Defined benefit pension or final salary pensions are among the most generous of pension scheme arrangements. They provide scheme members with a guaranteed income at retirement based on a mixture of years worked and final salary.
Did you know that in 2015 changes were made to pension death benefits. This means that should you die before the age of 75, you may be able to pass your pension to a nominated beneficiary tax-free and if aged after 75, your pension pot could be drawn by a beneficiary at their own marginal tax rate; provided of course that your pension scheme allows for this level of flexibility.
Did you know that the Government plans to add 1.25% on the dividend tax rate. You can receive £2,000 of dividends a year tax free but after that the tax rate is 7.5% for basic taxpayers and 32.5% for higher taxpayers. This is planned to rise to 8.75% and 33.75% respectively in April 2022. This means a basic taxpayer will pay £263 in tax, up from £225 on £5,000 of dividend payments. For a higher taxpayer this will e £1,013 up from £875.
The age at which pension savers can access their pot freely, is set to increase from 55 to 57. The change, which is due to come into force in 2028, will affect most people approaching retirement. This will mean that from 2028, those under 57 will not be able to access their pensions without incurring a tax penalty. There are exceptions, however, notably people forced into retirement by bad health as well as firefighters, police and the armed forces.
There are about 1.6 million lost pension pots in the UK worth over £19.4 billion. The ABI (Association of British Insurers) says that pensions often get mislaid when people move house and fail to tell their pension scheme provider. Tracking down lost pensions is certainly worthwhile as it will give you a clear view of your financial position when you are looking to retire.
Here are six things that we, as trusted award winning Independent Financial Advisers, can do for you:- Personal advice – Our friendly Financial Advisers will source solutions that are best for you and your loved ones. We’ll ask questions about you, your family and lifestyle, together with a risk assessment; to fully understand your needs, aspirations and your future goals.
Do you know the best savings options for children? • Up to £9,000 a year can be invested in a Junior ISA, for the tax year 20-21, for a child under 18. Capital gains and income are tax free. The allowance can be split between cash, and stocks and shares. They can only be opened by the child’s parents or guardians, but anyone can contribute to a Junior ISA account. The money can’t be withdrawn until age 18, unless the child is terminally ill. After this point the Junior ISA will become a full ISA and the adult limit of £20,000 will apply.
You will have many things to consider when investing for retirement. How your money will perform in the stock market, how long you may need an income for and whether the amount you withdraw from your pot each year is sustainable. You must also think about timing, because the movements in the stock market can have a huge impact on how long your pension pot lasts.
Those approaching retirement should consider protecting their income from inflation after the cost of living index jumped to its highest level since November 2018. The official rate of inflation hit 2.1% in May 2021, up from 0.7% in February. The rate is expected to stay close to or above the Bank of England’s target rate of 2% until at least 2024, according to forecasts by the Bank’s monetary policy committee.
Reduce Charges It pays to shop around, just like your do for home insurance, mobile phones and fuel; but most people forget to do the same for their pensions investments and life insurance. We are independent financial advisers, so can source the best deals from the market.