Pensions are, arguably, the key to this goal. They are one of the most useful tools used in the financial planning industry, to help achieve a financially secure future.
At Beaumont Wealth, our pension managers can help you manage your pension per your financial goals and needs. Our pension managers have over 23 years of financial planning expertise, helping clients transform their financial futures.
We offer robust planning and bespoke advice, giving our clients peace of mind that they are investing in their future. Our team of pension managers offer independent, expert and impartial advice, with no hidden surprises.
There are two main types of pension schemes: defined benefit and defined contribution plans.
Defined benefit plans:
A defined benefit (DB) plan can only be set up through an employer, you cannot set one up privately. With a DB plan (sometimes also called a ‘final salary plan’) the amount of money you get back is calculated using the salary you are on at the time of retirement, or whenever you leave the pension scheme, as well as factors like your age, years of service and earning history.
With DB plans your employer will pay in and you might also be asked to pay in. You can get tax relief on these payments. If you have a DB plan your employer is responsible for ensuring you will have enough in your pension fund to pay out an income for life once you reach retirement age. Pension transfers can move your fund from one provider to another, should you change jobs.
Our financial advisers do not give advice on these types of plans but can give you information on how your plan works and build any subsequent advice around these plans.
Defined contribution plan:
Defined contribution (DC) plans are the most common form of pension plan nowadays. All personal pensions are DC and, usually, a workplace pension is too.
A DC plan is one that you and your employer pay into (assuming you have got the plan through your job). In its most simple form, a defined contribution pension is simply a savings plan. It is designed to help people to save for income later in their lives. You can get tax benefits on the payments you make, usually in the form of tax relief.
A DC plan is a managed pension fund. So, once money has been paid into the plan, either as a lump sum or on a regular contribution basis, it will be invested in various ways depending on the type of pension. It is important to make sure the money is invested in line with your attitude to investment risk, as the value of investments can go down as well as up. A managed pension fund must be managed appropriately, in line with how much income you might need for retirement and how long you have until you intend to retire, so it’s important to choose a trusted pension fund manager.
As you can see, there is a lot to consider when thinking about pensions. Our independent pension fund managers and pension advisers are experts in pension planning and will help you get your plans on track, setting you up for financial freedom later in life.
Regardless of the type of pension you have, it is important to consider financial planning, investments and inheritance tax planning when setting up a pension.
Financial planning involves looking at an individual’s overall financial situation and setting goals for retirement. This can include looking at current and future expenses, as well as other sources of income.
Investments are also an important part of pension planning. The fund investments that are made with pension funds can have a significant impact on the amount of income that a retiree will receive. It is important to consider factors such as risk tolerance, diversification and fees when choosing investments for a pension plan. A pension fund manager will be able to help you with this.
Finally, inheritance tax planning is also an important consideration when setting up a pension. An inheritance tax is a tax that is paid on the value of an individual’s estate when they die. By planning, individuals can reduce the amount of inheritance tax that their estate will have to pay, which can help to preserve more of their assets for their heirs. Independent pension fund management can help minimise inheritance tax liabilities.
The government encourages people to save for their income later in life and therefore there are various tax advantages and incentives, to encourage people to pay into this savings plan.
One benefit of investing in a pension is tax relief. This is essentially free money, paid on top of your contribution by the government. The tax relief you receive (up to certain limits) is based on you level of income tax you pay:
20% for basic rate taxpayers (or nil taxpayers)
40% for higher-rate taxpayers
45% for additional rate taxpayers
As an example, if you’re a basic rate taxpayer, if you put £100 into your pension, you’ll get £25 tax relief so £125 will be paid into your plan.
(Note: the rates for Scotland differ and tax treatment will depend on individual circumstances. Tax rates also change, and not all areas of Estate Planning or Tax Planning are regulated by the Financial Conduct Authority).
There are restrictions as to when money can be removed, this is to encourage people to use their pension funds later in life, and not withdraw them early.
The current age is 55, but from April 6th 2028 this will increase to 57. Usually, 25% of the fund can be taken as a tax-free lump sum, with other income being taxed at the usual tax rate.
After the age of 55, you can receive pension income in different ways. This could be via:
Using the entire fund to purchase an “annuity” which is a product which will pay you a guaranteed income for the rest of your life.
Using part of the fund to purchase an annuity and leave the rest invested.
Taking regular income from your pension plan, keeping the pension invested to provide this income.
Taking periodic lump sums from your pension.
Cashing in your entire pension fund in one go.
Or, a mixture of all the above.
Having a pension gives you great flexibility and long-term financial security. But, to make the most out of your pension funds, you should speak to an independent pension fund manager.
Our independent pension fund managers work in partnership with you through an ongoing advice service. We can help keep the pension plan on track whilst you are saving for your retirement. And, our pension managers can also manage and advise on your income during retirement.
To speak to us about financial advisor pensions or pension fund management, just get in touch. One of our pension fund managers will be able to help you.
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