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Personal pensions

What is a personal pension?

Personal pensions, or private pensions are a tax efficient means of saving and building a fund to provide you with a regular income during your retirement.  Before retirement, you pay a regular amount – usually monthly or annually, into your fund.  Or, you can pay a lump sum.  Your personal pension provider will then invest your money on your behalf in funds of your choice.  The personal pension is usually provided by financial organisations such as building societies, banks, insurance companies or unit trusts.

Will a personal pension suit me?

If you are unsure if a personal pension is right for you, seek pensions advice from an independent financial adviser before making a decision.  They will also be able to help you decide which particular personal pension will best meet your needs as part of a personal financial plan. 

Personal pensions

  • Available from banks, building societies and life insurance companies or unit trusts
  • You can start receiving an income from the age of 55 (by 2010)
  • No limit on the number of schemes you can have
  • Contributions don’t affect your entitlement to the basic State Pension
  • You can save as much as you like, up to your total earned income in a financial year, provided the total value does not exceed the lifetime allowance of £1.8 million in 2010/11
  • If you earn less than £3,600 per annum, you can still contribute that amount 
  • Schemes are likely to have a higher minimum contribution and higher annual charges than a stakeholder scheme, for example
  • Greater investment choice and flexibility
  • You receive tax relief on your pension contributions

Fund choices and costs

Bear in mind that a personal pension is simply an investment which is taxed in a specific manner.  The growth, or loss, within the plan is mainly determined by the performance of the underlying assets and the charges incurred.  Pension charging structures have changed dramatically over the past few years and the cost of a new pension is now far lower than in the past.  Many people now find themselves with outdated, overpriced pension contracts.  In some cases you may even be able to switch contracts with the same provider to better your charging structure.  See our information under personal pension transfers.

As independent financial advisers, we can offer you investment advice and pensions advice that will help you choose the most suitable asset class or fund for your pension.  They should meet your attitude towards investment risk and your existing investment portfolio.

We only offer a fee-based financial planning service, rather than commission, as we believe it gives you the best independent financial advice and service.  The fee is a ‘transparent’ fee.  You will know exactly what we will charge and what we are charging for before you decide to proceed.  If you do not want ongoing investment advice on your personal pension we will not make any commission charges for your pension once it has been put in place – this potentially can save you a substantial amount of money.

How will my money be managed?

We specialise in investment management and look to maximise your gains in good market conditions and preserve your capital in poor periods by proactively advising you and altering your investment portfolio accordingly. 

Can I keep my pension going even if I am not earning?

Yes.  Contributions up to £3,600 per annum can be made.  This can be useful for non-earning spouses, children and grandchildren.

What happens when I need to draw my pension?

Your choices of how to draw on your money when you reach retirement will probably include the following options:

  • Use your whole pension pot to provide a taxable income for life – annuities

Or

  • Take up to 25% of your pot as a tax-free lump sum and use the rest to provide a taxable income from an annuity

Or

  • Use your pension pot to provide income (and tax-free lump sum) in stages – a ‘phased retirement’

Or

  • If your pension pot is large enough, or for other tax advice reasons, you could use the Income Draw Down option where the income stream can be adjusted within parameters

Any questions about your personal pension?

If you are a millionaire or a small business owner, this is an important area for you to consider fully.  If you have any questions, please call us on 01582 839280 or Email us.