New research [1] has exposed the staggering impact of the gender pension gap. The study shows that women have smaller pension pot sizes in every age bracket, and the situation worsens the closer retirement gets. Worryingly, women, on average, retire with less than half the income of men. Reduction in amounts paid into pensions The amount
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When looking at the Lifetime Allowance things are not as simple as they seem. The case study below looks at some of the things to consider. Mr Bloggs is a 57-year-old consultant surgeon with the NHS. His wife is 52 years old and works for a pharmaceutical company, although she also worked within the NHS.
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Using pension drawdown in retirement offers lots of flexibility and the potential to keep your pension growing. However, the tax on pension drawdown can get very messy. In many cases, HMRC tax the first pension drawdown payment incorrectly. Having to sort this out can kick start months of toing and froing with HM Revenue and
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Inheriting a sizeable pension can dramatically alter a lot of financial plans. So how should someone make sense of the options available and use this money wisely? What is an inherited pension? When someone dies with money in a pension pot, this will usually pass down to whoever they have nominated to receive it. Wills
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A recent study promoting buying annuities has received some attention in the press. An annuity is where you exchange some or all the money in your pension for an income. The company you buy it off will pay this income for as long as you live. You can also have the income linked to inflation
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If you are a higher or additional rate taxpayer, there is a simple way to avoid HMRC “taking” as much tax from you. This is claiming the tax relief you are eligible for on your pension contributions. Despite this being free money, research published in Pensions Age revealed thousands of people do not claim their extra
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The State Pension is a vital source of income for millions of retired people across Britain. If you are looking to get more income in retirement, a good place to start is with your State Pension. It is important to know how the system, which can be complex, works. If you are not receiving the
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Following the release of the September inflation figures the increases in the State Pension from April 2022 can be calculated The State Pension and new State Pension are usually increased each April by the “Triple Lock” which is the higher of: Annual CPI from the September before the increase; 3-month average wage growth to July
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We are committed to helping our clients better appreciate the value and benefits of financial planning. One of the ways we do this is by using lifetime financial forecasting, which we also refer to as cash-flow modelling. This enables us to help our clients understand their financial planning needs better. This is because it allows
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In September 2020, annual inflation in the UK was running at 0.5% on the CPI measure and 1.1% using the old RPI yardstick. At the time price rises were the least of our worries. 12 months later and inflation has become a hot topic. The latest (August) figures are 3.2% CPI and 4.8% RPI. The
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Those in control of how to extract money from their business broadly have three main options. These are to take out the money either as salary, dividends or by making employer pension contributions. The Health and Social Care Levy and the increase in dividend tax rates both make the extraction of profits via pension contributions
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The University of Manchester Research has published a report entitled: Pensions and Divorce: Exploratory Analysis of Quantitative Data. The report has found that, within couples, men have substantially more private pension wealth than women. This poses challenges should they divorce. The researchers looked at the pension wealth of almost 30,000 people over the age of
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Since 6 April 2010, the personal allowance is reduced by £1 for every £2 of income above £100,000. Since then, the personal allowance has almost doubled. It was £6,475 in 2010/11 and now stands at £12,570 in the tax year 2021/22. Income at this level is formally taxed at 40%. However, the fact that anyone
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It has become common practice for employees to exchange part of their salary and/or bonus in return for their increasing the pension contribution they pay by the same amount. This can be far more attractive than the employee making a direct pension contribution on his/her own behalf, particularly if the employer is prepared to increase
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The Institute for Fiscal Studies has released a report looking at when might be the best times for individuals to save for retirement. The findings are obviously very general but some chime in with what we find from our clients and our personal finances. What have the IFS said? Most individuals expect their income to
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Standard Life Aberdeen (SLA) has just published ‘The Class of 2021’. This looked at 2,000 UK adults who were either due to retire in the next 12 months or had retired in the past 12 months. The document contains some interesting hard data alongside some softer marketing material. What stands out? The average retirement was
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You can save as much as you want into your pension subject to certain limits. One of these is the Lifetime Allowance (LTA) and exceeding it can cause tax charges. What is the lifetime allowance? If the value of your pension exceeds the LTA, you will pay a tax charge, known as the Lifetime Allowance
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In the March 2021 Spring Budget, the Chancellor confirmed that the Lifetime Allowance (LTA) will be frozen at £1,073,100 until April 2026. The LTA was planned to increase by CPI each year as it has done since 2018/2019. The annual increases now won’t take place until at least April 2026. The change has little immediate
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Around three in four people risk outliving their savings in retirement, a report looking into the impact of the pension freedoms indicates. The research found evidence many retirees risk potentially running their pension savings down. It termed this as “sleepwalking into retirement”. The study examined retirement planning and spending habits following the introduction of pension
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Buried amongst the other announcements made on 25 November was a paper from the Treasury looking at measures of inflation. It revealed a decision about replacing the Retail Prices Index (RPI) with the Consumer Prices Index (CPI) including owner-occupied housing costs (CPIH). The RPI has not been an official National Statistic since 2013 because of serious deficiencies
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All registered pension schemes can (in theory at least) invest in property, including land, either in the UK or overseas. Pension schemes can invest directly in property, but many choose to invest indirectly using pooled vehicles. These include unit trusts, open-ended investment companies (OEICs) or real estate investment trusts (REITs). As well as allowing smaller
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A new report from the Institute of Fiscal Studies (IFS) has shown pension saving has crashed among the self-employed. What does it say? Back in 1998, just below half (48%) of the self-employed paid into a private pension. By 2018 this had plummeted to just 16%. The contrast with regular employees, because of auto-enrolment, is
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NHS Pensions Savings Statements are prompting enquiries on annual allowance charges. Here is a reminder of the special provisions that apply to annual allowance charges of NHS clinicians in England and Wales for the 2019/20 tax year. Many will have recently received Pensions Savings Statements for tax year 2019/20 and may have questions about their annual
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The Government has rejected the Public Accounts Committee (PAC)’s proposal that HMRC should evaluate pensions tax relief. The concern was HRMC did not understand the impact of some of the UK’s largest tax reliefs which includes pension tax relief. The committee called for a formal review, but the Government disagreed. They pointed to several recent consultations
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The Institute for Fiscal Studies the effect of the pandemic on those nearing the end of their working lives. In a new Briefing Note, the IFS investigated how workers aged 50 and over have reacted to the pandemic. This has included how their retirement plans have already been affected by the crisis. What were the findings?
