PENSIONS

We have access to the full range of financial services. If you have a need for mortgage, protection, pensions or investment advice we can offer help to both private and corporate clients in all these areas.

Initially please contact Mr. Gareth Jones at these offices for a confidential discussion to see how we can help.

Financial Services Act law places a legal obligation on all financial advisors to give best advice always. If your affairs are found to be in good order, and no further action is necessary, you will be assured this is so.

We are able to give all clients access to full independent advice on pension matters and we are bound by professional codes of conduct.If particular issues are of interest please contact us for a brief discussion.

PENSIONS HAVE CHANGED RADICALLY.

There are many (some say "too many") new pieces of legislation that have altered the whole face of retirement planning. It is important that you stay in touch with developments to ensure you have as prosperous a retirement as possible.

NEW PENSIONS LAW CAME INTO FORCE IN APRIL 2006 (known as "A Day").All the differing types of pension investment plans will be swept aside and be replaced by a simpler set of rules for all.NOTE> care needs to be taken to plan correctly for existing pension investments. In changing from the "old" system to the "new" many transitional rules need to be catered for. If not planned carefully opportunities and benefits may be lost forever.

The following subjects are covered in brief -- please scroll through to the topic of your choice.

Remember - all the plans explained below are historic. They have all been combined into the new arrangements from 6th April 2006. Also remember that pensions legislation is subject to onging change and you should contact us for access to specific advice to meet your own needs and requirements.

• Personal Plans -
• Personal Pensions, general
• Personal "Stakeholder" Pensions
  - Including all latest developments
  
• Self Invested Personal Pensions
• Retirement Annuity Contracts
• Company schemes -
• Executive Pension Plans
• Final salary schemes
• Small Self Administered Schemes (SSAS)

Please note
1. Throughout this section the regulations governing "20% directors" (i.e. those who have at least a 20% equity shareholding in the company concerned) are in many ways greatly different from all other members of pension schemes. It is imperative that such directors take particular care regarding pension planning.
2. In the UK Court of Appeal it was decided that an employer, who was also the trustee of the pension scheme, does not owe any duty of care to give advice to an employee in respect of his/her membership of that scheme. (Outram v. Academy Plastics Limited)

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PERSONAL PENSIONS

Personal Pensions, general

Personal pensions are a unique way of saving for retirement. There is no other investment that attracts the same advantages. These include:
-generous tax relief at the start when money is invested (up to 40%)
-tax advantaged growth throughout the life of the investment and, again,
-generous tax free benefits at retirement.

There is no limit to the profits that can be made by these plans but the amount of initial investment is restricted to a percentage of earned income available.

For the tax year 2004/2005 between 17.5% and 40% of income can be invested depending on the investor's age at 6th April 2004 (up to a "capped" maximum pensionable income).

Tax legislation may (and definitely will) change.

Company sponsored Pensions

WARNING - EMPLOYERS READ THIS SECTION - YOUR COMPANY AND ITS DIRECTORS COULD FACE FINANCIAL FINES IF YOU DO NOT OFFER YOUR STAFF ACCESS TO A PENSION SCHEME.

With the increasing possibility of compulsory employer investment into pensions where there is no scheme for employees why wait?

The government hopes to make company pensions efficient, low cost, and flexible "alternatives" to other types of personal pension plan. Although stakeholder pensions were aimed at people earning between £9000 and £18000 there was virtually no one who is barred from having a pension investment.

Even children and those with no earnings can still invest!

• Minimum contributions - small and affordable
• Maximum contributions - £3600 p.a. (with scope for more in some
  instances)
• Charges levied evenly throughout the life of the plan (no "up front"
  high charges)
• All charges limited to 1% p.a. of fund value
• No transfer charges or other fees for encashment etc.

Note:
Costs may be covered by a charge (for example, by an hourly rated fee) rather than taking commission.

TALK TO US - Company Pensions are a vital part of any organisation's financial considerations. Great care needs to be taken to get things right. And quickly, too.

