March 31, 2017
In a final salary pension you’ll typically retire at the age of 65, and conventional wisdom has always been; you’ll work until 65 and then retire on a percentage of your income (via a final salary pension).
Morbidly under this arrangement, once you die your surviving spouse will get 50% of the pension until the end of their natural life and then pension dies with them. To give a monetary example:
Mr retires at 65 years old on £10,000.00 per annum
Death at 80. (£150,000.00 income from 65 to death at 80)
Surviving spouse is still alive and would then receive £5,000.00 per annum
Mrs dies at 85 (£25,000.00 income from 80 to 85)
TOTAL INCOME FROM PENSION = £175,000.00 AND PENSION FINISHES
The above example shows that when Mr retires at 65 and Mrs dies after at 85, the pension would have paid them £175,000.00.
This may seem a lot, but if you’ve ever had a final salary pension, no matter how long ago, you may be entitled to a Final Salary Pension Transfer that will give you the ability to retire earlier on more money.
Final Salary pensions DO actually have a calculated value long before you retire, however, you must ask for this information in a very specific format in order to make an informed choice if they are offering good value for money or not.
It is common for the transfer value to be comfortably in the region of well over £250,000.00!
The benefits of a Final Salary Pension Transfer:
- The bigger the firm, the bigger the deficit for them so they have a larger pay-out.
- If death occurs at any stage, then the amount is paid in FULL to your spouse/children TAX FREE! Using the same figures as the earlier example, it would mean the children would have received an extra tax free £75,000.00 (£250,000.00 transfer value less £175,000.00 taken on the same income level)
- You are in control of your capital. Moving from a Final Salary arrangement to a personal pension you own the capital and NOT the pension firm.
- You are able to retire early which a final salary scheme wouldn’t allow, or retire on more money at the same age. You choose, and not the scheme!
This process cannot be initiated without a Financial Adviser.
We are currently in a market which is, for various economic reasons, offering vastly inflated transfer values. Pension providers will offer transfer values which can be converted into ratios to determine its value which your financial adviser can calculate for you to ensure the analysis is bespoke.
However by law, you must speak with a specialised financial adviser in order to transact this business as it’s a regulatory requirement.
March 29, 2017
In February the UK introduced £1,500 tax-free pension advice allowance for UK savers planning for their retirement. This means savers will be able to withdraw up to £1,500 from their pension pots tax-free to pay for financial advice.
First announced in the Autumn Statement 2016, the new Pension Advice Allowance (PAA) will enable people to withdraw £500 on up to three occasions from their pension pots to put towards the cost of pension and retirement advice from April 2017.
Simon Kirby, UK’s economic secretary to the Treasury, confirmed that the £500 allowance can be used a total of three times, but only once in a tax year.
The PAA will allow people to access retirement advice at different stages of their lives i.e. when choosing a pension or before retirement. It will be available at any age, meaning people can start retirement planning at any stage of their life.
It can also be redeemed against the cost of regulated financial advice, including ‘robo advice’ as well as traditional face-to-face advice.
Additionally, the advice allowance will be available to holders of “defined contribution” pensions and hybrid pensions with a defined contribution element, but bars “defined benefit” or final salary type schemes.
Pension providers will be able to offer the allowance to their members from April 2017.
In February’s announcement, the Treasury cited research that found on 22% of people approaching retirement know the value of their pension pot, with just 14% of people confident about planning their retirement goals without financial advice.
In need of pension advice? Our team at Bespoke Support Network are here to help. We understand how difficult and confusing planning for your pension can be. Our team of advisors can offer you support with your pension and retirement queries and questions. For more information contact us today.
March 27, 2017
According to recent research, first time buyers will need at least £23k to get on the property ladder in 2017. Don’t be scared off by these figures, your chances of getting on the property ladder are more realistic than you think!
How to buy a home in 2017
If you live in an expensive area like London, and don’t have an income to match then shared ownership might be for you. This subsidized system only applies to new-build developments is available to many, with a couple of provisos.
Individual schemes have minimum income requirements that are based on the cost of the property to make sure you have enough money to pay the mortgage. This requirement is usually around £30,000 gross household income in London (less in other cities).
However, you can earn too much to qualify for the shared ownership properties; over £66,000 household income (for a flat) or £80,000 (for a family sized home). Despite this, the average income in London is £37,000, which means the majority of people in London could potentially qualify.
You can buy between 25% and 75% of the property, which means your mortgage and deposit requirements are less. You then pay the housing association rent (up to 3% of their share of the property value).
There will also be a service charge but it will still be cheaper than a mortgage. Although you only own part of the property; the most notable benefit of shared ownership is that you can stay in the property as long as you like, doing what you like with it and have the option to buy a larger portion of the home in the future. Plus, when you sell you will split the proceeds with the housing association.
