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Review your personal pension plan before it’s too late!

Year after year, surveys consistently show that the number one concern for most people approaching retirement is the fear of not having enough money to maintain their lifestyle during this period.  According to the LV State of Retirement Report, published in 2012, 58% of those set to retire within five years have become more concerned over the last 12 months about their financial situation and their level of savings for retirement.

This sentiment is one frequently encountered by the Retirement and Investment Solutions team. Time and time again, we meet individuals who are simply not prepared for their retirement. Instead of reviewing pension plans and keeping up-to-date with their finances, many are sticking their head in the sand, accepting what’s done is done. This doesn’t have to be the case.

Below are a handful of scenarios we experience on a daily basis. Unfortunately, sometimes it’s too late to make a difference. However, asking for advice and reviewing your personal pension plan on a regular basis can, in most cases, positively affect your retirement income.

1. If only he had reviewed his pension plan much earlier!

A gentleman approached Retirement and Investment Solutions wanting to know whether or not he could afford to retire later this year, when he would be 65.  As part of the service provided by Retirement and Investment Solutions a letter of authority was sent to the gentleman’s Pension Provider.  He took out a personal pension plan in the early nineties, with London Life, which is now owned by Phoenix Life and has been invested in a ‘With Profits Fund’ since the outset.  This is supposed to be lower risk strategy which was designed to pay out an annual bonus.  However, this particular plan has not paid a bonus since 2003, i.e. 10 years of no growth!  

Unfortunately, in this case, it was not financially viable to move the gentleman to a more modern and cost effective plan with only months to go.

The good news is that by shopping around on the Open market and taking consideration of his health and lifestyle we are able to provide a higher income than if he took the benefits from Phoenix Life.


2. Be careful what you sign-up for!

A lady approached Retirement and Investment Solutions and took advantage of the Free Retirement Review.  She had a Canada Life Personal Pension, which was taken out in 1997 and has been paying regularly each month into her plan and increasing the amount each year to keep pace with inflation.  Unfortunately, what she did not realise was that 2% of each contributions was deducted at outset in initial charges and the pension  plan deducted a further £4.44 per month for a “policy fee” plus annual management charges on initial units of 4.75%, annual management charges on accumulation units of 1.25% and additional charges if she wants to switch funds. To make it worse, every time she increased her regular contributions, there were additional initial units purchased, which were being charged at 4.75% per annum.

Retirement and Investment Solutions advised the lady to cancel her direct debit to Canada Life immediately.  We then consolidated her various old plans into one modern contract at a lower ongoing cost, with improved investment management. The lady’s regular contributions were redirected into her Employers Group Pension plan by way of Salary sacrifice, which will also reduce her National Insurance bill.


3. Without advice, he would have lost one third of his total pension fund in penalties!

A client of Retirement and Investment Solutions came in to see an advisor in July 2012. The gentleman had decided that he wanted to take the benefits from his personal pension plans. He accepted that the fund values were not brilliant, but did not know until advised by Retirement and Investment Solutions, that by delaying taking the benefits by 5 months, until the plan’s normal retirement date, i.e. age 65 in this instance, the penalty that applied in July 2012 disappeared on his 65th birthday. 

 

Retirement and Investment Solutions cannot stress enough the importance of reviewing your pension plan on a regular basis. Don't leave pension arrangements and financial affairs until just before your retirement.  You may well be surprised to learn how little your investment fund is worth and how little a pension payment it would provide.

If you are not confident that your investments are performing as well as they could, or you are unsure about your pension and looking for advice, Retirement and Investment Solutions can provide you with a Free Retirement Review to help you avoid any of the above and set you on the right path to a more secure retirement.

A shake-up of state pensions

Last week, the government outlined proposals for a major overhaul of the state pension system. The aim is to simplify the system by getting rid of all the means-tested sections entirely for all those retiring from April 2017.

