We would love to demonstrate our level of knowledge by detailing all the options available plus the good, bad and down right ugly but there just isn’t enough space therefore please read the following brief precis and then contact us for more details.
Personal Pensions are investment vehicles specifically designed for the self-employed and employees who are not members of Occupational Pension Schemes, to fund for their retirement income. Personal pensions operate on a money purchase basis; contributions are paid into the plan which are then invested in chosen collective investment funds until retirement benefits are drawn. Pension benefits are based on the amount of fund accumulated and the retirement option chosen. A tax-free lump sum can be taken in most cases prior to the retirement option being chosen. Currently this is a maximum of 25% of the accumulated fund at retirement. For more information please contact us.
Group Personal Pensions Scheme
Typically a group of individual personal pensions administered by an employer and often having a contribution from the employer.
Self Invested Personal Pension (SIPP)
With a SIPP individuals can exercise greater control over the choice of investments within their personal pension if they wish. These plans are designed to allow for much greater flexibility in investment content than a standard personal Pension Plan in addition there are powers to borrow within the fund for legitimate purposes. SIPPs enable an individual or an appointed investment manager to manage their own investment portfolio and/or commercial property. The costs of running the schemes do suggest that these are more suited to larger funds however this is not always the case and the possibilities are best discussed further. For more information please contact us.
Small Self Administered Scheme (SSAS)
This type of retirement benefit is company sponsored, allowing the controlling directors of the company to retain control and access to the funds within the scheme. The allowable investments etc are broadly similar to SIPP as are the borrowing limits however, there are specific lending powers that are not allowable under a SIPP and may be of interest. For more information please contact us.
Occupational Pension Schemes
These are pension schemes offered by an employer and related to employment with that company. There are principally two different types:
Defined Contribution or Money Purchase which similar to Personal Pensions rely on investments growth and have benefits related to the size of the fund accumulated by the style of the benefits taken.
Defined Benefit or Final Salary benefits are related to salary and length of service and are not reliant on the performance of any funds to provide those benefits, (although this is typically important in all but a few unfunded schemes like the civil service etc.).
For more information please contact us.
Transferring Pension Benefits
This is another very important subject and requires extreme caution when dealing with benefits held in defined benefit or final salary schemes due to the presence of investment risk in other vehicles.
The advice to transfer any pension benefit from one to another is based on many individual factors and therefore is not easy to cover in a brief passage such as this. For more information please contact us.
Pensions and Divorce
Both the Pensions Act 2004 and the Finance Act 2004 have created possibly the biggest shake-up in the pensions industry ever.
A pension sharing order is issued by a court. It makes provision for the pension rights of a scheme member to be split on divorce and details how much the ‘pension debit’ and ‘credit’ will be. A ‘pension debit’ reduces the value of the scheme member’s pension benefits. Anyone who is in an occupational pension scheme (e.g. EPPs, CIMPs, S32s) would have found that the ‘pension debit’ was taken into account when calculating their HM Revenue and Customs maximum benefits on their pre A-Day benefits. It was still treated as a benefit for that person even though it was actually payable to someone else. For more information please contact us.