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Retirement & Pension Planning


You may have accumulated a number of different pension arrangements over the years, or be looking to begin your pension planning and looking for a suitable vehicle. Pension plans are not the only way to save for retirement and we consider a number of options, advising our clients.

SIPPs (Self Invested Pension Plans)

For those wanting greater control of their pension, then a SIPP is likely to be appropriate for you. SIPPs earn tax relief in the same way as normal pension funds, and usually one quarter of the value of the fund can be taken as tax-free cash from the age of 55.

SIPPs for example can invest in Bank Deposits, Bonds, Shares, Unit Investment Trusts, Open Ended Investment Companies, Exchange Traded Funds, Commercial Property, Hedge Funds, etc. When you retire, you are not obliged to either buy an annuity or switch into an Income Drawdown Plan, and you can use your SIPP to manage your retirement income.

For those who may require a more straightforward choice, you may wish to look at Stakeholder pensions or NEST.

Stakeholder Pensions

Stakeholder pensions are like a personal pension but have to meet certain minimum standards to ensure that they are value for money. The Annual Management Charges are limited to 1.5% per annum for the first 10 years (and thereafter up to 1%). Like a SIPP, you can start, stop, re-start or change your contributions whenever you want, without penalty.

You receive tax relief on contributions of up to 100% of your earnings each year, subject to a maximum of, currently, £50,000 for the 2012/13 tax year. Your employer may already offer you access to a Stakeholder pension scheme through the workplace. We sometimes use Stakeholder pensions for setting up children’s pensions (typically with contribution(s) by parent or grandparent). 




The National Employment Savings Trust will be introduced in the UK from October 2012.

The Government estimates that about 7 million people are currently under-saving for retirement and a major part of the Government’s pension reform ideas is to make it easier for these people to save for retirement.

From October 2012, UK employers will be required to automatically enrol employees into a “Qualifying Workplace Pension Scheme”. This auto-enrolment could be to your existing company pension scheme if it meets certain criteria, otherwise the employees will be enrolled into NEST, which aims to be a simple, low-cost pension scheme being introduced by the Government.

Between October 2012 and 2017, depending on the size of company, all UK employers will be required to contribute a minimum of 3% of each employee’s eligible earnings into a pension, assuming the employee does not “opt out”. Employees will need to pay a personal contribution of 4% with a further 1% tax-relief being added, to make the minimum contribution 8%.

Therefore, we believe, NEST is designed to become the “default” option for employees in the future.

Company or Occupational Pensions

These vary from company to company and are typically either: “salary related” – whereby the amount of pension you get is based upon your salary, the number of years you have been in the scheme, and the “accrual rate” (e.g. one sixtieth).

Money Purchase Scheme

A Money Purchase Scheme is based on how much has been paid into your scheme and the investment performance of that money.

Your employer may give you the option of diverting any employer contributions into your own personal arrangement, e.g. SIPPs or Stakeholder pensions.

Using your Pension Fund to buy Premises

Your old, frozen and current pension funds may be used to acquire commercial property. The idea is that the property ownership can be split between you personally and/or your business, and/or your pension funds. This therefore gives you a route to enable the purchase of the commercial premises you perhaps thought you could not afford. We could help you structure the deal so that your company ends up paying rent into your own pension fund. This is of course a complex area so please contact us for advice.

Pensions for Children/Grandchildren

This has been possible for several years. The maximum amount you can invest is £2,808 per year (which the Government tops up to £3,600 with basic rate tax relief).

It certainly is an excellent idea to start a child early on a pension scheme, as this typically means they will have a 20, possibly 30 year head start. However, this is a long-term investment as the funds cannot be touched by the child until they reach the minimum age of 55 under current legislation.

SIPPs or Stakeholder pensions can be used for this purpose. Parents, grandparents and other relatives can contribute.

Other Savings and Investments

There are alternatives, if you choose not to invest through a pension to save for your retirement. There are a number of tax-efficient alternatives available with (Stocks & Shares) ISA allowances (£11,280 per person 2012/2013 or £22,560 per couple per annum) i.e. an ISA investment strategy could be considered.

Once ISAs are maximised, you could also consider your Capital Gains Tax strategy, as there is an annual exempt amount to profits of £10,600 (2012/2013). This is your tax-free annual allowance and any profit above this figure is taxed at 18% for basic rate tax-payers and 28% for higher earners. (Take care with the calculation; it is more complicated than just your current income tax status.)

There are National Savings, depending on the rates and their availability.

There are also potentially higher risk tax-efficient investment such as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS). There are significant tax breaks available from the Treasury to encourage people to invest in the UK's smaller company sector via a VCT or an EIS fund, especially for higher rate tax payers and people with capital gains or inheritance tax issues.

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