covered, please let us know:
The next instalments in our ‘Pension Planning’ series:
Part One: Contributing to a Pension – how, where and when to accumulate pension savings.
Part Two: Drawing an income from a Pension – the options available at retirement.
Part Three: Drawing an income from a Pension for those in poor health or terminally ill – how to get the maximum value out of a pension for the individual or for their loved ones.
Part Four: Pension sharing and divorce – a look at how you can secure an appropriate pension share for your client on divorce pre and post retirement.
Part Five: NEST (National Employment Savings Trust) and Personal Accounts – a summary of what all employers should know in relation to the proposed new State Pension scheme and what an employer can do now.
Part Six: The Inheritance Tax treatment of Pensions - on death before or after retirement.
A sensible overall plan
Professional Financial Centre (East Midlands) Ltd has successfully helped many clients to put a sensible financial plan into place that will last them for the rest of their lives. When looking at the huge choice of investments available we are able to prove that we only have your interests at heart. We do not have any vested interest in choosing one particular product or course of action over another. As changes happen, we review our clients’ plans, adjusting them to meet changing economic circumstances and family needs. If you want to challenge us to do the same for you or your clients, you will not be disappointed. If you simply want a second opinion, our view on your existing holdings, or have a general query about financial matters, please call us.
Professional Financial Centre (East Midlands) Ltd is a local financial services resource for Legal and Accountancy firms who do not operate in house Financial Services departments. We share the same ethos as Professional firms, in that we act purely in our clients’ interests, operating solely on a fee basis and accounting to our clients for any commissions. As a result of our qualifications, experience and culture, we qualify to be included on the SIFA Professional Directory of IFA’s, which is endorsed by the Law Society. The database can be seen atb www.sifa-directory.info.