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“Pension Freedoms”

Easter Monday, April 6th 2015, marked a landmark change in Pensions, in what the Government calls “Pension Freedoms”. The new rules allow people with Defined Contribution (DC) schemes, over the age of 55, unprecedented freedom over how and when they take their pension. This allows them to take their whole pension pot if they choose, subject to tax.

The first 25% of their pension pot can be taken as a tax-free lump sum. They will have to pay income tax on the amount withdrawn over and above the 25% tax-free allowance. It is worth noting that if this amount together with their income totals more than £42,386 (2015-16) they will pay tax at 40% or more. If on the other hand they decide to buy an annuity, they will only pay tax on the income drawdown. If the total falls below the tax threshold of £10,600 they will not pay tax.

This diagram explains the new rules (Credit: HM Treasury).

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The new rules are designed to make it easier for a pension to be passed onto dependants. If they die before the age of 75, the pension pot can be passed on tax free. If they are over 75, and the descendants want the whole pot as a lump sum, they will have to pay 45% tax (55% previously).

Example:

If you have a pension pot of £200,000 on retirement, you could take £50,000 tax-free as a lump sum, use another £50,000 to get a regular income through an annuity, and then drawdown as much as you wish or need from the remaining amount each year to supplement your income

Pension Wise is a free and impartial government service that is designed to help people understand their new pension options. Note that this only provides guidance and not advice.

Find the State Pension Calculator here:

State Pension Calculator

Published: 7th April 2015



Pension Wise goes Live

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The Government’s new pensions guidance service has gone live today, Pension Wise. This website is designed to be a first port of call for consumers, offering free and impartial information and guidance to people on the new pension freedoms. The new rules coming into effect in April 2015 will allow you to have much greater control over your pension pot, but many more dilemmas over what to do with your money. This service will aim to answer your questions.

Pension Wise is designed as a six step process helping retirees understand how to turn their pension pot into income. These steps are:

  1. Check the value of your pension pot
  2. Understand what you can do with your pension pot
  3. Plan how long your money needs to last
  4. Work out how much money you’ll have in retirement
  5. Watch out for tax
  6. Shop around for the best deal

Take a look at the website here and let us know your thoughts, will it help you?https://www.pensionwise.gov.uk/

Published: 12th February 2015



Government Pensioner Bonds Extended

The popularity of the Government Pensioner Bonds has led to George Osborne announcing an extension of their availability, in line with the Governments long term economic plan of supporting savers regardless of age. They will now be offered for a further three months, until 15th May 2015.

The bonds have flown off the shelf with more than 610,000 savers purchasing the bonds since their launch adding up to over £7.5 billion. George Osbourne expects the extension to lead to at least 1 million savers benefiting from the annual interest rates of 4% for the 3 year bonds and 2.8% for the 1 year bonds.

Source:

https://www.gov.uk/government/news/chancellor-extends-hugely-popular-pensioner-bonds



Government Pensioner Bonds

More than £1 billion of government pensioner bonds of a possible £10bn worth of bonds were sold in the first two days after they went on sale through National Savings and Investments (NS&I). On the first day the demand was so great the website and phone lines crashed within minutes. Savers flocked to take advantage of some of the best interest rates in the country at 2.8% for a one year bond and 4% for a three year bond.

Just What are Pensioner Bonds?

• One or three year bonds were available.
• Fixed interest rates of 2.8% for one year bonds and 4% for three year bonds.
• Anyone over 65 could invest up to £10,000 into each type of bond, a maximum of £20,000 per individual.
• Minimum investment of £500.
• They were not ISAs so account holders may have to pay income tax on the interest they earn. (The only way to avoid this is if your annual income is below the personal allowance,( which is £11500 this tax year) and/or you have used up the savings allowance.
• Cash invested in pensioner bonds could be taken out at any time, but at a cost of 90 days’ interest on the withdrawn funds.
• Security of money assured as they are backed by the government.
• You can’t purchase these bonds on behalf of another person.
• Contact nsandi.com, call 0500 500 000 – or write to National Savings and Investments, Glasgow G58 1SB with any queries you have on your bonds.

One of the big drawbacks with Pensioner Bonds is that your money, and your interest, are locked away for the length of the bond. If you are planning to live off your savings this could cause a big problem. If you wish to withdraw your cash early then you must forfeit 90 days of interest

Sources:

http://www.nsandi.com/



Winter Fuel Payments need reforming, says Retirement Education Services MD.