Still unsure how to get onto the property ladder? Feel free to speak to one of Bespoke Support Network’s expert advisors. Our business advisors provide information about everything business related, from accounting to pensions. Our head office is based in Essex where we provide business support for businesses all over Essex and London. To speak to one of our pension experts, please call 0300 303 3441.
March 24, 2017
What is a final salary scheme?
Final Salary Pension schemes are an annual income in retirement based on employee salary in the final year of employment and length of service. It is usually paid at the rate of one-sixtieth of final salary multiplied by the number of years of scheme membership. Therefore, someone who is a scheme member for 40 years would retire on two-thirds of final salary.
When you contribute to a final salary scheme your money goes into a pot with that of other members. You have no control over your funds or where they are invested. But if disaster strikes the stock markets just as you retire you will be protected because your company must make up any shortfall.
How does a money purchase scheme differ?
In a money purchase, or defined contribution, scheme an individual pot of money is saved on your behalf. In retirement, the money is used to purchase an annuity, which pays an income until you die.
What you collect on retirement depends on how much you and your employer have contributed, the investment performance of your savings minus the costs of running the fund.
With final salary schemes, companies take all the investment risks. With money purchase schemes the risk is shifted onto the employee. You decide which annuity to buy with your pension savings and if it does not produce an adequate income, no one will bail you out.
What happens to my pension if the scheme closes?
Any benefits you have built up to date in your final salary scheme will be protected. The preserved benefits will continue to rise in line with price inflation up to the point at which they retire.
Still unsure about Final Salary Pensions? Bespoke Support Network are business advisors providing information about everything business related, from accounting to pensions. Our head office is based in Essex where we provide business support for businesses all over Essex and London,
To speak to one of our pension experts, please call 0300 303 3441.
March 18, 2017
MPs have warned that increasing the state pension age may mean that working people could die before they become eligible to receive it.
The Commons Work and Pensions Select Committee have stated that the state pension age would need to increase to 70.5 years in order to finance the triple lock guarantee on pensions. This is based on the average life expectancy in areas across North England, meaning increasing the state pension age will mean men in Manchester, Birmingham, Bradford and Blackpool will die before they qualify for it.
Pensions have grown each year since 2010 under the triple lock, either by the rate of inflation, average earnings or 2.5% minimum; whichever is the higher figure. Although the guarantee has meant many pensioners have been taking an “ever greater share of national income”.
In their November 2016 report, the Committee advised that the triple lock should be replaced by a smoothed earning link from 2020. By setting the state pension to a fixed proportion of average earnings, purchasing power during periods of inflation is safeguarded. Figures indicate that in order to make the triple lock affordable, the age of state pension would need to increase to 70.5 years by 2060, meaning young people face working 50 years of their lives before receiving their state pension.
By making the triple lock sustainable it would mean pushing the state pension age over average life expectancy in poorer areas of the UK. In Blackpool the average life expectancy is 67.5 years with the lowest male life expectancy in the UK, whilst in Bradford, it rises to 68.7 years old and 70.2 years in parts of Manchester.
Frank Field, MP Committee Chair, argued that putting the triple lock in place to make the state pension expenditure sustainable excludes even more people from the state pension altogether.
To find out more information about pensions, speak to our expert team at Bespoke Support Network on 0300 303 3441. Our experts can offer you a free advisory consultation and point you in the right direction with all your pension needs.
March 16, 2017
Following a recent news story Bespoke Support Network wanted to highlight the importance of making an inheritance act claim at the time you need to, not when it’s too late.
In January 2014 Pauline Milbour died leaving behind an estate worth nearly £17 million. She left her husband, Leonard Milbour just £150,000, his daughter from a previous marriage Laurel Milbour was left nothing and her only child, Luanne Fresco was appointed as executor alongside her husband Carlos Fresco. At the time of the event Leonard chose not the to make a claim and unfortunately passed away later in the year, October 2014.
His daughter then chose to launch a claim in 2015 on behalf of her deceased father. This was bought under the s1(1)(a) section of the 1974 act, against Luanne fresco. Had the claim been successful it would have increased the value of Leonard’s estate, essentially increasing their benefit too. Because Mr Milbour had passed away after the claim was made it was up to the court to decide whether or not it could be brought at all.
However the claim wasn’t successful in being brought forward, as the right to make a claim under the Inheritance Act 1975 ends with the death of the individual. Alexander Learmouth TEP, the claimant’s representative commented “claims under the 1975 Act are not “causes of action” and do not survive the death of the applicant, even in the case of a spouse.”
The Inheritance Act 1975 has been put in place to protect you. This story is among many others where it has simply been left to late.
When you are writing your will it is important to factor in the effect it can have on your loved ones when you pass. If you are in a similar position to Leonard or your worried that your will needs to be updated, our experts can help.
