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The Year of Hard Truths – A Look Ahead to the 2014 Budget

Chancellor of the Exchequer, George Osborne, will deliver the 2014 Budget on Wednesday, 19th March – little more than three months after he delivered the Autumn Statement.

When Osborne delivered his Budget in March 2013, the news for the UK economy wasn’t particularly good – in fact, many commentators were worrying about the UK slipping back into a ‘triple-dip recession.’ Since then, the forecasts and figures are much improved and in December, the Chancellor was able to predict growth of 1.4% in 2013 and 2.4% in 2014.

These figures have since been confirmed by the IMF, which recently gave a very positive assessment of the outlook for the UK. The anticipated growth of 2.4% is higher than for any other European country, and the economy is now growing at its fastest rate since 2007. Inflation was down to 2% in December and the latest figures show that unemployment has fallen sharply to 7.1% (much lower than most economists were anticipating).

So with the Chancellor surely in buoyant mood when he stands up to deliver his speech, can we look forward to some Budget handouts? After all, there is a General Election only 15 months away and the European elections are in May of this year, at which the Conservatives risk coming a poor third behind UKIP and Labour. After four years of pain, it must surely be time for the Chancellor to place less emphasis on austerity…

Sadly, the answer is ‘no’.

In a speech on January 6th, George Osborne warned that 2014 would be “a year of hard truths.” He stressed that the UK economy “still had a long way to go” and that difficult decisions would have to be made. Significantly, he still requires another £25bn of savings (or ‘cuts’ depending on your political standpoint) and is looking to the welfare budget for the majority of this, particularly targeting young people of working age.

The Budget speech will be one that George Osborne will enjoy giving – he will claim the credit for the improvement in the economy and a further fall in the UK budget deficit. But the mood will remain sombre and the message simple: the UK economy has come a long way and is doing better than a great many of its competitors – but we cannot relax now.

The Budget Deficit

The UK’s budget deficit narrowed sharply in December, when there was a net deficit of £1.03bn compared to the £3.58bn in the previous month. Historically (taking the period 1995 to 2013), the budget deficit has averaged £1.23bn per month. George Osborne will welcome the reduction and look ahead to further falls in the deficit, but to many right-wing commentators it will remain far too large for comfort.

Welfare Spending

As noted above, this is the area where the Chancellor will look for the bulk of his savings. He will argue that it is absurd not to target the huge welfare budget, given that savings would otherwise have to come from more (politically sensitive) areas such as schools. However, Osborne is likely to resist calls from some of his backbenchers to make cuts in NHS budgets. That money is likely to remain ring fenced.

Housing

Figures released by the Bank of England revealed that £12.4bn in new mortgage loans was approved in December, putting mortgage lending at a six year high. The housing market rose by between 8% and 10% in 2013 (depending on which survey you use) but this included some notable ‘hot-spots’ such as London and the South East, and Manchester.

When George Osborne announced his help-to-buy scheme in the last Budget many commentators worried that it would create a ‘housing bubble’ and these latest figures will have done nothing to calm those fears. The Chancellor – backed by a recent study from the Institute for Fiscal Studies – will refute them and claim the help-to-buy scheme as a resounding success.

Unemployment

As above, unemployment came down significantly in December. Most economists were expecting a fall to 7.3%: instead unemployment came in at 7.1%. The Chancellor will anticipate further falls in 2014 and don’t be surprised to see further measures to encourage employers to take on staff, particularly in sectors like manufacturing and engineering.

Interest rates

An unemployment rate of 7% is the Bank of England’s ‘forward guidance threshold’ at which it was theoretically going to consider interest rate rises. However, no sooner had the figures been announced than Governor Mark Carney was declaring that rate rises were unlikely at the current moment, the UK economy being “well short of escape velocity.” Expect to hear the Chancellor use a phrase like, ‘this Government has overseen the longest period of sustained low interest rates since…’

That then is the background to the March Budget and a look ahead to some of the points we expect to see in it.

