We recently hosted a webinar on pensions, in case you missed it, here’s another opportunity to hear our experts give valuable insight into numerous pension-related topics. The webinar features expert panelists Matthew Tyerman, Jonathan Cross, and Michael McDermott. We would also like to thank John Wyn-Evans, Head of Investment Strategy at Rathbones Incorporating Investec Wealth and Investment (UK) for his insights into the investment market and the impact this has had on pensions.
Pension Webinar available to watch on demand
Watch the complete webinar or watch the section or sections that interest you. The webinar has been broken down and the following topics are available to watch:
- The recent changes to pension tax
- Annual Pension Allowance
- Lifetime Pension Allowance
- Planning for retirement - how much do you need and how to go about building a pension pot to meet your goals?
- Current state of the Investment market
- How you can use your pension to save tax
- Buying a commercial property with your pension
- Looking after your family
- How pensions can be used to reduce an Inheritance tax liability?
- Passing on your pension to your spouse.
- Decumulation (spending your pension)
- Why review your pension with an advisor
The Complete Pensions Webinar January 2024
Webinar: Introduction and latest changes to pension legislation
Webinar: How much do I need to retire?
Webinar: Multiple pension pots? Why consolidate your pensions?
Webinar: Current state of the investment market
Webinar: How you can use your pension to save tax
Webinar: Purchasing a commercial property with a pension
Webinar: Pensions and Inheritance Tax
Webinar: Taking money out of your pension including cashflow modelling
Pensions Webinar: Your questions answered
The webinar included a question and answer session and we have answered all the questions below:
Question: I have a SIPP with Interactive Investor and have already taken my 25% tax-free lump sum. Can I invest some of the remaining sum into ordinary bonds, savings accounts, etc. or must it be invested in the stock market?
Answer: You can invest in several different vehicles but it must remain within a pension wrapper - so you can't remove it and put it in a deposit bank account for example. However, that said whoever you have your pension with you should be considering your attitude to risk and what you are going to do with the assets. You mentioned bonds - that's unlikely to drive much of a return over the longer term where people win is just having enough in vehicles that they can draw down from like a cash deposit account and then risk assess the remainder of the money and invest it over the whole of their lives. Really, it's like a river that ebbs and flows but you still manage to take an income from it and the value will go up and down. Watch the tide and not the waves.
Question: If you can carry on paying into a pension after you start to drawdown, does the 25% tax-free amount increase in line with the additional contributions?
Answer: Yes, it's not just the additional contributions that could increase in value because you have left 75% of your fund invested which will also grow in value. So, in the future, if the amount you left grew from £500k to £600k - so the difference in these two sums would be eligible for the 25% tax-free allowance.
Question: I am a teacher thinking of taking an early pension, in particular the lump sum. Can I then return to work?
Answer: There's nothing under standard pension legislation that prevents you from returning to work. But if you're talking about taking an income from the teacher's pension scheme I'm not sure whether that scheme has any restrictions over retiring and then immediately returning to work. If it is the main teacher's pension scheme I would check with them but if it is a standard private personal pension there are no restrictions.
Question: How do I know if my pension is performing well?
Answer: The key thing is what you benchmark your pension against. I think over the long term the key thing would be to you are keeping your nose ahead of inflation. Inflation is probably the most destructive thing to any savings product, is that it declines relative to your outgoings. Obviously, within our industry, you can manage yourself against a benchmark or you can look at what your pension is doing against what other people who are offering similar products are and there are lots of services that will rank the performance of investment managers against each other. But I think I would come back to the fact that the key thing you need to do is to make sure that you keep your nose ahead of inflation.
Question: How would you go about tracking down old pensions? And how long does it take to consolidate pensions? Is it costly?
Answer: If you're looking to track down old pensions there are various lost pension services that can do that for you. Several of the larger pension providers subscribe to these, and we would be happy to help you. If you haven't got a clue where the pension was, it will be very difficult but if you have old valuation statements or old employer details, please get in touch with details and we would be happy to point you in the right direction.
