Claire Davies

The

benefits of pension schemes in saving for retirement What tax relief means and how to benefit from full relief Types of pensions available to you Considerations in taking pension benefits Why you need to start saving for your retirement now

 Income

tax relief on contributions Investments/Savings grow free from CGT and income tax liability Death benefits for your spouse & family 25% tax free lump sum on retirement Benefits cannot be taken until age 55 Provides you with a fund for the purpose of annuity purchase / retirement income

There are two methods of claiming tax relief: Net Pay Method Employer Schemes payroll deduction Contributions from gross salary No further action required to claim tax relief
Relief

at Source Personal Contributions net salary Basic Rate tax claimed back from HMRC Complete tax return to claim back higher rates

Jane and Amy wish to make a 100 gross contribution to their personal pensions and gain full relief:

Jane is a Basic Rate Taxpayer: 100 x 80% = 80 net contribution 80 is 80% of 100, so she has received tax relief of 20% Amy is a Higher Rate Taxpayer: 100 x 80% = 80 net contribution She is entitled to higher rate tax relief of a further 20% 100 x 20% = 20 100 gross pension contribution has cost Amy 80 - 20 = 60 60 is 60% of 100, so she has received tax relief of 40%

 Pension

contributions are unlimited

You

can only claim tax relief on the higher of: 3,600 100% of UK earnings capped at 50,000*
*Reducing to 40,000 from April 2014

Carry

Forward Relief

 Flat

rate State Pension of 145.40 per week - 7,560.80 per annum

years of National Insurance or credits to be paid pension age will be increased to 67 by 2028

35

State

Benefit Final Salary Income based upon final salary and length of service Liability on Company NOT individual
Defined

Contribution Money Purchase Income based upon amount contributed and investment growth Liability on individual
Defined

Choosing a scheme
Investment choice & performance Financial Strength Charges Quality of Service

Stakeholder:
Minimum contribution: 20 Annual Charges: 1.5% for 10 years; 1% for remainder

Self Invested Personal Pensions (SIPP)

Greater Investment Choice Drawdown Arrangement Charges are higher

25% Tax Free Cash Lump Sum

Income is Taxable

Savings in excess of Lifetime Allowance taxed at 55%

Annuity Purchase:
Open Market Option Various Options Level, Linked, Spouse Pension, Guarantees Enhanced

Drawdown
Remain Invested Maximum Income reviewed triennially

 55%

of UK population do not have adequate savings for retirement of UK population are not saving

20%
54%

of men under the age of 50 have inadequate retirement savings of women under the age of 50 have inadequate retirement savings person saves 190 per month

64%

Average

Current Age

Annual Pension in retirement (age 65) if saving 200 per month

Annual Pension in retirement (age 65) if saving 300 per month

20

12,480

18,720

25
30 35 40

10,140
8,136 6,408 4,920

15,120
12,120 9,612 7,380