Pensions
Your questions answered
Q: Over the past 20 years or so my employment history has varied, ranging between full-time and part-time employment. Am I entitled to a state pension and what is the amount likely to be?
A: A starting point would be to make contact with the Future Pension Centre on 0845 300 0168. You would then be able to determine your current position in relation to receiving a state pension and how much you are likely to receive. Currently, for a full state pension, a man needs to have made 44 years of National Insurance contributions, a woman 39 years.
This will change for those due to retire after April 2010, when the requirement will be for 30 years contributions by both men and women to attain a full state pension.
Q: I have been reading in the financial press numerous articles about pension funds that have not been used to purchase annuities and whether they form part of your estate. If I do not use my pension fund to buy an annuity, will it form part of my estate on my death and can it be inherited by my children?
A: Pension fund money is either ‘pre-retirement’ money or ‘post-retirement’ money and has nothing to do with whether you have actually retired or not. It simply relates to whether you have started drawing any benefits out of the pension.
For ‘pre-retirement’ money, on death your pension fund will normally fall outside your estate, and can pass to your children tax-free, provided that you have completed the necessary nomination form. It is prudent to notify your pension company to whom you would like the money distributed, in order to avoid arguments after your death.
Up to age 75, you also have the option to start drawing a pension using an Unsecured Pension (formerly known as a drawdown plan). If you do this, it means that your pension fund is now ‘post-retirement’ money, but you still have the option that on death the fund can be paid out to your children, less 35 per cent tax.
Once you get to age 75, though, the government insists that you start drawing your pension by this age. You could still avoid buying an annuity by drawing your pension using an Alternatively Secured Pension (ASP). If you opt for this route, you could arrange for your pension fund to be passed on to your children’s pension funds on your death, so they get the money, but only in the form of an addition to their pensions, which they cannot gain access to until age 50 (55 from 2010).
These changes were introduced as part of the government’s pension simplification programme introduced to make pensions easier to deal with.
Q: Can you clarify whether I can have a stakeholder plan or similar personal pension at the same time as my occupational pension?
A: Prior to April 2006, it was partially true that a member of an occupational scheme earning more than £30,000 was not able to have a concurrent stakeholder or personal pension plan. However, this situation has changed substantially and you can now contribute to a personal pension (or stakeholder) or additional voluntary contribution plan at the same time as being a member of an occupational pension scheme.
The contribution levels are what the restrictions now relate to. This is known as the annual allowance, and for this tax year means that you (together with contributions from your employer) can contribute up to £225,000. For defined benefit (final salary) schemes, the calculation is somewhat more complex.
Q: I’m currently a member of a company pension scheme that contributes 10 per cent per annum to the scheme, which is not a final salary pension. There is not a particularly diverse range of funds to choose from and switching funds can be a slow process.
Ideally, I would like to have total control over where my money is invested and actively manage the funds myself. What are the options available to me?
A: This is a complex answer as typically within a company pension scheme your wish to have control over your investments is not one that can always easily be achieved. The degree of control you have personally will depend on the following: whether you have an occupational money purchase scheme, where the trustees of the scheme are responsible for investment choice on behalf of the members; an occupational scheme, where the trustees specify default investment choices but give the members significant choice over their own contributions; or a group personal pension or stakeholder scheme, where the members have considerable investment choice and the employer pays contributions but has no control over investment choice.
Since your employer is ultimately responsible for where they choose to pay their contributions, the question is whether they would be happy to make alternative arrangements for their contribution to your policy in order to cater for your desire to have more control over your investments. They may not wish to do this and would be under no obligation to make separate arrangements for you in this case.
In this instance, you could consider running a self-invested plan concurrently alongside the employer arrangement in order to provide the degree of flexibility you seek in relation to your own contributions. However, we do not know whether the scheme that you refer to benefits from an employer contribution which is conditional on a certain degree of matching, that is to say a specific level of employee contribution is required to qualify for the employer contribution.
For this reason, it is difficult to be more specific about your options without knowing whether your employer contribution would be at risk. It would not be prudent to forego a significant employer’s contribution purely because the investment flexibility you seek cannot be obtained within your employer’s scheme.
Your property may be repossessed if you do not keep up repayments on your mortgage.
For mortgage advice you can choose how we are paid: pay a fee, usually 0.5% of the loan amount, or we can accept commission from the lender.
Levels and bases of, and reliefs from, taxation are subject to change.
|
