Pension Freedoms 4 years on

Pension Freedoms 4 years on

The Government’s announcement of Pension Freedoms in 2014 came into play from the start of the 2015/16 tax year, promising “freedom and choice in pensions”. It has now been four years since the new rulings took effect, yet many people approaching retirement age are still none the wiser as to the key features.

Let’s remind ourselves of the key elements, with a focus on what it means for your finances.

The Pension Freedoms Plan

The introduction of the new plans in 2015 allows people aged 55 and over to take out their private pensions as a single lump sum, removing the previous limit of 25%, although anything over the initial 25% will be hit by tax which could put you into a higher tax rate bracket..

Individuals essentially have a number of options at their disposal:

  1. Leave funds in the pension, as is the default position until you wish to start taking payments.
  1. Withdraw the full sum of money from the private pension, although not recommended in nearly all cases. (25% tax-free; 75% taxed).
  1. Withdraw lump sums equalling a percentage of the overall funds, leaving the leftovers in the pension fund.
  1. Take the tax-free 25% and then buy an annuity to gain a monthly income for the rest of your life.
  1. Take the tax-free 25% and then buy a drawdown product, giving you a monthly income and the flexibility to keep withdrawing lump sums if required.
  1. A combination of an annuity to secure guaranteed income alongside the flexibility of withdrawals

A recent market study by our regulator, The Financial Conduct Authority estimated that 100,000 people use the fifth option without seeking advice and is costing consumers up to £25m in missed pension income each year. Moreover, pension freedoms can lead to the unnecessary tax being paid and being caught up with other rules, such as the Money Purchase Annual Allowance which can limit your contributions to £4k a year, rather than the annual allowance currently £40k.

As such, it is highly advised that you speak to an expert before making any decisions on how to utilise your pension.

New Rulings From 2019

While the increased flexibility has provided additional options, the teething problems of missed pension income have been further exacerbated by the fact that many have focused on the short-term by taking lump sums, essentially putting their long-term financial stability in jeopardy.

As a result, the Financial Conduct Authority (FCA) is to usher in some amendments in November 2019. These planned changes are designed to make things a lot clearer for individuals.

Firstly, consumers will receive “wake up packs” every five years (starting at age 50) until their pension has been entirely cashed. This will include a summary, risk warning, and basic guidance. Secondly, pension firms will have to look into enhanced annuities to see whether clients are eligible. This must be supported by a market-leading quote based on their individual circumstances.

Further ideas are being trialed with a view to making them available in 2020. This includes a requirement for pension firms to provide clear information regarding payments and fees, as well as insight into potential investment pathways.

It is important to note that a pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation which are subject to change in the future.

Given the pending changes, now is the perfect time to seek further advice from a financial adviser. The health of your future finances may depend on it.

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The Pro’s and Con’s of buying an Annuity

The Pro’s and Con’s of buying an Annuity

Protecting your financial health with the right retirement plan is a responsibility that nobody can afford to ignore. The decisions revolving around your pension are undoubtedly among the most important of all, and an annuity is one of the options that you’ve probably heard about.

Before rushing into a decision one way or another, it’s imperative that you understand the potential benefits and drawbacks – not least because it is often not possible to undo your decision. Here’s all you need to know.

 Annuities At A Glance

In essence, an annuity is an agreement in which you trade your pension (or at least a part of it) for a guaranteed income that will last throughout retirement until the day you die, regardless of what age that happens.

Annuities are a form of insurance, then, and are used by many people throughout their retirement years.

 Annuities: The Pros & Cons

Like most financial products, there are a number of pros and cons to consider before taking out an annuity agreement. Let’s take a look at both below.

The Pros

First and foremost, the annuity arrangement means that your income is guaranteed for life. This means that you’ll have money entering your pocket even if you live for 20 or 30 years after the annuity payments start. This in itself is extremely reassuring.

Annuity agreements offer flexible options, including the choice between flat payments and increasing payments. The latter option gives you the best chance of staying ahead of inflation and increased living costs, resulting in the same level of buying power at all times, albeit starting at a lower initial income.