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The Money & Pensions Service (MaPS) has undertaken some research among people aged 50-70 with some pension savings besides the State Pension. The results make disturbing reading: 37% of over 50s are leaving their retirement financial planning until their final two years before retirement or won’t prepare at all 35% of retirees said they left financial
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A report claimed thousands of older women have not received their full state pension entitlement. In a follow-up report, Lane Clark Peacock LLP (LCP) summarizes their findings since then. A vital message is to encourage a much wider group of women to check their state pension is correct. Dozens of women have told LCP they
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Inheritance Tax (IHT) can affect property, money and possessions. Your pension is normally free of IHT, unlike many other investments. It is not part of your taxable estate. We say normally as a tax case has just finished concerning one of the times someone’s pension can be subject to IHT. What is the case? The
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There are many benefits of turning using a financial planner. Financial planners have the expertise to advise on how best to achieve your goals. They can play a role in deciding where to invest your money to ensure it is working hard in pursuit of your ambitions. You are bound to think about how safe
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A report on the front page of Wednesday’s Financial Times has added weight to the possibility. It has highlighted a quirk of the calculation which could cost the Government dearly if no changes are made. To understand why we need to understand the fundamentals of the Triple Lock. The increase each April is the greater
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Deferring the state pension is the default option. If you do not claim it the Government will not pay it to you. For a lot of people, this might be a better option for them. Of course, you need to think about how long you defer for too. Factors to consider As with all pension
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MIT AgeLab has identified three simple questions to ask yourself to gauge how prepared you are for retirement. They uncover crucial factors which may determine your future quality of life. When it comes to retirement planning, we are inclined to focus on accumulating wealth and spending it wisely. While not outliving our wealth is essential
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The research on how best to generate retirement income has been evolving for decades. In the 1950s and 1960s, the leading strategy was to buy bonds live off the interest. This prevailed until the high inflation of the 1970s ravaged the true value of bond interest. In the 1980s, retirees shifted to buying dividend-paying shares
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The Lifetime Allowance (LTA) limits how much someone can draw from their pensions without incurring tax charges. It currently stands at £1,073,100 (2020/21). Lifetime allowance charges can arise on various occasions with the main ones being: When benefits are initially taken (Taking tax-free cash from a pension is an example of this), On the death
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Everything that goes into growing the money in an investment plan or pension involves time and money. You should expect to pay a reasonable level of charges. These charges do reduce growth. Let us use an example where the underlying investments within a plan grew by 5% before charges. If charges were 1%, they would
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The Government introduced personal pensions in 1988. This allowed the self-employed or employees of companies not offering a pension scheme to have a pension. They are money purchase schemes where contributions receive tax relief. Pensions underwent a radical change from 6th April 2006 with the introduction of Pensions Simplification and the March 2014 Budget announced
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As you might imagine, this is a question clients ask us often. A rule of thumb is the “4% rule”. This means on a £100,000 pot you would withdraw £4,000 and increase the withdrawals each year with inflation. Taking any more runs the risk of the pot dwindling and running dry within 30 years. We
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When taking an income from your pension pot, you will start with two choices. Do you want to hand over your money to an insurance company and they will pay you an income for the rest of your life? Or do you want to keep a pot of money from which you decide how much
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On Friday 7th February, the House of Commons Library (HoCL) issued a briefing paper entitled ‘Reform of Pension Tax Relief’. The following day the front page of the Financial Times (FT) ran a headline “Javid eyes tax raid on high earners”. The article suggested restricting tax relief on contributions to 20% could “raise more than
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Divorce is one of the most difficult subjects to talk about. The emotional upheaval of divorce can be difficult to deal with. So too can the financial implications. When relationships end, there are so many things to consider. Children, home, and support are the first things you focus on. When you begin the process of
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Doing the right thing with your pensions is not always easy but it has become much harder for members of the NHS pension scheme. Many have incurred tax bills through no fault of their own. Some are opting out of their pension schemes altogether to avoid tax. Giving up the lucrative benefits afforded by the
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Lifetime financial planning done correctly has to include a fluid financial forecast created using sophisticated planning software. We take a snapshot of your financial situation and project this forward year by year. The process is only as comprehensive as the information we put into it. The more information we put in, the better the output. The
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