Pension & Retirement Planning Advice in Milton Keynes

 

Pensions are designed to help you build a financial safety net for retirement, ensuring you have a regular income once you stop working. There are a variety of pension products and investment strategies, which can often seem complex. We specialise in simplifying these options, offering tailored advice and ongoing portfolio management to help you maximise your retirement savings.

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Types of Pension Arrangements

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State Pension

• Basic State Pension: Paid to individuals with sufficient National Insurance contributions. As of 2023/24, the full amount is £203.85 per week.

• Additional State Pension (formerly SERPS/S2P): Offers more to low/mid earners, carers, and the long-term ill. From April 2016, state pensions are simplified into a single-tier flat-rate pension.

 

Workplace Pensions

• Occupational Pensions:

  • Defined Benefit (Final Salary): Based on your salary and years of service.

  • Defined Contribution (Money Purchase): Based on contributions and investment growth.

• Auto Enrolment Schemes: Mandatory for employers since 2012. Employers must contribute at least 3%, employees 4%, and the government adds 1% tax relief.

 

Personal Pensions

Open to everyone, including the self-employed. These include:

• Standard Personal Pensions

• Stakeholder Pensions: Capped charges, but fewer investment options.

Contributions receive tax relief:

• Invest £80, and HMRC adds £20 (basic rate relief).

• Higher-rate taxpayers can claim additional relief.

• Up to £60,000 can be contributed annually (2023/24), with unused allowance from the past three years eligible for carry forward.

 

Investment Strategy & Ongoing Management

 

Your pension is typically invested across various sectors and asset classes – such as shares, property, and bonds – tailored to your risk profile. We construct diversified, risk-rated portfolios and conduct quarterly reviews to align your investments with global market movements, aiming to maximise long-term growth.

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Retirement Options (Available from Age 55)

 

1. Take Benefits from Your Existing Pension Provider

You may access your benefits directly, usually with 25% as a tax-free lump sum, and the rest providing a taxable income.

 

2. Purchase an Annuity (Open Market Option)

You can shop around for better annuity rates from another provider. This guarantees a lifetime income and may offer higher returns than your current provider.

 

3. Flexi-Access Drawdown (FAD)

• Take 25% of your fund tax-free upfront.

• Leave the remainder invested for ongoing growth.

• Withdraw flexible amounts, taxed at your marginal rate.

• Note: Once income is drawn, future contributions are limited to a £10,000 annual allowance.

• Ongoing investment strategy is critical to maintain income sustainability.

Risks:

• Capital may be depleted over time.

• Future annuity rates may be lower.

• High early withdrawals can reduce long-term income.

• DWP may means-test benefits.

 

4. Uncrystallised Fund Pension Lump Sum (UFPLS)

• Withdraw lump sums as needed.

• 25% is tax-free; the remainder is taxed as income.

• Triggers the £10,000 annual allowance cap.

• Subject to emergency tax initially.

 

5. Phased Retirement

• Gradually access pension in stages by segmenting the fund.

• Each phased withdrawal releases 25% tax-free cash, with the remainder buying an annuity.

• Remaining funds stay invested, offering potential future growth.

 

6. Combination Plan (Phased Flexi-Access Drawdown)

• Combines phased withdrawals with drawdown flexibility.

• Provides control over timing and tax treatment.

• Income can consist of tax-free cash and taxable drawdown income.

 

Important Compliance Note

 

If you flexibly access your pension (via FAD or UFPLS), you must notify any other pension schemes you’re a part of within 91 days. Failure to do so can result in:

• A fine of up to £300

• Ongoing penalties of £60 per day

• A fine of up to £3,000 for incorrect disclosures made fraudulently or negligently

 

Pension Simplification & Legislative Changes

 

Since ‘A’ Day (6 April 2006), pensions have been governed by a single universal regime. Key reforms include:

• Tax-free lump sums up to 25%

• Early access from age 55

• Full concurrency (multiple plan contributions allowed)

• Wide investment flexibility

• Flexible drawdown options without annuity restrictions

• “Carry forward” rules allowing unused allowance from 3 previous years to be used

 

Budget 2023 Updates:

• Lifetime allowance charge abolished

• Annual contribution limit raised to £60,000

• Greater flexibility and access from age 55

• Reduced allowance (£10,000) for those accessing pensions flexibly

 

Summary

 

Pension planning involves a wide range of options and strategies that should be aligned with your personal goals, tax position, and risk appetite. Whether you are starting early, nearing retirement, or looking to optimise your drawdown options, we are here to guide you every step of the way.

As independent financial advisers based in Milton Keynes, we offer personalised pension advice to help you make informed decisions and secure your financial future.