“The Government should take more urgent action to target winter fuel payment to the most needy, namely those over 80 still in their own homes”, says RES MD Tony Wheeler.

“The move to push up the qualifying age should be balanced by giving more help to the oldest members of our communities still in their own homes. Why does it seem beyond the wit of the Government to initiate an over 80+’s electricity tariff through all energy suppliers to those still in their own homes or to single occupant households?.  Why not drop the standing charge to them too as this is a disproportionate charge to low single person or pensioner couples households?”



Why are recent Chancellors so focused on attacking Britain’s pensioners?

“Why are recent Chancellors so focused on attacking Britain’s pensioners?” asks Tony Wheeler, MD of Retirement Education Services.

Pensioners have seen their savings decimated by falsely lowered interest rates through the use of quantitative easing. On top of this, pension increases have been reduced by the change from Retail Price Index to the lower Consumer Price Index.

Despite this, pensioners were highlighted as having received some form of favour by George Osborne simply because they received an increase of over a fiver a week, due to higher than expected CPI in September 2011. Now we have the prospect of diminishing personal allowances for those over 65 and 75, through the freezing of age allowances in the budget.

In addition, the Chancellor has reduced the maximum payout regarding the savings credit element of Pension Credit. The effect of this will be to claw back most of the cost of living increase given to over 300,000 pensioners. This will make all those approaching retirement question the value of saving for their retirement years. Most importantly says Tony, it threatens the success of the Government’s auto-enrolment into pension schemes –  especially affecting those people in their late fifties who may fear losing pension credit top-ups because they have accumulated only modest savings. This is the last thing the major employers want just as they are undertaking the expensive and time consuming task of encouraging employees to invest in pensions.

If the Government don’t stop their attack on pensioners soon, they will find they are no longer in Office following the next General Election and rightly so.



HSBC fined £10 million pounds for mis-selling investment policies to fund care.

10/12/2011

Retirement Education Services have been just as shocked as other organisations at the revelations on TV and in the newspapers (Daily Mail 6/12/11) concerning the inappropriate products offered to the elderly to fund care home fees.

RES MD, Tony Wheeler, commented that we have used NHFA for many years with regard to advice concerning the rules and regulations on care fees in Nursing Homes both Local Authority and commercially run. Their literature was always of a high standard and comprehensive in its coverage.

We were nervous when HSBC took them over in 2005 and since that time have cautioned those who attended our courses that they had become owned by a High Street bank which may exert more pressure on their advisers so far as financial products for care was concerned. How right we were.

Our policy of never accepting payment directly or by commissions for any organisation that we work with (or suggest to participants) has been fully endorsed by this dreadful affair.

We have already reviewed the assistance that we received from them in our self-teaching packages and will decide shortly which organisation we can trust to work with us going forward.

We are anxious at present to ensure that the information we give continues to be without bias towards the sale of investment products.

Unfortunately even the present site recommended by the Government has admitted on its website to receiving fees for business placed with experts that help them, e.g Solicitors and IFA’s



Ending of Default Retirement Age Raises Difficult Questions

15/12/2011

Having provided in-house and open retirement planning courses, one to one retirement counselling and senior executive retirement workshops for twenty five years, Retirement Education Services find themselves on a new journey.

With the Government ending the UK Default Retirement Age of 65, the majority of workers in the UK will for the first time have to decide solely for themselves when they will retire.

This will be well received by many who get so much more from their work than a wage or salary.  For example scientists and innovators who want to complete their research on a project and not be forced to stop by some arbitrary date of birth. Single people who obtain most of their social contact from work or those in partnerships that are less than harmonious and therefore going to work provides considerable respite, they too may wish to stay beyond their state pension age.

However RES Managing Director Tony Wheeler has considerable reservations about the change some of which he believes the Government have overlooked altogether.  He says that the Government are obviously focusing on the difficulty in affording to pay for pensions longer because we are living longer.

The Government have no doubt done their sums on how their decision will substantially increase unemployment for young people if older workers stay on.  However, have they considered the burden for employers who could have replaced long serving dearer workers with lower cost apprentices, and reduced their wage bill during this recession whilst orders are lower?

Have the Government also considered that workers in physical or very stressful roles could as a result of working longer leave the workplace through serious illness, placing an added cost and strain on the health service?