As usual, we will be writing our own Budget Summary on March 19th and we’ll aim to have this with our clients the following day.

Should you have any questions on how the planned changes in the Budget – or the outlook for the UK economy – might impact on your financial planning then as always, don’t hesitate to contact us.

 

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Hints and Tips for the Tax Year End

As always, the end of the tax year is an important date in anyone’s financial planning calendar. In most cases, tax allowances end with the tax year: making the best use of them while they are available can mean a big difference to the eventual returns from your savings and investments.

We have therefore put together some hints and tips which will hopefully guide your financial planning as the end of the tax year approaches – but as always, if you have any questions on any of the points below don’t hesitate to get in touch with us.

  • First and foremost make full use of your Individual Savings Account (ISA) allowance. The limit for 2013/14 is £11,520 but if you don’t use it by April 5th it is lost. Husbands and wives both have an allowance, and from April 6th the limit will rise to £11,880. If you are saving for children don’t forget to make use of Junior ISAs.
  • An often overlooked allowance is your annual Capital Gains Tax allowance. The amount for the current year is £10,900 (rising to £11,000 in 2014/15) and again both husband and wife have the allowance – so there is scope for transferring assets between you in order to reduce your tax bill.
  • If you believe that your estate might be liable for Inheritance Tax (the current limit is £325,000, which is frozen until 2017/18) then it makes sense to do something about it. Inheritance tax is an area where a little planning can go a long way. First of all you can make annual gifts of £3,000 free of any tax liability and also use any unused allowance from the previous year. You can also make gifts from regular income, providing they don’t reduce your ‘normal’ standard of living. It’s also possible to make IHT–free investments, although that is probably outside the scope of these relatively basic notes.
  • An increasing number of employers now offer arrangements whereby employees can sacrifice salary for approved share options or pension contributions. It may be worth talking to your employer to see if this is possible, as it can be very tax efficient for both the employer and the employee.
  • Irrespective of the position with your employer it always makes sense to review your pension arrangements, particularly with the Government reducing the Pension Lifetime Allowance from 6th April 2014. The reduction to £1.25m has potentially serious implications for many people and if you feel that you may be affected you should get in touch with us.
  • You can also start pension contributions for your children, even if they do not have any earnings. A net contribution of £2,880 will be grossed up to £3,600 with tax relief – a generous donation from the taxman!
  • If your spouse doesn’t work – or earns less than the annual personal allowance – you should consider moving assets into his or her name. This is a perfectly legal and perfectly sensible tax planning move: again, we will be happy to give you advice on how to do this.
  • Remember that interest paid on bank and building society deposits will have tax deducted at 20%. If you do not pay tax then you can sign a form to have the interest paid without the deduction of tax. Alternatively, you can submit a repayment claim to HMRC.
  • Finally, make a will. Over half the UK adult population do not have a valid will and dying without one (dying ‘intestate’) can have serious implications for your financial affairs. Don’t assume everything will go to your spouse – it may not! A good will can minimise tax and give your family security and protection. We will discuss the points that you need to consider and we’ll work with your solicitor to make sure that your will accurately and clearly reflects your financial planning.

Hopefully the above points will help you plan for the end of the tax year and make the most of the allowances that are available.

Remember, they largely disappear at midnight on April 5th (which is a Saturday this year, so for practical purposes the last day of the financial year is Friday April 4th.)

As above, if you have any questions on any of these points or suggestions then we are only a phone call or an email away

 

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We are a nation of worriers but are we worrying about the right things ?

Britons spend more time planning their next holiday, haircut and shopping excursions than they do making preparations for their financial future, according to a new study by Scottish Widows, examining the long-term worries of the nation. The survey of 2,000 people conducted by One-Poll in December 2013 and January 2014, indicates that we may be trapped in a vicious circle of our own making, as the things we worry about most are also the things we tend to put off planning for.