Under the existing system, many pensioners are entitled to a top up their basic state pension payments of £107.45 a week, via the means-tested Pension Credit and the second state pension. However, figures suggest that around 1.5 million people fail to claim Pension Credit.

The coalition's proposals include a single flat-rate state pension, worth around £144 in today's money, to be introduced for new pensioners from 2017. The actual sum will rise with inflation over the next few years. The new reform will create a flat rate pension based on 35 years of National Insurance Contribution, rather than the current 30 years, in a bid to help women, low earners and the self-employed, who under existing rules find it almost impossible to earn a full state pension. The state pension age is also set to rise to 66 by 2020, and to 67 by 2028.

However, more importantly for clients of Retirement and Investment Solutions, who could well have built up entitlement in excess of £144 per week, it is proposed that transitional arrangements will be introduced to protect state pension rights accrued up to the start date of the new single-tier pension. We will be monitoring the situation right through to Royal Assent and will keep our clients informed of what these changes mean to them individually.

 

 

 

 

 

Retail Distribution Review comes into force

A landmark shake-up of the financial advice market came into effect on the 31st December 2012, forcing advisers to clearly explain their costs and services to customers. The aim is to provide consumers with the confidence that the advice they are given and products they are sold  are best suited to their needs.

However, Retirement and Investment Solutions are already a step ahead.  It is business as usual for our clients, as we already follow the new framework within the Retail Distribution Review (RDR) and have done so for the last 8 years. 

The requirements and regulations created by the Financial Services Authority (FSA) address long-standing problems with how some organisations within the financial service industry operate. The FSA has set out three measures for financial advisers in investment management companies, banks, insurers and other firms to ensure they are fair to consumers.

These are:

1. Improve the clarity with which firms describe their services to consumers.

Firms offering financial advice must explicitly disclose and separately charge clients for their services. Many consumers receiving financial advice currently pay commission to their financial adviser, but under RDR, commission payments are abolished and replaced by a direct fee.

At Retirement and Investment Solutions we make sure that we are clear and transparent at all times and our uncomplicated and easy to quantify fee structure reflects this. Our investment and retirement planning fees are the same, regardless of product, provider or service. This guarantees that you receive totally impartial advice based on your specific needs and circumstances.

2. Advisory firms to clearly describe their services as either independent or restricted

Firms offering advice must clearly describe their services as either “independent” or “restricted” and explain what this means to the customer. An independent adviser will cover all products and allthe product providers in the market. A restricted adviser will cover a limited number of products and a may utilise a limited number of product providers in the market.

At Retirement and Investment Solutions, we focus all our energy into supporting those over 50 and have therefore made the decision to provide an advice service restricted to the investment and pension needs of the over 50s market. This enhances our ability to provide truly specialist retirement planning advice and solutions, perfectly suited to helping you achieve the retirement you dream of.

We will continue to recommend investments and pensions from the whole of market, but do not currently advise on specific types of investments, i.e. unregulated collectives, Venture Capital Trusts, Enterprise Investment Schemes etc. 

3. Increase the professional standards of investment advisers.

Individual advisers working in advisory firms must adhere to consistent professional standards, including a code of ethics. The FSA has accredited eight professional bodies, including the Chartered Institute for Securities and Investment (CISI) and the IFS School of Finance, to provide RDR qualifications and issue statements of professional standing (SPS) to financial advisers. -  Retirement and Investment Solutions’ advisors attained the qualifications needed to comply with the new requirements well in advance of the 31 December 2012 deadline.


At Retirement and Investment Solutions we believe that important financial arrangements, such as pensions and investment solutions, should be kept under regular review and proactively change according to your personal circumstances, investment conditions and legislation. If you have any questions about the service provided by Retirement and Investment Solutions, please feel free to contact us for more information.

Autumn Statement Update

The Chancellor, George Osborne, delivered the government's latest plans for taxation and spending in his annual Autumn Statement yesterday.  Whether you are a pensioner, saver or investor, the news will no doubt affect your future finances. With this in mind, Retirement and Investment Solutions highlights some of the key facts and changes that could have an impact on the over 50s.