Self invested personal pensions

These plans allow the investor some degree of control and decision-making over the issues over where the money is to be invested.Some investors feel they may be able to have more success in managing their own investments rather than rely on the expertise of an investment house. In these circumstances the self invested plan may be the ideal solution.
In conjunction with the plan manager, the investor can express wishes as to the type of investment although restrictions do apply. Legislation sets out which types of investment are permissible and which are not. It also sets out the limits for investing in any given category.
At all times decisions must be made in conjunction with the pension provider as the plan manager has a duty to ensure any proposed investment meets all criteria.
The "age based" scale of monetary limits applying to individual personal pensions (see above) also applies to these plans.
The value of your investments is not guaranteed and can rise and fall
depending on performance.

Retirement annuity contracts

These are an older form of personal pension retirement savings (finished June 1988). These plans had many similarities to personal pensions described above but existing investors need to take care in considering how to make best use of these investments.

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COMPANY SCHEMES

Executive pension plans

These were plans for provision of pensions and tax free lump sums based on a number of criteria. These include the member's earnings, length of service, final salary and other factors.
Whilst investment in a personal pension plan is regulated by the amount all the contributions at the investment date the amount payable into an Executive Pension Plan was based on the expectation of the final pension.
In brief, this was assessed by carrying out "maximum allowable contribution" tests. These calculations could be undertaken each year to ensure that contributions kept up with salary rises etc.
Firstly, the current salary was projected forward to the selected retirement date, using growth rates and actuarial tables, to arrive at what was seen as the expected "final salary" at retirement.
Secondly, based on this "final salary", an estimation of the resulting pension was made.
Lastly, calculations were undertaken to work out how much needed investing now to provide that resulting pension. This was the maximum contribution allowed for the year under examination.
In general, the minimum retirement age was 60, being 10 years above the minimum age for retirement under a personal pension, although retirement due to ill health could have been earlier.
At the retirement dates the member could expect to receive a potentially substantial tax-free lump sum, a pension paid during retirement and surviving spouse and/or other dependants' patients could have been provided in the event of the member's death after retirement.
On death prior to retirement a lump sum was paid out and a pension to the surviving spouse and/or other dependants.
Remember - there were major differences between personal pensions and Executive Pension Plans in the calculations of both the initial investment and the final retirement benefits.

Final salary schemes

These are occupational schemes provided by employers whereby the critical factor is the calculation of final salary and pension benefits. For example, in a basic scheme a maximum pension of two-thirds final salary may be given on retirement where 40 years' service has been given.
In many schemes there may be other pension calculations such as early retirement due to ill-health etc.
The introduction of the Pensions Act 1995 imposed many burdens on such schemes. One of the major problems for schemes, as a result of this legislation, is known as the" future funding requirement". Under these rules, strict calculations are applied to the scheme investments, on a regular basis, to ensure that there are sufficient funds to pay all the expected pensions years into the future.
For some the burden of these new calculations has proved too great and the schemes may have closed down and/or moved over to group personal pension arrangements. Worse still, it could even mean that the sponsoring company is required to invest so much money into the scheme that it must close down and go out of business.
Such schemes are not as popular as they used to be mainly for this reason.

Small Self Administered Schemes (SSAS)

If a company feels it wants a greater say in precisely where pension money is invested this could have been the perfect solution.
These are, in essence, the company equivalent of a self-invested personal pension as outlined above and could be suitable for up to 12 members.
The SSAS is not a pension plan in itself but rather a scheme into which various investments are placed. As with the personal plan the company has a degree of control over what investments are actually made. The sponsoring company can even borrow money back from the SSAS, within limits. For example, if a company has cash available it may consider making an investment into a SSAS, and obtaining the corresponding tax relief, then immediately making arrangements to borrow the investment back from the SSAS to fund future business expansion. This could be a better alternative than borrowing money from a bank or other lending institution.

The SSAS can also invest in other, more traditional, areas (described above), Pension Investment Bonds, land and property etc.
The overall performance of any SSAS would therefore depend on the performance of each individual investment made. Generally speaking it is always wise for any such plan to include a spread of different investments to maximise potential returns.
At all times the company must make sure that any investment is approved by the regulations and monitored by the Pensioneer Trustee, a body approved by the Inland Revenue for the monitoring of such self administered arrangements.

The advent of the new simplified arangements in April 2006 has lead many to speculate that this type of investment may no longer be appropriate.

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