The UK is revealed to be a nation of procrastinators with only (5%) delaying plans for a weekend food shop compared to (22%) who delay planning for retirement. 90% of people questioned in the survey think it is important to have a plan in place for retirement, yet more than one in three (36%) have no plans at all. Health is the number one worry for over half (57%) of the nation, but is also the area in which people are most likely to avoid taking action, with 28% of people putting off visiting the doctor or dentist.

The Top Ten Worries:
1.Our own health.
2.How much money we have to spend on an everyday basis.
3.The health of our kids.
4.Whether we’ll have enough to live on after retirement.
5.The health of our partner and relatives.
6.How much we weigh and losing weight.
7.How well our kids are doing at school and their later education.
8.Relationship with our partners and clearing debts (equal).
9.Employment including redundancy and our next job.
10.Whether you have locked the door to your home or car.

The Top Ten Delayed Plans:
1.Going to the doctor or dentist.
2.Saving for retirement and losing weight (equal).
3.Getting a haircut.
4.Having a plan in place for our financial future and getting a new job (equal).
5.Buying a new house.
6.‘I don’t put off planning anything’.
7.My physical and aesthetic appearance.
8.Saving for a holiday and planning an outfit for an occasion (equal).
9.Saving for a property.
10.Buying gifts for an occasion.

When asked how far in advance people start planning their financial future, 39% of people admit to worrying about whether they’ll have enough to live on after retirement, but only one in five (20%) worry about whether they should actually be contributing to a pension.

Alarmingly, only a quarter (26%) would start planning for retirement 20 years ahead of time, evidence that financial planning for the majority of working people is not as high up the priority list as it needs to be!

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Sources: www.scottishwidows.co.uk

Eastbourne the Sunshine Coast !

My First Week in Eastbourne – by Adrian Elliott – ISO Certified Financial Planner

Finally the paint has dried on the walls and the office is now open!

So how has my first week been?

We had a number of client meetings organised for this week and the reaction and feedback has been brilliant, they all loved the new office, especially the corporate colour chairs.  Oh and yes, the chocolate helped!

There have been a few teething problems, like deciding on cups, hence our company colour paper cups! Eco friendly of course, provided by Tidmas Townsend – shameless plug ! but thank you Mark !

Normally our business is generated from referrals, however, this week we were surprised that we had a couple of potential clients just walk in and ask for advice after seeing our signs courtesy of X-treme Print – yes I know another plug – but thank you Kerry

We’re all delighted with the response, mainly through social media and the people who have seen the project unfold and the journey I have been on leading from Reigate to Eastbourne – we always had the plan that Concept would have a new office in Eastbourne (who says planning does not work!)  Can I just take this opportunity to thank all those involved in making this happen – especially the team – without the team there is no dream !!

Finally ……..The commute to work now takes me 9 minutes as opposed to 90 minutes! Albeit I’ve now started canoeing to work!  Who says Eastbourne is the sunshine coast !!

We are looking forward to welcoming more people in to our new office and introducing our ‘Award Winning Firm, Concept Financial Planning.’

Adrian

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Inflation Rates: What’s Pushing our Prices Up or Down?

The ONS (Office of National Statistics) revealed recently that the UK inflation rate had dropped to 2% in December 2013, but what actually contributes to influencing our inflation rate, moving the prices of the goods we use up or down?

Over the last five years, the three main contributors to the 12-month inflation rate were food & non-alcoholic beverages, housing, water, electricity, gas & other fuels, and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12 month inflation rate each month.

The largest downward contributions to the change in the CPI 12-month rate between November and December 2013 came from food & non-alcoholic beverages. Prices overall rose between November and December 2013 as they do between these months in most years. The rate of the rise was smaller than between the same two months in 2012 and was the smallest it has been since 2006. The downward contribution came from price movements for most foodstuffs and non-alcoholic beverages, with the largest contributions coming from price movements for fruit and meat.

These downward contributions were partially offset by an upward contribution from prices for bread and cereals where the rate of price increases has accelerated. Looking over the longer term, inflation for food and non-alcoholic beverages has grown at a faster rate than overall inflation in each of the last eight years.

