Tag Archives: pensions

Can I access my pension savings before I retire?

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If you are over 55 and have the right pension – yes you can! This is great news for people in the UK at the moment, as the official retirement date seems to be getting further and further away.  But why would you want to use hard earned cash which has been saved for your later years? Isn’t this a bit risky?

Use the guidance of a regulated financial advisor

Clearly money put aside for your retirement years was put there for a reason. To diminish those funds could be putting your retirement in danger. For this reason, you should never mess with your pension pot alone and get the guidance of a regulated financial advisor if you are thinking of releasing money. These professionals are accountable to the FCA.  Many offer a no-obligation pension check and can help you understand the options available to you. They can let you know if releasing money is right for you or not, based on your individual circumstances. It could leave you worse off in retirement.

In other words, as you approach your final working years you can double check that your pension pot is strong enough to fund a long retirement and also consider how you can use your savings to help you with debts, treats or big buys in the here and now.

So how do you access your pension?

In 2015 the government in the UK introduced pension freedoms. They allow people to take lump sums from their pension or a regular income, from the age of 55. You can only do this with work pensions or private pensions. You cannot access your state pension or unfunded pensions. If you have a final salary pension you can transfer monies to a fund which offers access. However, be careful as you could be giving up valuable guarantees. Before you do this get guidance as to whether having access to your pension will be detrimental to your long term benefits.

What are your options?

Here are three fundamental ways in which you can access your pension savings:

  • One lump sum
  • Taking out lump sums whenever you need them
  • Income drawdown. In other words, you draw down your pension as a regular income.

The first 25% of any money you take from your pension will be tax free. Any money left in your pot will continue to be invested by your pension provider. As seen above, you can take as many lump sums – if and when you need them. With drawdown you can create an extra income for yourself which could act as a sole or complimentary income. 

Why do people access their pensions?

Throughout our working lives our hard earned cash tends to go on five specific things:

  1. Sustenance. i.e., paying for those things we need just to allow us to live comfortably
  2. Those treats we give ourselves on a weekly/monthly basis
  3. Short-term savings (i.e., that holiday to America next summer; that new sofa you have been promising the family; rainy day money)
  4. Emergency funding (that unforeseen urgent bill etc.)
  5. Long-term savings (i.e., a savings pot for retirement)

There is always going to be the time when you need that extra bit of cash urgently. It seems people access their pot for reasons 3 and 4 above. Statistics from 2018 show people tend to access their part for the following reasons:

  • 32% to tackle a debt
  • 21% to make house improvements
  • 10% to buy a new car

See here how people are using pension freedoms in the year 2019/2020.

Whatever you do – don’t go it alone. Seek out the guidance of a regulated financial advisor to ensure your pension pay-out will be maximised after any access or indeed if it is a good idea at all. Check out the FCA website to get ideas as to where to find an advisor.

If you are considering your pension, consider using a regulated pensions specialist like Portafina or, view the information guides at The Pensions Advisory Service.

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The Importance of a Good Pension

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Whether you are just starting out in your working life, or just about to stop working permanently, you should still be thinking about your pension. 

A pension doesn’t simply sit there until you are ready to use it. Depending on the part of the world you live in, and your job role, you may be entitled to a state pension, company pension, or both. 

Many people have an array of questions about their pension and how versatile the system is. 

Can I transfer my pension? The answer is simple: yes, you can. Transferring pensions can be a great idea if the provider you are currently with does not offer a pension plan that suits you. You may also have more than one pension plan in place, from multiple or previous jobs, that you wish to bring together into one lump sum. This can be done by instructing the current providers of your change – you click the above link for more info.

There are a wide variety of pension plans available in the United States that give you a wide range of choice dependent on your current and future situations, as well as familial responsibilities. 

Can I pay more if I have the spare money? Again, the answer is yes. You can pay in more than the minimum amount if you so choose, to increase the payments you will receive later in life. You may find it beneficial to use some form of pension calculator to figure out just how much you should be putting in now so that you can afford the lifestyle you want in the future or essentials at the very minimum.

A good pension plan is vital to your later life. When you no longer have a stable, monthly income from your current place of employment, it is the pension that will make sure you can pay your bills and buy food. 

Some pensions can also be used by your spouse. This means that, if you die, your money won’t entirely be wasted. Your spouse can then receive some of this money up until their own death.

Once you reach the age of entitlement, your pension is yours to do with as you see fit. Unlike food stamps or other government-provided means of assistance, the pension comes from years of input from either yourself or your employer, meaning that it is actually, in part, your money trickling back to you. There are no limitations on what this money is used for, but once you have used that payment, you would not receive another until your next scheduled date. Due to this, it is increasingly important that your pension does what you want, and that you spend wisely. 