  • The overall annual Isa contribution limit will increase by 2.1% in April 2013, from the current level of £11,280 to £11,520.

  • The inheritance tax nil-band rate will rise by £4,000, from £325,000 now to £329,000 in 2015-16.

  • The basic state pension will rise by 2.5% next year to £110.15 a week.

  • The annual pension allowance will be cut from £50,000 to £40,000.  This will not come into effect until the 2014/15 tax year, however, giving many wealthier savers the opportunity to boost pension contributions now, although those who exceed the lifetime limit will face a tax charge.

  • The standard Lifetime Allowance will drop from the current £1.5 million to £1.25 million from 2014/15.

However there will be a new ‘2014' fixed protection option to ‘fix' the level at £1.5 million. The ‘cost' is that no further payments can be made to money purchase schemes, and the annual increase in pension earned must not exceed the ‘relevant percentage'.

In addition it is proposed that there will be another Personalised Protection option on the table for those already above £1.25 million by 2014. This also allows savers to lock into a £1.5 million allowance, but still pay in to their pension.

  • Child Trust Fund and Junior ISA subscription limits will both increase to £3,720 for 2013/14.

  • The plans for the 3p a litre fuel duty rise planned for January has been scrapped.

  • Pension drawdown limits will be raised by 20%, back to their pre 2011 level of 120% of the GAD rate. The fine details will be released in draft legislation in January, with the changes likely to take effect from April 2013.

  • From April 2014 the main rate of corporation tax will drop 1 percentage point to 21%, boosting small- and medium-sized enterprises (SMEs). A new Business Bank will be set up to provide a £1bn boost to the small exports businesses and the annual investment allowance has been increased, meaning SMEs can invest up to £250,000 a year with full tax relief in plant and machinery.

  • Personal tax allowance to rise to £9,440.

We will of course be advising existing Retirement and Investment Solutions’ clients at their review meeting about how these measures will impact on their personal circumstances.

In the meantime, if you have any questions, please contact Retirement and Investment Solutions on 01489 878300.


Retirement and Investment Solutions celebrates 15 successful years in business.

You may or may not know, but we were delighted to celebrate our 15th anniversary this November.

We marked the occasion with a canapé reception and champagne tasting at the opulent Grade II listed Georgian villa, Hill Place, in Swanmore, on the 22nd November. As well an opportunity to celebrate this milestone with clients, colleagues and associates, the anniversary event was a chance to raise awareness for Retirement and Investment Solutions’ company charity, Hampshire and Isle of Wight Air Ambulance. The event was co-sponsored by Brooks Macdonald, Retirement and Investment Solutions’ preferred firm of Discretionary Fund Managers.

When we found Hill Place we knew immediately that it was a fitting backdrop for our celebrations and the champagne tasting was enthusiastically appreciated. We wanted to say a big thank you to our clients and associates, who have been key to our ongoing success.

We look forward to continuing to provide retirement solutions for yet more of the over 50’s in the south of Hampshire.

Here is a sneak peek of some of the photographs.

Event1Event5

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More pictures coming soon...

Retirement and Investment Solutions anniversary will also be featured in the December issue of Solent Life.

Financial Product Best Buys – November 2012

To help you make more from your money, each month Retirement and Investment Solutions provides you with best buys for your savings.

 

  • Best instant access

Nationwide 2.20% AER

Minimum investment £1. Apply online

 

  • Best 1 year fixed rate

United Bank UK 2.75% AER

Minimum investment £2,000. Apply online, by post or in branch.


  • Best 3 year fixed rate

Close Brothers Savings 3.30% AER

Minimum investment £500. Apply by post.

 

  • Best 5 year fixed rate

Vanquis Bank 3.16% AER

Minimum investment £1,000. Apply online.


  • Best 1 year fixed rate Cash ISA

Marks & Spencer 2.8% AER

Minimum deposit £500. Apply by post or telephone.

