The Basics
Everyone needs to plan for their retirement, as State Pension benefits are unlikely to provide you with a reasonable standard of living in your later years. People are living longer and healthier lives, so it's even more important to think about how and when to save for retirement and how long to continue working.

There are many ways to invest for an income in retirement, and a pension needn’t be the only way to achieve this. A recognised pension plan is, however, a very tax efficient way to save money because you get tax relief on the contributions made. So, with a bit of planning, you can do a lot to help yourself get ready for retirement. Fairly small changes now can make a big difference to your life in the future - and you don't need to blow your monthly budget.

If you pay into your own pension plan, the Provider of that plan will usually offer a selection of funds so that you can pick an investment that you are happy with. The fund you select may be influenced by your own attitude to investment risk, or the length of time you have got to go before you reach retirement.

If you have already started planning for your retirement then it is still important to review your arrangements at regular intervals to make sure you have the best pension for your circumstances. How much do you pay in charges? What investment are you in? What returns have you made on your pension? Does your employer offer a scheme that you could join? Have you got paid up pensions that should be reviewed? These are all areas we can help you with.

Top Tips for Pension planning
1. Find out if you have a pension provided by your employer, and if you are not already a member whether you can join it
2. Start saving an affordable amount to a pension plan – don’t delay
3. If you already have pensions ask an expert to review them – you may be able to make them work harder for you.

What is a pension?
Pensions are long-term investments with special tax rules – for example, you get tax relief on contributions. You can't access the money in your pension until you reach age 50, going up to 55 by 2010. Some pension schemes have additional rules about when you can take your benefits – check with your scheme provider. You no longer have to stop working to draw a pension as long as your scheme's rules let you.

There is no longer a limit on the amount that an individual can pay into a registered pension scheme after April 6th 2006. However, there will be a limit on the amount of tax relief available on an individual’s contributions. Tax relief will be given on contributions by individual of £3,600 gross or 100% of relevant UK earnings that are chargeable to UK income tax, if higher.

Individuals though must pay a 40% tax charge on any ‘pension input’ that exceeds the annual allowance in any tax year. The annual allowance is currently £235,000 in 2008/09 and is rising in stages to £255,000 in 2010/11. The only exception to this rule would be when an individual dies or vests all their benefits in the scheme during the tax year in which the annual allowance is exceeded.

Whenever any benefits are ‘crystallised’ (this is called a benefit crystallisation event in the new regime), these will now be tested against your available lifetime allowance. The ‘standard’ lifetime allowance had been set at £1.6 million in 2006/07 and will rise to £1.8 million by 2010/11, although some people will have a personal lifetime allowance that could be higher or lower than this.

There are three main types of pensions that you may come across:
1. Occupational salary related schemes - (also known as defined benefit schemes) - offered by some employers.
2. Occupational defined contributions schemes (also known as money purchase schemes) - also offered by some employers;
3. Stakeholder and Personal pensions - you can start these yourself, or you may be offered a Stakeholder pension or a Group Personal Pension at work. These are also money purchase related schemes.

Pensions at work
If your employer offers a pension scheme it's a good idea to find out what type it is and how you can join. Your employer makes all the arrangements and may even contribute to it. If you work for a business with fewer than five employees, your employer does not have to offer you access to a pension scheme. You should still check what's available, as some small employers may offer a scheme anyway. The government is planning changes that will mean all employers will have to offer and contribute to a pension in future. Employers who haven't offered an occupational pension in the past may set up their own scheme, or may pay pensions into a new central scheme that is being set up.

What are the benefits?
Although you don't have to join any pension scheme offered through your job, it's usually a good idea to find out details of it. You may find that your employer is able to offer you a pension that you could not obtain if you were to go to a provider on your own. In addition your employer may offer you additional employee benefits, such as life cover, if you become a member of their scheme. Not all pensions offered by employers are occupational pensions. Your employer may offer a stakeholder pension or a personal pension through a group personal pension arrangement. These pensions are not called occupational pensions even though the employer may contribute.

Pensions you start yourself
All employers with five or more employees have to offer access to a pension scheme. If your employer doesn't offer a pension, there are lots of pension providers for you to choose from to take out your own pension. You can go to a provider direct but bear in mind that their representatives can only advise you on their company's own products, or ones they have adopted from other companies.

Please contact us for a free initial no obligation review

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