Overall, the cost of recreation and culture fell at a quicker rate between November and December 2013 than between the same two months in 2012. The downward contribution came from across the sector, with the largest contribution coming from prices for games, toys and hobbies – notably computer games, where there were reports of sales and lower priced games on older platforms.

The largest (though relatively small compared to many months) upward contribution to the change in the CPI 12 month rate between November and December 2013, came from transport, where prices overall rose at a quicker rate between November and December 2013 than between the same two months in 2012.

The majority of the upward contribution came from prices for petrol and diesel. Petrol prices rose by 0.5 pence per litre between November and December 2013 compared with a fall of 2.8 pence per litre between the same two months in 2012, to stand at 130.4 pence. Diesel prices rose by 0.8 pence per litre between November and December 2013 compared with a fall of 1.4 pence per litre between the same two months in 2013, to stand at 138.3 pence. The upward contribution was partially offset by air fares where prices increased between November and December 2013 as usual, but at a slower rate than in 2012.


Sources: www.ons.gov.uk

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Why Directors and Business Owners Fail to Plan their Retirement

Company directors and owners of SMEs make plans and do forecasts all the time. Cash flow forecasts, SWOT analyses, plans for renewals and refurbishment; there’s hardly a day when they’re not eyeball to eyeball with a spreadsheet.

So why do so many of them fail to plan their own retirements? With studies suggesting that only 1 in 3 directors and business owners has a comprehensive retirement plan in place – and that only 1 in 2 of those with a plan see that plan succeed – there is clearly a need for more directors to plan properly. Why do so many of them fail to do so?

Over the years we’ve probably been given half a dozen answers when we’ve asked that question. As you’ll see, none of them really hold water…

“I haven’t got time.” The simple fact is that no one ever has time. And yet planning your retirement is one of the most important jobs you’ll ever do. As the old saying goes, a director or owner of a small business will either walk out of his business or be carried out of it. Assuming your preferred course of action is the former, then there needs to be enough money waiting when you do eventually walk out – and the only way you can make sure of that is to plan for it.

“It’s too early/too late.” It’s not too early if you’re in your twenties or thirties and it isn’t too late if you’re in your fifties or sixties. We know that in your twenties and thirties you’re working all the hours in the day to build your business: but trust me, you will get older – rather more quickly than you think. And yes, of course it’s easier to achieve savings targets if you have more time but the simple fact is that there is need for financial planning at all ages, as personal circumstances and financial planning goals are always changing.

“I’m going to keep working.” There seems to be a trend amongst some business owners and directors at the moment to declare that they’ll never stop working, that nothing is as satisfying as working so why would you ever want to stop? Unfortunately your health, your family and your competitors may eventually play a part in this decision. In our experience, there comes a time for every entrepreneur and director when ‘enough is enough’ and when that time comes it needs to have been planned for.

“It’s boring/not worth it.” In some ways this is one of the easiest objections to understand. Many directors and entrepreneurs – especially younger ones – have seen their own parents dutifully save for retirement and then not be very well off when they do finish work. Unfortunately, everyone now working faces a very simple fact: the population is getting older and the Government simply won’t be able to fund the retirement you want.

“The numbers are too big/too frightening.” Sadly, this is a reflection of proper financial planning. If we’re going to plan for the retirement you really want then the numbers will be big – and they will be challenging. But there is no point in us preparing a financial plan which provides less than you want – and it’s surprising what can be achieved if you save consistently and keep your savings and investments under regular review.

“My business is my pension.” Despite the fact that virtually no businesses are sold at exactly the right time for exactly the right amount of money, many directors and business owners still say this. Of course the answer is to build your business but you also need to build cash outside your business as well. That’s what gives you choice and control and, ultimately, that’s what allows you to dictate the timing and the quality of your retirement.