 

  • Best 3 year fixed rate Cash ISA

Marks & Spencer 3% AER

Minimum deposit £500. Apply online or by telephone.

 

  • Best 5 year fixed rate Cash ISA

BM Savings 3% AER

Minimum investment deposit £500. Apply online or by telephone.


  • Instant Access ISA         

ING Direct 2.50% AER

Minimum deposit £1. Apply online or by telephone.

 

The rules for Child Benefit are changing

 

  • When?

From 7th January 2013

 

  • Who?

Any household receiving child benefit where one of the parents or guardians is earning more than £50,000 a year.

It is important to understand that the changes will affect you if either you or your partner is earning more than £50,000 a year. Even if one of you is earning very little or nothing, it will still affect you if the other partner is earning more than £50,000.  

 

  • How?

The person earning more than £50,000 a year will have to complete and submit to HMRC a self-assessment tax return each year.

This will result in that person paying extra tax that will effectively reduce the value of the child benefit to the extent that, if the person is earning more than £60,000 a year, the whole value of the child benefit will be wiped out by the increased tax liability.

 

  • Is there anything I can do?

For people earning above £50,000, increasing your pension contributions could help ensure that you keep hold of your full entitlement to child benefit. The HMRC looks at your "adjusted net income" rather than your gross salary when deciding whether or not you will lose your child benefit.

To reduce the impact, you can use your salary to buy childcare vouchers, medical insurance or Gift Aid to make charitable donations. Known as 'salary sacrifice', this can also help bring your income to below the threshold.

For example, basic rate tax payers signing up to the childcare voucher scheme now can buy up to £55 of vouchers a week. These can be used to pay for registered childcare at a nursery, playschool, childminder or after-school club.

  • Where can I get more information?

To view a comprehensive question and answer article on the new rules and how they may affect you, click here.

If you are interested in learning more about Gift Aid and salary sacrifice, click here.

The September inflation figures – how this will affect you

In September, the Office of National Statistics (ONS) announced the monthly UK inflation figures. Many people may only pay a passing interest into the monthly inflation rates, however, the September figures affect how the tax and benefit system will look in April 2013.

The Government uses September's Consumer Price Index (CPI ) figure to calculate a range of benefits, such as income tax thresholds, benefit amounts and public sector pensions, which are typically increased each April, in line with the rate of annual inflation measured in the previous September.

The figures highlight that the annual CPI inflation for September fell to 2.2% and Retail Price Index (RPI) to 2.6%. The CPI figure of 2.2% will have the following impact:

  • State pensions: Basic state pension (BSP) should rise by 2.5% next April. This is the result of a government guarantee and would see the state pension increase by at least £2.69 a week.Other state pensions (ie. additional pensions such as S2P, SERPS and graduated pension) will rise by 2.2%.

  • DB pension statutory increases in deferment and in payment will be under the 2.5% and 5% rate caps if the scheme inflation link is CPI.

  • The revaluation factor for accrued DB benefits in annual allowance calculations for 2013/14 will be 2.2%. As earnings are generally growing at a lower rate, this may give a little extra headroom for benefit accrual.

  • Working age social security benefits should rise by 2.2%, where the Government has not already announced that they are being frozen. There have been rumours that the Chancellor may choose a lower rate of increase, in line with earnings for instance.

  • ISA limit - in 2013/14, the ISA investment limit, which is now linked to CPI, should rise to £11,520 (after rounding to nearest £120).

  • CGT annual exempt amount – in 2013/14 should increase to £10,900 (after rounding up to nearest £100) as it is also CPI-linked.

To find out how all this affects you and your financial position, please feel free to get in touch and we’d be happy to review it for you.

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Contact us

Retirement and Investment Solutions
5 Lancer House, Hussar Court
Waterlooville
Hampshire, PO7 7SE

T: 01489 878300
F: 0870 0104883
E: advice@retirementis.co.uk