A QUICK GUIDE TO RETIREMENT PLANNING

It is understandable if retirement is one of the last things on your mind at the moment. However, it is vital not to lose sight of this most important area of your financial future. Retirement is a time when you can have the freedom to do what you want, when you want.

Types of pensions

Whatever pension scheme and/or savings plan you decide on, you'll want your funds to grow and be worth as much as possible in the long-term. Here are the pension options available:

State Pension

The amount of basic State Pension you'll receive will depend on the amount of National Insurance contributions you've paid or are treated as having paid. Depending on your individual circumstances, you may also be entitled to additional State Pension.

The State Pension is payable from State Pension age – 65 for men, 60 for women born on or before 5 April 1950. The State Pension age will increase for women born after 5 April 1950 from 60 to 65 between 2010 and 2020 and then for both men and women from age 65 to 68 between 2024 and 2046. You can also put off claiming State Pension for up to five years.

Company pensions

Company pensions are set up by employers to provide pensions for their employees on retirement. If you are able to join one, it's worth considering. Most people will be better off in retirement than if they had not joined.

Personal pensions

Personal pensions are available from banks, building societies and life insurance companies, who invest your savings on your behalf.

Under HM Revenue & Customs rules you can start receiving your pension from the age of 50 (increasing to 55 by 2010). You can also take part of your pension fund as a tax-free lump sum.

In April 2001, the government introduced 'stakeholder pensions', a new type of personal pension scheme designed to be secure, flexible and good value for money.

Tax relief benefits

The government encourages you to save towards your pension by giving 'tax relief' on money you put into personal and company pensions schemes up to certain limits. In practice this means that money you would have paid in tax is used towards your pension pot instead.

If you're not a taxpayer, you can still get tax relief on your (or someone else's) contributions to your personal pension, up to a certain limit.

Forecasting your pension

How much pension will you receive when you retire? If you’re not sure, it's definitely a good idea to check how much pension you'll receive, so you can take action now if you think you won't have enough to live on when you retire. You can do this by getting a forecast of what your State Pension or other pensions will pay.

Topping up the pot

If you have little or no pension, it is possible to catch up. You might want to consider starting a personal pension, as well as looking into any options for saving for a pension through your work. A good place to start is to find out how much State Pension you will be entitled to.

Pension rule changes from 2006

Since April 2006, simpler rules have been applied to both personal and company (occupational) schemes. The new rules allow most people to pay more into their pension schemes – and on more flexible terms.

If any of this sounds complicated or you unsure of how to plan ahead, then don’t hesitate to talk to one of our financial advisors. It’ll take a weight off your mind, knowing that your future is being planned for now.

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