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Financial Retirement Planning |
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Over 50s retirement contacts |
Retirement planning Options |
As
life expectancy increases, it is possible that retirement will become
something some of us will not be able to afford. So the earlier
you can start planning for your retirement, the better.
You are under no obligation to retire at the State Retirement Age.
If you want, you can delay the drawing of your state pension. During
the period that you defer receiving your State Pension it will be
increased, so that once the pension is started the weekly payment
will be higher than would have been the case at your State Pension
Age.
The start date of receiving benefits from Private Pensions cannot
normally be extended beyond age 75. Whether the delay in the start
of the pension payments will result in a higher income being paid
to you will depend on the terms of your particular pension plan.
A pension annuity is bought by using your pension fund, at the time
you retire, to provide an income in retirement. Many private pension
plans now allow you to draw your benefits at the time you wish to
retire but do not force you to purchase an annuity. Your income
is provided by making withdrawals directly from the pension fund
which remains invested. Under current rules you can defer the purchase
of an annuity until the time you reach age 75.
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Allowable
Pension Contributions |
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|
Personal
Pension Plan contribution limits |
|
|
Age
at start of tax year |
%
Net Relevant Earnings* |
|
35
or less |
17.5%
|
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36-45 |
20% |
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46-50 |
25% |
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51-55 |
30%
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56-60
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35%
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61-75 |
40%
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*Net
Relevant Earnings are broadly speaking your income from work.
For employees it can include the value of company cars and fringe
benefits, overtime etc. It excludes income from investments.
Only earnings up to the Earnings Limit can be used for Personal
Pension Plans, ie |
|
|
Maximum
Retirement Annuity Plan Contributions |
|
|
Age
at start of tax year |
%
Net Relevant Earnings |
|
50
or less |
17.5% |
|
51
- 55 |
20% |
|
56
- 60 |
22.5% |
|
61
or over |
27.5% |
|
Retirement
Annuity policy limits apply to policies effected before 1 July
1988 |
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There are a number of ways that you can supplement your retirement income, but it is important to be sure that you take proper, independent financial advice that is relative to your own circumstances. It could prove expensive to make the wrong decision.
PLAN FOR RETIREMENT
1. There are basics that everyone needs; clothes, food, heat, light, water etc and you need to sure you have enough pension to cover those basics, but there are many more to remember that could be described as luxuries; car tax, insurance & MOT, hobbies, birthdays, anniversaries, Christmas, holidays, meals out etc. It is a good idea to start making a note of everything you spend money on over a period of time to arrive at a monthly budget that covers all your likely expenses. You can then set about finding the right way for you to achieve this income.
2. The sooner you start saving the better. There are many different companies offering private pension schemes that allow you to save as much as you are able, within the limits set, and the tax you would have paid is added back into the pension scheme. These savings are invested and form the basis of your regular retirement income, but there are charges payable too so you must ask questions about administration charges from several different companies.
3. Whilst you are still working, it would be worth checking what pension scheme your employer offers. Many employers will make contributions to your pension fund, but it is important to understand what the likely "pay-out" might be. It is unlikely, now, to be based on your final salary.
4. If your employer does not have a pension scheme, they should offer one of the new "Stakeholder" pension schemes. These, like the private pension schemes, vary considerably in fees and charges, so it is important to make sure your contributions are not going to be eaten up by the administrators.
5. Be aware that the later you are investing, then the more risk you are taking if your pension investment is in stock & shares. We have seen the value of shares plummet overnight on more than one occasion. Over the long term, they may well prove to show very good growth, but the value of your shares on the day you retire is of paramount importance.
6. You can find other means of earning an income in retirement, but there are tax implications. As in employment, there are limits to how much you can receive before you start paying tax on your pension. You may continue to work part-time or earn some money through a profitable hobby in order to "top up" your pension.
7. Many people are investing in property to supplement their income, as we have seen such a rise in property values lately. Depending on the area you live in, a second property could be rented out for a regular income. However, it is important that you understand the possible pitfalls. There are poor tenants, poor managing agents, landlord obligations, and legal requirements; there are, of course, ideal long-term tenants too. Perhaps a family member would be more advisable. You can sell the property again at any time (subject to your tenancy contract) but you may liable for Capital Gains tax if the property has increased in value.
8.
You might consider having a lodger under the "Rent a Room"
scheme. Provided the room is furnished, you can achieve a rent of
£4250 a year without it affecting your income tax. However,
you may have a Capital Gains Tax liability if you sell your property
later. It is worth speaking to your local Tax Office for advice.
9.
There is a possibility that you could obtain cash against the value
of your property through an Insurance company - usually referred to
as Equity Release. Although this idea has received bad press in the
past, most schemes are now regulated by the Financial Services Authority.
Essentially, you take a mortgage against your property and the repayment
is made when you either enter into full-time care or you die. The
amount you can borrow depends on the value of the property and any
interest due is added to the loan. It is important to remember that
these schemes will not be appropriate for everyone and if you decide
to sell your home you may incur a large amount of charges. It is essential
to take as much advice as possible.
Top Guides For help with retirement
Whatever your retirement goals, these valuable guides will point you in the right direction.
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Planning for Your Retirement and Children's Future
Discount Landlord Insurance provides cheap landlord insurance in UK.
Take
advantage of tax efficient savings with your annual ISA
allowance
Individual Savings Accounts (ISAs) were introduced in
1999 to replace Personal Equity Plans (PEPs). When you
invest through an ISA, the income and growth are free
of income and capital gains tax and you do not have to
declare an ISA on your tax return. more
>>>
Release
the equity from your home with one tax free lump sum or
receive monthly payments for a more comfortable retirement.
See if you
qualify for equity release through Age Partnership.
For more
information, visit http://www.agepartnership.co.uk
Landlord Insurance is available in the UK from Simple Landlords Insurance
500
Ways to make money
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When
you`re stuck for ideas on how to make an extra income
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Other
related page: Elderly
benefits explained in a nutshell |
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