It is also possible to pay a lump sum and start taking monthly payments right away, or defer the payments until a later date (such as after you retire). Some of the agreements also allow you to defer payments to a loved one should you pass – albeit only or a set amount of time.

If you have health problems, you could receive a higher level of income. This is because of the provider will look at life expectancy

The Cons

Annuities can be quite complex and difficult to understand. Nobody should take a financial product that they do not understand.

Annuities do not allow you to change the payment terms, even if your situation changes, which can tie you into financially suffocating agreements.

Annuity providers offer different rates of payments, so it is important to shop around. Depending on investment performance and longevity, an Annuity may not offer the best deal when it comes to the total income it pays out. When you (or your spouse if joint income is selected) dies the annuity dies with you.

Is An Annuity Agreement Right For You?

As with most financial products, there is no single right or wrong answer. As long as you consider what’s most important to you, finding the right option shouldn’t be too difficult. But if you do still require some help, our experts are only a call away.

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How to Create the Perfect Retirement Plan

How To Create The Perfect Retirement Plan

Retirement, for many, is a chance to continue doing the things they love most, from following their favourite football team across Europe to getting away from the British weather for a winter in the sun. However, waiting until you’re 67 to step away from the working world entirely can feel like a long time away. It’s for this reason why many are looking into retiring early, on a plan which ensures they don’t have to give up any aspect of their current lifestyle.

Unfortunately, retiring on your own terms is expensive, especially if you want to enjoy the comforts and luxuries you’ve had since you first started to earn a wage. What’s more, your retirement is going to last a significant number of years, so preparing in advance for these years is crucial. How do you create the perfect retirement plan, however?

How Much Do You Have?

The average employee who has been working for several years will have a pension pot building up. All employers must provide workers with a workplace pension scheme, which employees are then automatically enrolled in. You are automatically enrolled if you meet the following criteria:

  • Aged between 22 and the state pension age – in 2019, the state pension age for both men and women is 66. However, it is going to increase further to 67 by 2026.
  • Earn at least £10,000
  • Classed as a ‘worker’
  • Work within the UK

How much you have within this pension pot will depend on a variety of factors, including what type of scheme you’re enrolled in, how much both you and your employer pay in, and the tax relief the government has added to your workplace pension.

The current minimum contribution limits are 5% for you as the employee and 3% for the employer.  That is a maximum of 8%.  Tax relief is also available in most situations reducing which makes up part of your 5% contribution thus reducing the amount you actually pay.

To work out how much pension you have to play with in retirement, you first need to discover how much is in your savings already. Once a year, your pension provider should send you a statement. However, you can also choose to check the amount online, should your provider allow you to track it via their website.

You can also check your State Pension online, using the website. You can then accurately see how much you have for your pension.

How Much Do You Need?

Once you’re aware of how much pension you have, you need to work out how much you need.

How much do you predict your winter away in the sun will cost? How much, on average, is a season ticket for your favourite football team?

Also add into this amount the monthly outgoings you will still have: mortgage repayments, utility bills, and other lifestyle factors.

How To Achieve The Money You Need

Savings are the best way to build your pension pot up, but you need to be saving in the right places. Therefore, it’s highly crucial you find the best pension scheme for you and your savings. Of course, if you have the opportunity to pay more into your pension, it’s recommended you do so, as this is one key way to increase your amount.

Alternatively, you can choose to switch your pension from the government-backed workplace scheme to a private scheme. A private scheme may offer you higher interest on the money you pay, therefore, enabling you to withdraw a higher amount when you choose to.

Why A Pension Is The Best Plan

A pension plan is the best solution for ensuring you have the funds available to enjoy your lifestyle for the rest of your life. While employers now have a commitment to providing a workplace pension, if you’re not automatically enrolled, it’s imperative that you do so as soon as possible. There are several reasons why a pension is a wise move, including:

  • A pension is tax efficient. What this means is for every £1 an employee pays into a pension scheme, the tax man will you give 25p. When you’re ready to withdraw your pension, 25% is tax-free. If you accrue £100,000 in your pension pot, £25,000 is tax-free.
  • Today’s pensions are highly flexible. Long gone are the days where you had to buy a monthly annuity pension from an insurance company. Now you can draw as little or as much as you’d like out of your pension after the age of 55.
  • Your pension can be passed onto your loved ones in the wake of your passing. You can even leave it as a lump sum, so you know your family is looked after when you’ve gone.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Contact us to start your retirement plan.

