Download Report

Five Key Pension
Freedom Rules
New regulations set your
pension free from 6th April 2015
“Pension Freedom Day”
The Clock’s Ticking
Make sure you don’t’ miss out
www.profilefs.co.uk
Follow these rules to
enjoy a comfortable
retirement lifestyle
Rule 1
Avoid excessive charges – some pensions have “rip off” charges
All pension companies have charges, but some are a lot
higher than others. The rule is that the higher the charges
– the more that will be taken from your pension savings
each year
For example a pension fund built up over a lifetime of
working to be worth £100,000 with 0.5% charges would be
reduced to £87,000, but with a 1 pc annual charge would
reduce to £76,000 and by increasing the annual charge to
1.5pc this reduces the value of the fund to £66,000.
So you may be able to make your pension savings worth
significantly more just by moving them to a lower charged
plan. It is therefore important to have a review with a
pension adviser to find out how much your existing
pension savings are being charged each year and
whether this can be reduced by moving to a lower
charged plan.
Impact of different Annual Management Charges (AMC)
0.5% AMC
87% to you
£1 £1 £1 £1 £1
£1
£1£1 £1 £1
£1
£1 £1 £1
£1
£1 £1 £1 £1 £1 £1
1% AMC
76% to you
1.5% AMC
66% to you
£1
£1
£1
£1
£1 £1
£1 £1
£1
£1 £1 £1 £1 £1 £1
£1
£1
£1 £1 £1 £1
£1 £1 £1 £1 £1 £1
Source: DWP modelling
Assumptions: 1. Initial annual contribution: £1,200 • 2. Investment growth: 7.00% • 3. Annual contributions growth 4.00% • 4. Individual saves from age 22 to State Pension age (SPa) of
68 (in line with Government proposals)
Rule 2
Always get advice from FCA
regulated companies – don’t
get stung by any scorpions
With freedom there can be risk and one of the risks
following Pension Freedom is that there may be
unscrupulous people who could target your pension
savings. This is why it is essential that you receive advice
only from organisations that are authorised and regulated
ed
d
by the Financial Conduct Authority (FCA).
It is easy to check whether a person or organisation is
authorised and regulated by the FCA, just go onto their
website http://www.fsa.gov.uk/register/home.do and
search their register for the name or number of the
organisation. For example Profile Financial Solutions is
directly authorised by the FCA and you can look up our
name and number 596398 on the register.
Rule 3
Start preparing now – you’re never too young (or too old)
We know it’s not the most exciting subject, but the earlier
and more often you start thinking about your pensions the
better. The good news is that no matter how old you are, as
long as you are not already drawing your pension, there
are things you can potentially do to make your pensions
work harder.
The first thing to do is to pull together all the information
you have about your existing pensions, including tracking
down any you may not have heard from for a while. Then
have a regulated pension adviser review these existing
pensions to make sure they are in the best place.
The second thing you can do is start contributing more
into your pension, the sooner you start the more your
pension will eventually be worth. For example:
Save £100 pm for 20 years with 7% pa growth and your
pension fund could be worth over £50,000.
This example ignores the impact of tax relief and charges
which are covered by Rules 1 and 4.
Rule 4
Make the most of Pension tax benefits – the Tax Man is your friend
It’s not often we can regard the tax man as our friend, but
with pensions this is the case for the following reasons:
• You can take 25% of you pension funds as a tax free
lump sum from the age of 55
• Following Pension Freedom you can take the rest of your
pension whenever you want to, but you will need advice
on any tax implications
• The returns from your pension savings grow tax free
within your pension, this means they should grow much
faster than would be the case outside a pension
• You can avoid a “death tax” on your pension funds,
following Pension Freedom under some circumstances
you can pass your pension savings onto your
beneficiaries free of inheritance tax
• The tax man will give you tax relief on any savings you
put into a pension, this means that in the example
below your £100 pm savings will actually cost this much:
£20 TAX RELIEF
£40 TAX RELIEF
£45 TAX RELIEF
YOU PAY
£80
YOU PAY
£60
YOU PAY
£55
Basic tax payer/
non tax payer
Higher rate
tax payer
Top rate
tax payer
A wide number of rules and regulations apply to the tax
treatment of pensions, so ensure you contact a financial
adviser such as Profile Financial Solutions for advice on
your individual circumstances.
Rule 5
Get regular advice – there are big decisions to be made
now and in the future
Some people have the knowledge to manage their own
pension savings but most people look for the help of a
professional adviser. With Pension Freedom this is
increasingly important – as decisions made now can have
a major impact on retirement lifestyles.
The first thing to do is to make sure existing pensions are in
the right place. This will typically require a review by an
adviser who specialises in pensions. Then as your
circumstances change over time it is important to regularly
review your pensions. We recommend that any adviser you
use formally reviews your pension every year.
Rule 2 highlighted that it is critical to ensure any adviser is
regulated by the Financial Conduct Authority. But there are
other things to consider in selecting an adviser as well, for
example:
• Will they provide a pension review free of charge and at
no obligation?
• Are they independent and will they consider the whole
of the market?
• Do they provide a convenient way for you to receive
advice from a qualified adviser?
It may cost your
pension if you
delay…
SO ACT NOW!!
Profile Financial Solutions can help you benefit from
Pension Freedom and enjoy a more comfortable
retirement lifestyle by undertaking a free, no obligation
review of your existing pensions.
Profile Financial Solutions are financial advisers who
specialise in helping people make the most of their
pension savings. We are directly authorised and regulated
by the Financial Conduct Authority (FCA) and offer a
whole of market service.
Part of our service is to offer free, no obligation pension
reviews where we will assess people’s existing pensions
and see whether we can offer them a better alternative.
We also offer an ongoing advice service to ensure
people’s pension remain in the best place.
Profile Financial Solutions believe that Pension Freedom
offers great opportunities for people to enjoy a more
flexible pension in retirement and we are keen to help you
benefit now and in the future.
Please feel free to ring us on 01772 804404 or
email us at service@profilefs.co.uk if you have any
questions on our services or Pension Freedom
T: 01772 804 404 / E: service@profilefs.co.uk / W: www.profilefs.co.uk
Profile Financial Solutions Ltd (www.profilefs.co.uk) is authorised and regulated by the Financial Conduct Authority No: 596398