Having a good pension plan in place now can make life that bit easier for you when you retire. Enjoying your golden years can be a very real possibility when you have put the work into place in your youth. 

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An Independent Scotland – The Implications For Savers And Investors

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·         Cost of financial services will increase, leading to poorer returns for all

·         Diverging tax and regulatory systems will create complexity for all

·         Better state pensions for Scots

·         Potential investment and savings arbitrage opportunities in the longer term

Following the publication of the Scottish Nationalist manifesto for separation between England and Scotland yesterday http://www.scotreferendum.com/reports/scotlands-future-your-guide-to-an-independent-scotland/ , here are a few thoughts on what it might mean for savers and investors.

Duplicate institutions, duplicate systems, more complexity

Tom McPhail, Head of PeScottish flag, scottish independencensions Research ‘As well as the obvious costs of all these duplicate institutions, there is the un-quantified and potentially far greater cost of having to do everything twice. Every bank, insurance company, financial adviser and investment manager North and South of the border will have to invest huge sums of money in running duplicate systems and training their employees to deal with two different regimes; to take just one simple example, if a customer wants to know what rate of pension tax relief they are entitled to, the answer will depend on whether they live in Carlisle or up the road in Dumfries.’

‘This all has a cost to investors North and South of the border; in simple terms a Yes vote would mean poorer returns in the future on ISAs and Pensions due to higher administration costs.’

An independent Scotland would look to create its own financial institutions. It is hard to say exactly what they would all cost; they would be smaller than their English counterparts but equally they would suffer many of the same fixed costs. Here are some of the duplicates the manifesto looks to create, together with the current cost of their UK versions:

·         Financial Conduct Authority £432 million

·         Pensions Regulator £49 million

·         NEST pension scheme £240 million

·         Pension Protection Fund £35 million

Better state pensions for Scots

Scots are being promised a state pension £1.10 higher than the planned new single tier state pension from 2016. Based on current average pension benefits and costs, we estimate this would cost an additional £52 million a year to deliver.

It is also being proposed that the planned increase to the state pension age to 67 could be delayed North of the border. Under UK legislation it is planned to increase from 66 to 67 between 2026 and 2028. Based on previous research from the NIESR and the PPI, we estimate that this could cost the new Scottish government £1 billion.

Potential investment and savings arbitrage opportunities in the longer term

Danny Cox, Head of Financial Planning ‘For now, investors should carry on making as much use of their tax exempt investment allowances as they can; it has been confirmed that existing arrangements would be honoured North of the border in the future. A change to tax rules in the future could open up the possibility for investors to capitalise on preferential investment terms in one jurisdiction compared to the other, or perhaps seeing people move to benefit from preferential inheritance tax rules.’

A vote for separation might unsettle the markets but we don’t expect to see any significant volatility

A fully independent Scottish government would have complete freedom to vary income, capital gains and corporation tax rates. In the longer term we could see companies relocating North or South, and people changing residence to take advantage of preferential personal taxation opportunities. Estate agents, tax advisers and lawyers should all prosper in this new regime.

The Collapse of Private Pensions

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According to data published by the Office for National Statistics today, membership of private pensions (as opposed to the National Insurance funded state pension) has hit a new low; just 35% of men and 32% of women aged between 16 and 64 were active members of a private pension in 2011/12.

Membership of Defined Benefit pensions has declined from 46% of employees in 1997 to just 28% in 2012, almost exclusively now in the public sector.

Participation rates of employees varies dramatically between public and private sectors, with 85% of men and 81% of women in the public sector, compared to 36% and 26% respectively in the private sector.

Hargreaves Lansdown comment, Tom McPhail, Head of Pensions Research ‘These figures illustrate dramatically how important it is that auto-enrolment succeeds over the next 5 years. It is vital that nothing is done to jeopardise this project and that everything possible is done to encourage people to stay enrolled in their workplace pensions. Recent calls for reform of pension taxation or for small businesses to be exempt from auto-enrolment should be postponed or ignored until the foundations of a savings culture have been properly laid.’

Separately, the ONS has reported average contribution rates as 19.2% of payroll for Defined Benefits schemes and just 9.4% for Defined Contribution arrangements.

Tom McPhail: ‘The inevitable consequence of this level of pension funding is that millions of people will have to work on into their 70s because they won’t be able to afford to retire earlier. All defined contribution members should be shown what their contributions are likely to buy for them in the way of a retirement income, this pension projection should be updated regularly and members should be encouraged to engage with their retirement planning. 9.4% as an average is simply not enough. Investors should aim to be contributing at least 12% of their income towards their retirement. For a more personal estimate, they should use an online pension calculator.’

Many pension calculators are available on the internet, this is one example http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

What do you think? Do you have a pension?