We’re always happy to talk about a client’s retirement planning. Directors and business owners can plan for their retirement very tax efficiently – and they enjoy flexibility which certainly isn’t available to normal employees. It makes sense to explore the options: we promise you that it isn’t too late and if there is one thing we will guarantee you – it won’t be boring … !!

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1268-FA_L&P_Winner_2013_OL_Individual Pensions Adviser

 

 

Will the State Pension really fund your post-retirement leisure?

Too many people are going to rely on the state pension in retirement to provide for all their needs and wants, including their leisure activities, a Nationwide survey has found. Nearly half of the 2,400 surveyed rely on or plan to rely on the state pension for their post-retirement holidays and other leisure activities. Going on a cruise or lazing on an exotic beach somewhere might turn out to be a bit beyond the state pension pocket!

The Nationwide findings also indicate that more than a quarter of all UK adults who say they plan to retire have not started planning for it yet. When it comes to planning financially for retirement, women appear to be less prudent than men. Nearly a third of women planning to retire admit they have not yet started putting money aside to finance their retirement, compared to 24% of men. The survey indicated that while it is not surprising that nearly two thirds of 18 to 24 year olds have yet to start thinking about their retirement plans, astonishingly nearly one in four UK adults aged between 45 and 54 have still not made any financial provision for their retirement years.

53% of men rely or plan to rely on their basic state pension compared to 44% of women. Reliance on the basic state pension also generally appears to increase with age. Whereas only 39% of those aged between 25 and 34 plan to use the basic state pension to fund post-retirement leisure activities, this rises to 58% of people aged over 55. Is this a sad but inevitable outcome of not planning to save earlier for retirement?

The study reveals that seeing the Northern Lights is one of the most popular aspirations with more than two in five UK adults not yet retired admitting they would like to visit Northern Norway. A seven-night Northern Lights break to Lapland is likely to cost around £1,000 per person half board, inclusive of activities such as a snowmobile ride and a husky safari. If this trip was to be funded purely from the basic state pension, it would require someone to save up their entire state pension for a minimum of nine weeks.

In the Nationwide survey, people were asked how else they expected to fund their post-retirement leisure. The main responses were:

  • money in a current account or savings account, including ISAs (44%)
  • the cash lump sum claimed from a private pension (31%)
  • an annuity (26%)
  • money from property, such as rent from properties or downsizing (17%)
  • inheritance from other people, such as family and friends (15%)

In addition, more than one in five (22%) of the survey respondents stated that they plan to continue working part-time during retirement in order to fund any leisure activities.

Without one or more of these additional income sources planned for, retired people are unlikely to have enough to achieve the lifestyle that they hope for. There is little doubt that the longer retirement savings planning is ignored, the more disastrous the outcomes for people’s post-retirement finances, and the tougher those later years are likely to become.

 

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An ISA millionaire shows the real power of tax free saving

Lord Lee, hailed as Britain’s first ISA millionaire, tells a compelling tale about how a sensible approach to investment, which includes the prevalent use of the tax free accounts, can pay huge dividends.

Writing in The Telegraph, Lord Lee describes how, after 16 years of investing a total of £126,000 into ISAs, his pot had grown to a hugely impressive £1 million.

Of course, not everyone who invests in ISAs will reach the level of return achieved by Lord Lee, but as we approach the April deadline for using your 2013/2014 annual ISA allowance, his examples proves a potent reminder of just how valuable ISAs can be to your investment portfolio.

Using mainly Stocks and Shares ISAs, Lee preaches patience to ISA investors and revealed that his own biggest investing flaw was a lack of it. Certainly Lee now seems to have little reason to worry, but with one holding sold early for between £4.88 and £11 now worth north of £20, the investor still clearly has some regrets.

For any investors who are not currently following Lord Lee’s example, April 5th is a key date. The end of the current tax year marks your last chance to invest up to the government imposed maximum ISA limit. This year the limit has been set at £11,520, with no more than £5,760 able to be held in a Cash ISA.

