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Financial Retirement Planning


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.

Allowable Pension Contributions
Personal Pension Plan contribution limits
Age at start of tax year
% Net Relevant Earnings*
35 or less

*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
£91,800 for 2000/1, £95400 2001/2, £97200 2002/3, £99000 2003/4.

Maximum Retirement Annuity Plan Contributions
Age at start of tax year
% Net Relevant Earnings
50 or less
51 - 55
56 - 60
61 or over
Retirement Annuity policy limits apply to policies effected before 1 July 1988

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.


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. You can view the options at Propertywide if you are interested in investing.

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.



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