“The new pension rules bring with it great opportunity, but also carry great risk for those who make the wrong decisions” – Ian Osang (Partner at Ingard IFM LLP)
New pension freedoms announced in the 2014 Budget have relaxed pension rules and offer far more flexibility as to how you can draw the benefits from the pension funds you have built up. For many who require security with their retirement income, an annuity may still be the best solution to provide the peace of mind required. For others who wish to benefit from the newly found flexibility, other solutions such as investment annuities or drawdown may be more suitable.
Implausibly High Returns
Unfortunately, companies promising implausibly high returns from schemes like overseas property, carbon credits and forestry to name but a few are already hovering and waiting to take your hard earned funds. Many of these companies are not regulated to provide advice, and this can affect your rights if something goes wrong. Over the years, many people have already lost most or even all of their retirement savings by ignoring the age old maxim – if it looks too good to be true, it almost certainly is.
It is more important than ever you carefully consider your options and select the right one, as mistakes can not only be expensive, but can also ruin the retirement you have planned. At Ingard IFM LLP, we offer a free initial discussion to help you on your way.Our qualified and FCA licenced retirement specialists, all of whom have at least 20 years experience helping clients, can demystify the options you have, and help advise you on the right solution for your own needs and based on your own circumstances and risk tolerance. We tell you what you need to hear, not want you may want to hear, so you are fully informed and there are no nasty shocks in the future.
Income is guaranteed to be paid until the death of the annuity holder, but it can also be modified to include any of the following options:
5-year guarantee - annuity ceases at death of annuitant, or after 5 years, whichever is the longer
10-year guarantee - annuity ceases at death of annuitant, or after 10 years, whichever is the longer
Joint life annuity - annuity ceases on the death of the second of two named annuitants
Your spouse can be protected after your death, by choosing reduction to half benefit, reduction to two thirds benefit or full benefit.
Thus the annuity is adjusted to the new level at the death of the annuitant or at the end of the guarantee period (if selected), and continues until the death of the spouse.
The annuity can either be paid at a fixed level or you can include an escalation at 3%, 5%, or at the % RPI (annual increase in retail price index). Thus you can choose to compensate for inflationary effects on your income. However the initial income level will be reduced if you choose escalation.
A purchased life annuity is an annuity purchased with your own funds, instead of from a pension fund. It operates in the same way as a compulsory purchase annuity, but it has tax advantages.
The entire pension which you'll receive from a compulsory purchase annuity is treated as taxable income much as in the same way as income from employment would be.
However, when you buy a purchased life annuity, the part of the annuity income which is calculated as capital repayment to you, is free of tax.
Your consultant can assist you in making decisions for such investments, and would be happy to provide comparative illustrations of such options.