In regard to the length of time it takes to consolidate - possibly up to a three-month period as it very dependent on the scheme provider and how quickly they give us the required information and then we can assess the scheme to see where best to consolidate to. But we would look to move it along as quickly as we can for you. Cost-wise it depends how much you're transferring and where the money is. We do charge an initial fee for our time so we would discuss that with you individually depending on your needs.
Question: Re the £10,000 annual pension contribution: Is there a carry forward option if my company has not previously made a pension contribution on my behalf?
Answer: Here the £10,000 is only applicable if you accessed income before, so the allowance might actually be £60,000. There are a couple of little quirks that feature in the legislation that have the potential to catch people out. One of which is that you must have had a pension vehicle - so a private pension or employer pension scheme including an armed forces pension from the earliest point that you are looking to carry forward from. So, if you have never had a pension you cannot use the carry-forward allowance.
If you have not contributed for a while, then we can potentially put in up to £180,000. But you must use the current year's allowance first before using the previous year's allowance and you need to ensure you don’t contribute more than your income for the year that you are contributing. Also, high earners need to watch out for tapering of annual allowance.
Question: Can we use previous years unused pension contributions this year and go over the £60K annual limit?
Answer: You can use this year’s limit and the unused limit from previous three years provided:
- You have enough taxable income or company profit to offset the pension contribution i.e. income or profit of over £60k. You can’t invest more than your annual earnings for the year.
- You have an existing pension which could have theoretically received this money in the last three years, even if this is a very old pension with not much in it or an old company scheme that pays a set sum at a specific retirement date (defined benefit scheme).
- The pension allowances for this year and earlier years are not reduced due to your income level – complicated but typically impact those with earnings over £150k.
- Your previous allowances may have been used or partly used by an employer or your own pension contributions, which will need to be taken into account.
Although this covers the main points, the rules are complicated and this is not an exhaustive list
We are happy to help you maximise your unused annual pension contributions.
Question: I am a Limited Company Director. Am I best to join a private pension scheme or should I set up a company pension for my Limited Company?
Answer: If you are a limited company director or a joint company director, nine times out of ten it is more efficient to have a private pension scheme rather than setting up a company pension scheme. The difference between private and company pensions in terms of cost is neutral but a personal pension is potentially more flexible and avoids any chance of getting tangled up in any future auto-enrolment rules that may come in force.
However, if you have a lot of employees, it may be more efficient to set up a company pension scheme.
You can have a private pension but make contributions via your company – this is called third party contribution. We can help you do this and ensure the money is invested well for you.
Question: If you have board or advisor roles in old age, does a pension payout add to revenues to calculate what tax rates (20% and 40%) are applied to?
Answer: Any withdrawals from a pension are added to any other taxable income. Once over the personal allowance you pay tax at the relevant rate. It is based on total taxable income including any employment or consultancy income.
Question: Can we draw 25% of pension pot every year tax free? Assume I have £100k in the pot, can I withdraw 25% of it i.e., £25k first year, then 25% of remaining £75k next year and so on?
Answer: Unfortunately, not. You can withdraw 25% of accumulated fund, i.e., the total. So, using the £100k example, you are entitled to withdraw £25k in a tax free lump sum and the remaining £75k would remain in your pension scheme.
Question: How far back in years does the carry forward allowance apply?
Answer: The carry forward allowance applies to the three previous tax years. You can currently use allowances from 20/21, 21/22 and 22/23 in addition to current tax year 2023/24. This isn’t a simple calculation though as the amount you can contribute depends on income and prior contributions. Also you need to factor in the order in which you offset and any employer contributions that have been made in this period.
Question: Are all pensions accessible at 55 yrs old?
Answer: You can generally access funds held within a pension from age 55, subject to both scheme and HMRC rules. For many, funds can be accessible at age 56 or 57 as it is usually it’s 10 years below your state retirement age.
You can contribute to a pension and receive tax relief up to age 75.
Question: Is it too late to start reviewing my pension at 63 years old?