Lee ends his article by hailing British business and by saying that we, as a nation, should be encouraging responsible savings and investments. Certainly, using your ISA allowance is one very sensible way of starting to do just that.

Sources: http://www.telegraph.co.uk

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Five strategies for tax planning in 2014

Many of us will be making a New Year’s resolution to sort out our finances – but an often overlooked part of putting your finances in order is making sure that your tax planning is effective. Are you claiming all the tax relief you’re entitled to?

To give your financial planning a head start, here are five strategies for efficient tax planning in the year ahead.

1.First and foremost, be organised. Make sure that you submit your tax returns on time. In addition, make sure you keep good records. This may not seem very exciting, but HMRC are increasingly stressing the importance of accurate record keeping. Everything tax related – interest statements, dividend vouchers, payslips, P60’s and so on – needs to be kept.

2.Make full use of your personal allowances. Even if only one of you is involved, the other could be employed in order to use up his or her personal allowance.

3.There’s also nothing to stop children being employed in the family business so as to take advantage of their personal allowance. Remember though that payment must be for actual work carried out, and at a reasonable commercial rate. Your children also have their own annual exemption for Capital Gains Tax, so it may make sense to move some assets into their names, especially if the value of the assets is likely to increase.

4.The contributions which an employer makes to a pension scheme are generally tax and NI free for most employees. If you want to boost your pension, it may be worth considering ‘salary sacrifice’ – giving up some of your salary to increase your pension contributions. You’ll need to discuss this with your employer and you may need some specialist advice from an independent financial adviser, but it can be a very effective way of increasing the amount going into your pension.

5.If you are running a business, try and incur expenditure just before the end of your tax year rather than just after as this will speed up the tax relief. Examples of the type of expenditure you might consider bringing forward include repairs to buildings and plant, and advertising and marketing campaigns.

As ever, if there is any aspect of your tax planning – or your wider financial planning – that you would like to discuss with us then please don’t hesitate to contact us.

Taxation law may be subject to future change

 

Tax Dates for your Diary

 

1   January 2014 – Due date for Corporation Tax payable for the year ended 31   March 2013.

19   January 2014 – PAYE and NIC deductions due for month ended 5 January 2014.   (If you pay your tax electronically the due date is 22 January 2014.)

19   January 2014 – Filing deadline for the CIS300 monthly return for the month   ended 5 January 2014.

19   January 2014 – CIS tax deducted for the month ended 5 January 2014 is payable   by today.

31   January 2014 – Last day to file 2013 Self Assessment tax returns online.

31   January 2014 – Balance of self assessment tax owing for 2012-13 due to be   settled today. Also first payment on account for 2013-14 due today.

1   February 2014 – Due date for Corporation Tax payable for the year ended 30   April 2013.

19   February 2014 – PAYE and NIC deductions due for month ended 5 February 2014.   (If you pay your tax electronically the due date is 22 February 2014.)

19   February 2014 – Filing deadline for the CIS300 monthly return for the month   ended 5 February 2014.

19   February 2014 – CIS tax deducted for the month ended 5 February 2014 is   payable by today.

1   March 2014 – Self Assessment tax for 2012/13 paid after this date will incur   a 5% surcharge.

 

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Ten things to do to make sure you can live on your pension

It pays to be prepared as retirement nears – be prepared for change and the inevitable decision-making. The Money Advice Service recommends that from about two years out, you should start thinking about your options and planning for the choices you’ll need to make. Consider getting professional advice because there are decisions that will shape your income and lifestyle for the rest of your life.

1 – Work out your likely retirement income. Your annual pension statements, or pre-retirement information from your pension provider or providers, will give you an estimate of the kind of pension income you can expect in retirement. You’ll need to request a forecast of your likely State Pension entitlement, and you should also take account of any income you might have from other savings, investments or assets.