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What Is A Pension Review?

Pension Review

Are you starting to prepare for your retirement? You may wish to complete a pension review. A pension review is typically an essential part of retirement planning and allows you to make sure that you will be secure financially when you lose your permanent income.

What Is A Pension Review?

Simply put, a pension review is a way to check how well your pension is performing. Is it generating the level of finances that you had hoped it would and are you on track for the level of pension you wanted by the time you retire?

Pension reviews can include various different pieces of information including:

  • Total annual fee
  • Level of growth
  • Type of investments
  • Ability to provide the right retirement

As you can see, a pension review will essentially show you whether changes need to be made during the pension planning stage. For instance, if the type of investments that you are currently using is not providing the level of growth that you need, then it may be worth looking at different investment options that could generate better results.

Who Completes A Pension Review?

A pension review can either be completed by an individual or a company working for an individual. Ultimately, this will be to make sure that the pension is providing the benefits that they require.

What Can You Learn from a Pension Review?

You can learn a lot from a pension review. The best and simplest way to look at this is through an example. Remember, you can start a pension review at any age, assuming you are already planning your pension. For instance, someone at thirty could theoretically conduct a review. This would provide them with a great start for their pension.

They might find that their annual fees are quite low and that they are currently involved with low-risk investments. However, by moving to high-risk investments, they would have lower annual fees. There could also be a good chance that the funds would grow at a faster rate too.

I had a private pension not working for me and an old works pension that was frozen. Tim put them both together and got them working for me. It is working well, just wish I met Tim 20 years ago. He is doing a great job. Tim has been my adviser for 4 years and my pension has increased by almost 50%. Thanks Tim.    Janice P, Birmingham – Client Since 2015

A pension review does not mean that you have to make these changes. It simply provides you or the company with all the information so that an informed decision can be made

Other Benefits of a Pension Review

There are various benefits of a pension review that you should keep in mind. First, you might have your pension spread across several different plans. With a pension review, you can begin the process of transferring all your pensions to a single provider. This will mean that keeping track of your pension and your finances will be easier. You’ll be able to see more clearly whether your pension is on target.

You might also find that your current pension plan is simply outdated and not in line with the economy of today. With a pension review you or the company can work to change your pension and ensure that it provides the benefits that you need. Ultimately, you can make sure that it is performing at the level you want or at least, increase the chances that it will.

If you would like an Independent Financial Advisor to do a pension review for you, please do get in contact with us through our contact page. 

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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Who Can Do A Pension Review

Who Can Do a Pension Review?

Retirement planning has become a major financial responsibility that many of us are trying to tackle as early as possible. It’s becoming clear that State Pensions will no longer be able to provide us with anything but the bare necessities, and many people find this to be unacceptable after working for a large majority of their lives. As a result, people are starting to take their pension into their own hands by conducting regular reviews to ensure that they are optimising the amount of money being stored in it.

But who exactly performs a pension review for you, and what does it entail?

What does a pension review involve?

Pension reviews typically involve examining your pension to see how healthy it is. This usually involves checking the growth of your pension, finding lost and neglected pensions that you have forgotten about from previous employers, and optimising the pension with different investments. It will also check that your pension fund will be able to provide you with a healthy retirement.

Here are some examples of pension reviews and why they’re useful:

A 55-year-old person could have changed jobs several times and accumulated several pensions, resulting in multiple annual fees of differing rates. A pension review could identify the exact rates and there could be a possibility of consolidating these funds in order to reduce the amount paid in fees.

Another example could be a 60-year-old that wants to access their pension pot. A review might show that the pot hasn’t grown as expected due to a high amount of fees being paid. As a result, withdrawing from the pot might not be a desirable option, but the pension review could look for alternatives.

Who performs a pension review?

Pension reviews are performed by financial advisors from companies that are regulated by the Financial Conduct Authority (FCA). The FCA’s website has an approved list of authorised companies that are permitted to perform your pension review.

