Pension Planning

What is Pension Planning?

Pension planning is the process of defining an individuals retirement needs ideally well in advance of their retirement date, so that all the required actions to achieve their desired objectives have been implemented on time.

Typically areas covered would include an individuals protection needs, retirement needs and saving and investment needs.

The process starts with a face to face meeting between the adviser/advisers and the individual client/clients to discover the clients current position and circumstances and their desired objectives. This is known as the confidential Fact Find.

Once the necessary information has been obtained, analysed and product solutions researched the appropriate pension arrangement can be chosen from a number of possible retirement solutions specific to match the needs of the clients.

What are the types of Retirement Solutions or Pension Arrangements?

Retirement solutions will usually include some form of pension arrangement from one or several of the following recognised and regulated pension schemes, as follows:-

• Regular Premium Pension Plans: Are technically termed ‘money purchase arrangements’ or ‘individual defined contribution pension schemes’ where regular contributions which attract tax relief in built up funds are made in a selection of investments to purchase benefits such as a pension income (taxable) with a 25% tax free cash amount from the fund at the chosen retirement date. Typically they will include all forms of Personal and Stakeholder Pensions and Group Personal and Stakeholder Pensions.
• Company Pensions: Schemes can be ‘occupational defined contribution pension’ schemes or ‘occupational defined benefit’ schemes. The latter are also known as Final Salary Schemes or ‘private sector defined benefit’ schemes or ‘public sector’ schemes. In both cases the employer will make pension contributions. In the former final benefits received will be dependent upon the fund performance, and in the latter benefits will relate directly to a multiple of the final years salary. 
• Self Invested Personal Pensions: SIPP’s are technically ‘individual defined contribution schemes’. They have similar benefits to all registered pension schemes, but also provide much wider investment choices than a regular personal pension, including the purchase of commercial property.
• Small Self Administered Schemes: SSAS are technically ‘occupational defined contribution schemes’ set up under a trust. They are pooled arrangements where contributions are paid into a single fund for the benefit of up to 11 scheme members who are also trustees. Similar to a SIPP they also have wider investment options.
• Pension Transfers: All forms of regular pensions can receive transfers in and allow transfers out to and from other regular pension arrangements, including SIPPS, and some forms of SSAS. Depending on the agreement of the Trustees, a Final Salary Scheme can also receive transfers in from any other type of pension arrangement. In most cases special rules will apply to Contracted Out Benefits or Protected Rights under a personal pension scheme. Outgoing transfers of Final Salary Schemes have more complex rules.

Why should I make contributions to a Pension Arrangement?

The major reasons for recommending pension arrangements as part of the pension planning process are the tax relief available on contributions and the tax exemptions available on encashment or retirement when benefits are drawn, such as the 25% of the built up fund as tax free cash. In addition any employer contribution made into a scheme on a member’s behalf will boost size of fund until benefits are taken.

Nevertheless, there are certain annual contribution limits (annual allowance) which will differ for earners and non-earners and size of built up fund limits (lifetime allowance) to qualify for tax relief or tax exemptions, and fund charges applicable to any of the pension arrangements which must be considered, together with any additional death benefits of the funds and the implications of early encashment due to ill health, fund transfers rules and charges or stopping contributions.

How do I make contributions to Pension Arrangements?

The first and most important step after you have decided you may want to make contributions or changes to pension arrangements is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of pension arrangement is for your particular circumstances as part of the pension planning process we make an application on your behalf to make regular contributions or transfer existing arrangements into a selected fund based on how much you can afford, any contributions being made or were made to all other existing pension schemes or deferred schemes, your personal tax situation and the amount of fund required at retirement, at the acceptable level of risk you are prepared to take to match your needs.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles associated with Pensions and Retirement from the Financial Services Authority website at http://www.moneymadeclear.fsa.gov.uk/products/pensions/pensions.html and http://www.moneymadeclear.fsa.gov.uk/tools/stakeholder_pensions/notes_index.html

Also you can download the free booklet ‘Just the facts about pensions’ from the same website at

http://www.moneymadeclear.fsa.gov.uk/pdfs/pensions.pdf

Additionally you can download the booklet ‘Just the facts about retiring soon’ at http://www.moneymadeclear.fsa.gov.uk/pdfs/retiring_soon.pdf

and also the booklet ‘Just the facts about your retirement options’ at

http://www.moneymadeclear.fsa.gov.uk/pdfs/retirement_options.pdf