Answer: It is never too late to review your pension. Things to look out for would be:
- Check your state pension and if it needs topping up.
- Check National Insurance records are up-to-date.
- Consider if you have any inheritance tax issues and whether you should spend your pension after other income sources.
- Pension tax relief available and ability to make further contributions.
There are lots of opportunities to do some interesting pension planning. Even when retired, it is worth reviewing as it may not be invested well.
Question: Can you say something about annuity rates which have recently been poor - do you have a view what they might be like going forward?
Answer: Annuity rates have risen a bit as interest rates have risen.Therefore, are likely to go back down as interest rates fall, once inflation under control. Annuity rates also depend on various options and personal criteria such as your age and your health. Do you want it to go up each year with inflation or are you happy with a fixed amount? Do you want your spouse to receive something if you die first? Do you want a minimum payment period in the event you die sooner than expected?
Question: What are the Pros and Cons of buying someone else's State pension entitlement, to top up your pension?
Answer: Topping up a partner/spouses scheme it can be advantageous however the pension will ALWAYS be theirs, you cannot buy someone else’s state pension.
Question: I am 38 now and don't have a pension as I am self-employed, where do I start from?
Answer: Come and see us. Speak to a member of our independent financial adviser team for a free initial consultation!
Question: Are there any benefits to transferring Defined Benefits (DB) pots pre-retirement into a current Defined Contribution (DC) scheme?
Answer: Defined Benefit pensions can be transferred in limited circumstances. The FCA deem this a high-risk area and have therefore made it difficult to do. We could take a look into this to see if there is any chance this could be done. The main benefits of transferring a DB pension are to pass on the pension pot to loved ones when you die or to spend it quickly if you are in ill health.
Question: Can I contribute my pension to gold?
Answer: This is not a recommendation, but you could theoretically buy exchange traded funds which are linked to the price of gold. There are different variants, some physically hold the gold in a vault others synthetically mirror the price of gold. There are pros and cons of each.
Question: For a retired person with no employment income, only pensions income. Are pension contributions to a SIPP limited to £3,600?
Answer: Based on information provided the answer is yes. You could contribute more but may not get tax relief.
Question: If I didn't work for 2 years in 2019/2020, and didn't pay into a pension, and then I did work in 2021/22 and paid into pension, can I use the pension carry on allowance or 2019/2020?
Answer: 2019/20 tax year is unfortunately too old now and this allowance is lost. You may have been able to use it if you had acted before 5/4/23. Sorry but happy to help in any other way!
Question: To pay for a commercial building with a pension are there any tax benefit of having the funds paid directly to the solicitor or withdraw and manage the cash for the purchase?
Answer: Don’t think so but worth discussing in person to understand the detail.
Question: Labour have stated that they will reverse the recent change to the Pension Lifetime Allowance.
Answer: Yes, that’s a possibility.Who can tell? Rules have been changed numerous times in different directions but remember the recent rule changes were partly to help reduce the tax burden to NHS staff were facing in connection with their pensions. In short, the previous rules discouraged them from working overtime. Governments sometimes change things by name but keep things similar. Years ago, Labour replaced the PEP tax free account with ISA accounts which do more or less the same thing.
Question: I am ex Royal Air Force and Civil servant, turning 60 in July, I am still working and paying tax at the highest rate 40% on my pensions, sounds like a visit to TaxAssist Financial Services is required?
Answer: Of course, happy to help you however we can!
Question: Can you continue to add into a pension after the age of 65?
Answer: Yes, you can continue to add to a pension up until the age of 75 and still get tax relief.
Question: What are your charges for financial advice?
Answer: Usually, 2.85% of amount invested but this falls for larger investment amounts. We also charge an annual fee, which starts at 0.87% of amount invested and again this fall depending on amount invested. This covers the detailed consultation, thorough research/planning and multiple meetings as needed to agree your plan and implement it. It also includes regular meetings (at least annual) to check everything is on track and to make changes where circumstances change.