Advanced Pensions & Simplification

In recent years the pensions industry has become more advanced in terms of the flexibility of investments available and the structure of the actual pension arrangments.

It is an area of constant change and you should consult us regularly to make preparations for a secure and enjoyable retirement.

 Self Invested Personal Pensions (SIPPs)

A Self Invested Personal Pension (SIPP) is a tax-efficient wrapper within which a wide range of investments can be held. A new SIPP must appoint a scheme administrator, usually the recognised product provider. SIPPs have the same tax benefits and regulations as conventional personal pension plans but you and / or your advisers have control over the investment choice - each SIPP is unique to the individual. Otherwise, it operates in the same way as a conventional personal pension in respect of contributions and eligibility, for Her Majesty's Revenue & Customs (HMRC) purposes.

The range of permitted investments is extensive and includes more conventional investments such as deposits, unit trusts, stocks and shares and also more unusual assets such as commercial property. The complex nature of a SIPP means that it is not suitable for all investors. Often, the benefits of 'self investment' are only advantageous to people with very large funds and / or investors with some level of sophistication when it comes to investment decisions. Often, there are additional charges for arranging and dealing with a SIPP and these charges would erode smaller funds quickly.

We will be able to provide more details and make a recommendation based on your own circumstances.

Pensions Simplification

On 6 April 2006 the pensions industry underwent some fundamental changes. These changes allow more flexibility for your retirement planning than previously permitted.

‘A' Day (Appointed day) arrived on 6th April 2006 and brought with it sweeping and radical changes for all pension plans - whether occupational or personal.

From this date there is just one set of tax rules for all types of pension, with an individual Lifetime Allowance (£1.75 million - 2009/2010) and an individual Annual Allowance (£245,000 - 2009/2010). These limits may increase each year (please ask for the specific yearly limits). All individuals will be able to fund up to these new attractive limits. Schemes already in existence before this date will need to update their rules to allow some of the new flexibilities. Exceeding the limits will simply trigger a tax charge.

The ‘A' Day rules made the majority of pensions much simpler and there could be a number of key advantages:

• Pensions are much easier to understand.
• Most customers now have greater flexibility in the size and timing of their contributions.

There will also be a number of other changes including:-

• Retirement age will rise from age 50, to age 55 by the year 2010
• Full concurrency (i.e. being able to pay into any array of plans you wish), subject to the annual allowance
• Wide investment flexibility
• Up to 25% tax-free cash will be available from the majority of pension schemes.
• The ability to commute a ‘small' fund as a one-off lump sum as opposed to having to draw a regular income
• Flexible options at retirement when deciding to take benefits
• No need to ‘have to' secure benefits at age 75 via an annuity.

Why not contact us to review your retirement planning?