2 – Shop around to get the best pension income for you. The most important thing you can do in the run-up to retirement is to shop around to find the best pension income – both the right kind of income, and the highest income of that type that’s available on the market. Most people buy a lifetime annuity with their pension savings, which means it’s a decision that affects their income for the rest of their life. It pays to get it right – shopping around can boost your income by 20% or more, and once you’ve bought a lifetime annuity you generally can’t change it.

3- Decide which kind of pension income is right for you. Most people need to know they have a minimum level of guaranteed income for life, so they purchase a lifetime annuity with their pension savings. Be aware that a fixed pension income will decline in value over time as prices rise. Consider ways of coping with inflation, such as an annuity that pays a rising income, phased pensions, or saving part of your income now to draw on in retirement.

There are other features to consider when choosing a lifetime annuity, depending on your preferences. For example, do you want your pension to provide for your dependants after you die? Do you want to link your income to the ups and downs of underlying financial investments? You may want to consider income options other than lifetime annuities, such as fixed-term annuities or income drawdown.

4 – Don’t miss out on an enhanced annuity if you have health problems. In most instances – such as buying life assurance – declaring any health problems can reduce your benefits and increase your costs. But the reverse applies when it comes to buying an annuity. If you have health problems or an unhealthy lifestyle, you may be entitled to a higher pension income. Many people who are entitled miss out, so make sure to check your position!

Decide whether to take some of your pension as a tax-free cash lump sum. You can take a portion of your pension as a cash lump sum when you retire. For most people, a quarter of their pension savings can be taken as a tax-free payment in this way.

Most people take their full tax-free entitlement, but this has a knock-on effect on the income you’ll get in retirement, so consider carefully what you can afford and how you’ll use any lump-sum payment.

5 – Decide when to retire and take your pension. The most likely reason to postpone your retirement date is to boost the pension income you’ll get. There are no absolute guarantees, but in general if you retire early you’ll get a lower pension income and if you delay retirement you’ll get a higher pension income. You can’t take the State Pension early, but if you defer it you’ll get either a boost to your weekly entitlement or a lump sum payment.

6 – Consider ways to boost your pension if you need to. With retirement nearing, the scope for making major adjustments to your likely retirement income is limited. But there are still things you can do if you want to make the most of the time that remains before you retire. Two key ways of boosting your pension are to pay more into it – to take advantage of as much tax relief as possible – or to defer the date you start taking an income.

7 – Don’t take risks with the pension savings you’ve built up. While there’s limited scope to make a guaranteed boost to your pension savings in the months before retirement, there are potential risks to the value of your savings to be aware of. In general, in the years leading up to retirement you should already have made sure that the way your pension is invested changed, to reduce the weighting of higher-risk assets such as shares. You should check with your pension provider to make sure your pension savings are invested appropriately.

8 – Clear your debts. You should normally try to start your retirement as free of debt as possible. Your income is likely to go down, so any fixed repayments will start to take up a bigger share of it. Many people use their pension tax-free cash lump sum to clear as many debts as possible. However, in many defined-benefit (salary-related) pension schemes, taking a lump-sum payment can be expensive in terms of the amount of pension income you must give up in return – in these cases it might be better value not to take the lump sum and to prioritise repaying your debts out of the higher pension income.

9 – Be ready for changes in your day-to-day budgeting. You’ll probably need to get used to a different pattern of income and spending when you retire. You’re likely to have less money to live on. Work-related costs will fall, and you may have paid off many of your debts. But your spending may go up in other areas, such as leisure, healthcare and, if you’ll be at home more, things like heating. To prepare yourself for these changes, it’s a good idea to draw up a budget – a record of where your income comes from and how you spend it – and to think ahead to how it might change in the years ahead.

10 – Seek professional advice. The whole area of pension income options and choices is complex. Making mistakes with your own pension arrangements can turn out to be very costly in the long term and life-changing in unwelcome ways. Seeking reliable independent advice should be an early move in your pre-retirement planning.

 

Please do not hesitate to give us a call or send an email – 01737 225665 or advice@conceptfp.com


Sources: www.moneyadviceservice.org.uk

 

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