Pensions

Retirement can mean a major change in lifestyle, and it can be a great opportunity, as you will finally be able to manage your own time. At the same time, your income in retirement is likely to be smaller than it was when you used to work, so it is important to consider your pension options carefully. The subject of pensions can be quite complicated, and you might be unsure about your pension options or other financial issues. If you need any financial advice, Square One, an FSA authorised firm can give you guidance on a wide range of issues, from annuities to drawdown, and even on the implications in divorce.

Types of Pensions

There is a wide range of pension types, and your retirement income options will depend on the kind of pension you have. Many pensioners will be entitled to a state pension, and you may also be entitled to one of the three types of non-state pensions through your employer or a personal pension scheme.

State Pension – Your National Insurance contributions will usually give you the right to a Basic State Pension once you've reached retirement age, which is currently 65 for men and between 60 and 65 for women.

Occupational salary-related schemes -  Offered by many employers, this scheme will calculate your pension based on the number of years you have been part of the scheme, and your pensionable earnings.

Occupational defined contribution schemes – Your pension fund is built up from your  contributions, your employer's contributions, and investment returns. Once you retire, you'll be able to take a tax free lump sum and use the rest to secure an income, sometimes in the form of an annuity. The amount of pension income will depend on the contributions, the performance of the investment, and the type of annuity you choose when you retire.

Personal pensions – A personal pension is a type of pension that you take out yourself, if your employer doesn't offer a pension scheme or you are self-employed. Your pension fund is built up from your contributions, investment returns and tax relief, and the amount of your pension income will depend on your contributions, investment performance, and the type of annuity your purchase.

Whether you have a pension scheme with your employer or a personal pension fund, Square One  can provide you with expert financial advice.

Retirement Income Options

Once you retire, there are various ways of converting your pension fund into a regular retirement income. Your decision will depend on the size of your pension fund, and your financial needs and circumstances. Some options will be suitable if you have a larger pension fund and are willing to take risks, while others can provide you with a more secure income.

• Lifetime annuities – A lifetime annuity serves to convert your pension fund into a pension income for the rest of your life. There is a wide range of annuities you can choose from, for example enhanced annuities (if you have health problems), joint life annuities (that pay out to your spouse/partner if you die), level, and escalating annuities. Your pension income will depend on the amount of your pension fund, your health, your age, your sex, and type of annuity you choose.
   
• Unsecured pension – If you decide not to buy an income when you retire, an unsecured pension can be a good decision. After you take any tax-free cash you can either buy a short-term annuity or take a taxable income from your pension fund, while the rest remains invested. An unsecured pension/income drawdown is generally suitable for those who have a larger pension fund, and who are willing to take some moderate risks. On the other hand, you will have flexibility over your pension income and won't have to lock into an annuity while you're still young.
   
• Phased Retirement – Instead of buying an annuity, you can also choose phased retirement. Phased retirement allows you to retire progressively. You can use part of your pension fund to buy an annuity, and you can later use another portion of your fund to buy another annuity. Phased retirement can give you financial flexibility, but entails higher risks than standard annuities.

Whether you have a large or a small pension fund and whether you want to buy a standard lifetime annuity or would prefer an unsecured pension, Square One can give you comprehensive financial advice.

Need Pensions Advice?

• If any of these following describe your situation please call or email us:
• I have existing contributory pension schemes such as personal pensions, retirement annuity contracts, Section 226 plans or Section 32 plans.
• I have a pension fund and I am not sure what do to with it.
• I am thinking about buying an annuity.
• I am thinking about drawing down an income from my pension fund.
• I am approaching 75 and want to know about my options
• I want to protect my spouse in retirement
• I am getting divorced and I have no pension fund but my spouse has a pension fund.
• I am getting divorced and I have a pension fund.
   

Please call Andrew Melbourne, one of our chartered partners and a pensions specialist on 01273 921990 or e-mail a question.

What next?

• Looking for more detailed financial advice? Explore your retirement options.
• Getting a divorce and looking for financial advice? Find out more about divorce and pension funds.
• Please call Andrew Melbourne, one of our chartered partners and a pensions specialist on 01273 921990 or e-mail a question.