It’s important not to trust any companies that cold contact you via phone, email, SMS or with other similar methods. Pension review scams attempt to persuade you to move your pension pot into a higher risk scheme that will likely take your money and run with it. They will claim they are approved by the FCA or may state that approval is not required since they are not the ones offering the advice.

How do I request a pension review?

A pension review can be requested at any time, but it’s important to seek out a financial adviser that works for a firm that is approved by the FCA to offer financial advice. The FCA has a register on its website that is a public record of firms, individuals and other bodies that are or have been regulated by the PRA and/or FCA. This will ensure that the financial advice you receive is impartial. The FCA register can be found at

Pension reviews are important especially if you’re uncertain about the situation of your current pension, but it’s vital that you seek out financial advice from experts that are approved to do so.

If you are looking to get a pension review done, please do contact us through our website, email or call 01384 671947

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

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The New State Pension

The New State Pension

The new state pension was introduced on 6th April 2016.  This affects everyone who has yet to reach state pension age.

The old system was too complicated to work out how much you would receive in old age, making it difficult to plan for retirement.  The new State Pension was introduced to simplify the situation.

The full State Pension is based on your National Insurance (NI) contributions only.  You will need 35 years contributions to get the get the full amount which is currently £164.35 per week.

Working out how much you’ll receive is very straightforward if you’re just starting work and haven’t built up any State Pension.

For example, 25 years of NI contributions means a state pension of 25/35ths of the full amount.  However, if you have less than 10 years, you won’t normally qualify for any State Pension.  It’s a good idea to get a forecast to see what you’ve built up so far so you know here you stand. This is available from the government website by clicking here.

The new State Pension increases each year by whichever is the highest:

  • earnings – the average percentage growth in wages

  • prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index

  • 2.5%

You can still get a State Pension if you have other income like a personal pension or a pension from work.

There is no perfect solution to your retirement planning, however, one thing is for certain; for most people this will only provide for a basic lifestyle.

In order to enjoy retirement and not have to work for the rest of your life you will need to make extra provisions.

At TKV we offer a complimentary pension review of your retirement plans, contact us to arrange a meeting.

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Do you know the value of your pension pot?

Do you know the value of your pension pot?

The new pension freedoms place even greater responsibility on individuals to take control of their own finances. Since April 2015, individuals have been able to spend their accumulated pension savings in way that suits them.

Yet despite this most radical of changes to pensions in a generation, we regularly see people who do not know the value of their pension savings.

If you don’t know the size of your pension pot, you should initially speak to your pension provider and get a statement.  Taking control and knowing what you have can help you plan to make your savings work harder for you in retirement.

The new pension freedoms place a huge amount of responsibility on people to manage their own financial affairs and to make choices that will impact their standard of living in retirement.

This is not something that people can be complacent about.  So if you have any doubt, I recommend that you seek proper independent financial advice before making any decisions.

If you need our help finding out about your pension – Contact Us on 01384 671947.

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The value of your investment can go down as well as up and you may not get back the full amount you invested.

How To Choose Your Retirement Age

How to choose your retirement age

Many people are concerned or confused about their pension as they approach retirement age, or possibly they are thinking about retiring and have a few questions. We may be able to help bring clarity to your situation.

Choosing your retirement age will have implications on how much money you will have in your twilight years.

There is no doubting the subject of retirement is complex.  Factors such as the rate you drawdown funds,  annuity purchase or taking all you cash in one go all come into play.  Choosing when to retire may well boil down to a simple question:

Have you acquired enough money to give you the income you want when you retire?

With this in mind it is worth considering an action plan for your retirement.  This will detail your various pension plans, pension funds and your state pension.  Your outgoings can also be put on your action plan.  This provides clarity on how much disposable cash you will have when you retire.  The advantage of an action plan is that it makes your financial situation clearer to see.

Good financial advisers will ask you questions about how you plan to live when you retire.  The more extravagant, the more money you will require to sustain a lifestyle of this kind.  So define your lifestyle and possibly estimate how much you will need to sustain it.

In all instances it is worth seeking independent financial advice.

  For financial advice contact us on 01384 671947 or leave your details and we will contact you.

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A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.