Pensions FAQ’s
What are the Costs?
Typically, modern pension plans have an annual management charge of between 01% – 1% depending on the provider and the amount of money within the pension. Normally the higher the value the lower the charging structure.
External fund links can carry additional charges which should be factored in to any advice around personal pensions.
What is tax relief?
The tax relief is the biggest benefit of all pension schemes.
Example: a basic rate or non-tax payer only need to pay £800 to get £1000 invested – the tax man pays the additional £200.
Example: a higher rate tax payers can claim back an additional 20 %, meaning only £6000 needs to be invested to get £1000.
What happens when I retire?
Your pension pot can be used in one of two ways:
Buying an annuity. This is the most simple and established way of generating an income for life from the proceeds of a pension. Depending on a client’s health there is a rate set for life with various options of guarantees available. The more guarantees taken the less income is paid. This type of plan suits many clients as the approach retirement as their capacity for loss is very low and a guaranteed income attractive.
Pension Drawdown: This is becoming more common and popular following the governments ‘Pension Freedom’ act. With this the pension remains a pension with the funds continued to be invested so the value is not guaranteed and an income is taken either on an ad hoc basis or set withdrawal. As the fund value can change there is no guarantee of income for life but there are other advantages including greater death benefits, more flexibility and opportunity to grow the funds under management.
Need further help?
If you are unsure of what the right plan of action is for you, please get in touch and we will do what we can to help.