How aware are the Government that through people (especially women) working longer, there will be less carers available to support elderly relatives and less child minders to support younger family members who may wish to have a family?

Most importantly Tony believes the Government have overlooked entirely how unpleasantly work may end for countless workers who have given decades of first class service to an employer.

This is because employees will retain their jobs for as long as they wish, providing they continue to perform them to an agreed or acceptable standard.  If a manager, director or owner of a business feels they are not, and the employee disagrees, you are heading for an employment tribunal.

This will frequently mean that the employee will end their working roles at odds with their employer.  There will be anger, frustration, sadness and disappointment.  It may mean they don’t leave with a retirement party and with the thanks and recognition they deserve for the contribution made in several earlier decades.  Their stress and anxiety will again impact on the NHS too.

In addition, taking cases to an industrial tribunal will bring an unwelcome burden of costs to the employer through committing management to attend and put together a good case, plus the cost of legal representation where necessary.

On our pre-retirement courses the most commonly voices concern is will we manage financially?.  If you give workers an opportunity to stay working longer they will take it – it is human nature just to earn and save a little bit more ‘just in case’.

There will be a significant number of partners that will be really worried about the health of their husband in a physically demanding job or of their wife driving long journeys on busy motorways as their reactions slow down.  Having a fixed retirement age at work has the advantage of giving people a focus or goal, and gives them reason to carefully plan their retirement.



How will the abolition of the Default Retirement Age affect Retirement Planning?

01/07/2011

The abolition of the default retirement age committed to by the coalition could have a catastrophic impact on retirement training & planning course providers says Tony Wheeler MD of Retirement Education Services Ltd.

Up to now HR or Pension Managers have been able to gauge based on age criteria how many staff would need to be budgeted for with a retirement training course year on year. These HR personnel might normally offer attendance to retirees say two or three years before their retirement age of 65.

Going forward employees will be able to decide their own retirement age simply giving their line manager or HR Depts their contractual notice period. This in most cases would be only 4 weeks or a calendar month.

To provide a pre-retirement training course within four weeks of a person announcing they are going to retire would be virtually impossible on an in-house basis and may require staff to be placed solely on ‘open’ courses by commercial providers such as ourselves given that we have the space to take them.

In the present recession it is most unlikely that larger Employers would wish to increase their spend on retirement planning which would be inevitable compared to the savings in-house events offer.

Even if a course could be engineered within four weeks there is little time for that employee’s partner to seek to be released by their employer with so little notice given.

However, far worse is that the benefit of attending immediately prior to retiring turns the process into retirement ‘panic’ not retirement planning. Long serving employees need and deserve to have a good time to consider the many aspects that will be raised by retirement course providers.

Examples of this would be to learn the pros and cons of deferring a state pension or paying additional voluntary contributions. Other situations could concern whether a divorced woman in her late fifties might be financially penalized if she were to re-marry before state pension age.

It will be hugely frustrating for employees retiring after state pension age to learn that their savings or state pensions could have been greater had they taken various actions several years prior to retirement day.

Their tax position could also be jeopardized if they take a state pension when continuing to work. They could fall foul of the age allowance trap.

2011 marks our Silver Anniversary of providing retirement training for individuals and employers alike. Our objective is to make it a year to remember for those clients who have helped us grow and to new clients wishing to sample our services.



Interesting Year ahead for Retirement Planning

1/1/2010

“We are in for an interesting year” said Managing Director Tony Wheeler when interviewed recently regarding retirement planning issues.

“We had a relatively in-experienced Pensions Minister Yvette Cooper oversee the implementation of the Pensions Act 2007 which involved the most major changes to the state pension since 1948. Since the election we now have an equally inexperienced new Pensions Minister in Iain Duncan Smith.

Countless women who retired before April 5th this year without full state pensions are likely to vent their anger at the Government when they learn that those reaching state pension age after 6th April may receive far more generous pensions.

For example a woman reaching state pension age on 4th April 2010 with a 20 year national insurance record will receive a pension in today’s terms of about £49 per week. A woman whose state pension age fall two days later on 6th April would receive £63.50 per week for the same 20 years national insurance record. If they both live to be 80, then £15,080 more will have been won or lost for the sake of having been born perhaps premature or later than due!! By 90 the figure rises to £22,620.

These figures ignore the state pension increasing each year which would exaggerate the imbalance substantially more.”




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