The importance of Pensions

 

I once said to some one “Oh I wouldn’t bother saving into a pension.” What a silly idea that is. I can’t believe there was a time that I thought so irresposibly about saving for the future. As I understand under present legislation you can with draw a lump sum of £15,000* with out having to take an annuity or  buy a regular income which if your fund was only that size it would produce a very small income. However a lump sum would be a useful thing, however small. The wisest ones or the luckiest of our working colleagues will be enrolled to final salary schemes, and not money purchase schemes. For the less fortunate will be scraping a life on the state scheme and having to deal with very small pots to keep themselves going into retirement. Moral of the story get saving into a pension now 66 comes around a lot quicker than you think.

 

*Lump sum withdrawl limit July 2009

The importance of Pensions

 

I once said to some one “Oh I wouldn’t bother saving into a pension.” What a silly idea that is. I can’t believe there was a time that I thought so irresposibly about saving for the future. As I understand under present legislation you can with draw a lump sum of £15,000* with out having to take an annuity or  buy a regular income which if your fund was only that size it would produce a very small income. However a lump sum would be a useful thing, however small. The wisest ones or the luckiest of our working colleagues will be enrolled to final salary schemes, and not money purchase schemes. For the less fortunate will be scraping a life on the state scheme and having to deal with very small pots to keep themselves going into retirement. Moral of the story get saving into a pension now 66 comes around a lot quicker than you think.

 

*Lump sum withdrawl limit July 2009

Approaching retirement

Simple steps to take when thinking about retiring.

1. Have you requested or recieved a forecast of your state old age pension. I have read that if you delay taking a pension at Normal Retirement Age that you can increase the benefit paid out under this scheme. I wonder if anyone can verify this statement?

Presumably the department of work and pensions would be in a position to give you the address to write to, or may be a trip to the Post Office may help, if you wanted to request a projection for your pension based on your National Insurance number / contribution.

2. Private Pension when did you last look at a statement from your pension company, like many people I suspect that most of the paper work gets filed in the I will deal with that later box. How are your funds performing or underperforming? Are your funds currently linked to the stock market, do you consider the market to be reaching a peak? These are the difficult decisions that Financial Advisers and members of the public have to try and gauge.

3.  If you do have a fund that is greater than the (can withdraw all the cash) because it’s so low? If you do then have you checked your annuity provider or plan. Will you buy an annuity of draw your funds out via a different method of withdrawl?

Moving away from Pension planning for 5 minutes

Okay why would you want to move away from pension planning? Maybe you’ve got to retirement and suddenly realised that after you’ve drawn your pension and got any state benefits that your entitled to, that you just don’t have enough to live on. What then ?

Well there is more that you can do for example if you own your property you can down size, generally many people don’t seem keen on this option, I don’t know why lets face it if your living in a big four bed detatched house and the grand children only visit at Christmas, why not release some funds. At this point I want a link to a fashion item, because unfortunately the young judge people. I believe in a fashionable way that can even include your children and grand children. If you have drawn our pension or downsized, you can get that new scooter or car, or even a new wardrobe. What the heck I say if your fit enough to enjoy it then make the most of it. More importantly maybe you could pay your dr to tell you how well you look….! or you might be able to pay for that BUPA appointment, some little things can make a big difference.

Back to the old pension world.

So there you go additional rate for tax relief on pensions for a higher rate payer (50%). Yes great if your a higher rate tax payer you can add £16,000 to your pension, the taxman automatically adds £4,000 and you claim an additional £6,000 via your tax return. At this point I have to stop typing due to fear of being sued for copyright.  I could also go on to write that if your income has reached £130,000 since April 2008 you need advice.

Lets think about interest rates for a minute.

One recent bit of news in the UKis the increasing cost of inflation, the implications of this could be serious if the rate of inflation increases too much. Will this happen? If it does interest rates will increase and a fixed rate mortgage for those who are borrowing will be a top priority. However there still seems to be a lack of decent fixed rates available to borrowers.

Lets face it all the lenders offer fixed rates in excess of 4% and longer term ones at 5%, I don’t know may be it is time to fix, If I could I think I would. But this is the man who famously fixed his mortgage at 8% only to see the rates drop and drop, and I even paid an arrangement fee for the privilege.

Check our website out www.Portsmouthpensions.com

What happens after you’ve tried thinking…

Okay so you have looked at your options, and there are many ways of raising more money if you need to when you have reached retirement. Trade down to a smaller property very simple way of releasing cash but can take time depending on the housing market, may be though it’s not an option.  What else is there? Equity release or lifetime mortgage, can be great in that you secure a loan against your property but you don’t actually have to make repayments, you are however charged interest which is rolled up into the loan, or you agree to selling a percentage of your house when it is sold. A lifetime mortgage you release money and pay the interest as you would on a normal loan, the only problem being there are not that many lenders that like lending past 75 for example. I dislike the fact that people are treated differently just because they are over 75, may be that is part of getting older I am not there yet so how can I comment.