The team at Bespoke Support Network can offer you a free advisory consultation and point you in the right direction. Call us today for more information.
March 14, 2017
Final Salary schemes are a type of defined benefit pension scheme that are offered by employers. The benefits you receive during retirement are based on your earnings and your length of membership on the Final Salary scheme.
How do final salary schemes work?
Many final salary schemes have either been closed to new members or to all members over recent years, although they are still offered by some, mainly larger, employers.
The Board of Trustees, who is responsible for all aspects of the scheme, typically runs a final salary pension scheme on behalf of the employer. This includes paying benefits to retired member. The Scheme Administrator, who reports to the Board of Trustees, typically does daily management of the scheme.
A final salary pension scheme normally offers you an income in retirement based on a proportion of your ‘final salary’, although other factors can be taken into account. It’s important to note that ‘final salary’ doesn’t necessarily mean the actual salary that you’re earning at the time you retire and draw your benefits from the scheme.
Additional Benefits of a Final Salary Pensions
There are a number of other benefits that may apply to some final salary pension schemes. For example, one example would be the additional contributions provided by the scheme itself. While not many final salary schemes offer this benefit, some have done so in the past as a means of discouraging members from transferring out or as a way to help employers retain the best talent.
Another benefit is the Pension Protection provided by the Government’s Pension Protection Fund. This fund prevents pension members from suffering financial loss in the event their schemes wind up and insolvency. This is not as unusual as it sounds given the nature of the guaranteed benefits final salary pension schemes promise.
To find out more about the final salary scheme, speak to one of Bespoke Support Network’s pension experts on 01376 386850.
March 12, 2017
The mortgage market is incredibly competitive and it can be hard to understand exactly what is on offer. With so many different providers and a huge range of products and rates available, it is a good idea to talk to your bank in addition to a independent mortgage advisor before deciding what mortgage to go for.
Lenders and brokers must offer fair advice when they recommend a mortgage for you. They will assess the level of mortgage repayments you can afford by looking at your income as well as your debt repayments and day to day spending, meaning you will find a mortgage to suit your needs.
Although all lenders and brokers must offer this advice, you might be able to reject the information given and find your own mortgage based deal with your own research. If you choose your own mortgage without advice it’s called an “execution-only” application.
By getting advice, rather than relying on your own research, it means you have more rights to complain if the mortgage turns out to be unsuitable. For example, if the advice you were given turned out to be unsuitable, you could make a complaint of financial mis-selling. Not taking any advice from the lenders means you have to take full responsibility for your mortgage decision.
Without lender’s advice you could end up:
With the wrong mortgage for your situation, which would be a costly mistake in the long run.
Being rejected by your chosen lender, because you didn’t understand the restrictions clearly or what circumstances the mortgage was designed for.
Once you have spoken your bank or building society, you should see a mortgage advisor who is a specialist with an in-depth knowledge of the market. They should be able to look at the range of mortgage products to suit your needs.
Other benefits of using an advisor:
- An advisor will also be able to take all the costs and features of mortgages into account, beyond interest rates.
- They may have exclusive deals with lenders, not otherwise available.
- They will check your finances to make sure you can afford a mortgage.
- They should only recommend a mortgage that is suitable for you and will tell you which one you’re likely to get.
- They often complete the paperwork for you, so your application should be dealt with faster.
To speak to one of Bespoke Support Network’s mortgage advisor, call 01376 386850
March 10, 2017
If you’re a business owner then you will be well aware that it is vital to protect the firm that you have dedicated your life to building. It is important to remember that when you move away from a PAYE environment you lose the benefits that come with it, “such as death in service, sick pay or private health care. This could end up not only condemning your company in the event of death/illness but your loved ones too.
Bespoke Support Network are pleased to inform you that we are working in association with a group of highly qualified financial advisors who can ensure that you and your business are protected.
When you create a plan to safeguard your business there are many things you need to consider, as follows:
* Does your business have any liabilities such as loans or credit cards?
* How much are you worth to the business? Is it worth considering a partnership in case of the event of your death?
* If you had to take a long period of time off work due to illness, have you made the correct provisions for another member of the team? Are they able to fill your role for the time being?
* Would it be practical for your family to deal with your company’s financial affairs if you were to pass away?
Following recent changes to group life legislation, a plan targeted at single lives and small companies has been introduced. Whereas before you were unable to have a one-man scheme you can now cover a single director up to 15 times their remuneration, using the ‘relevant life policy.’
Many business owners already have a form of protection in place, however it is recommended that you have this reviewed on an annual basis. By doing so you can ensure that the cover matches the requirements of your business. By not revising your current policy you could be in danger or having the plan too low or high of what the business is currently worth.
Here at Bespoke Support Network we offer you a personalised service, helping you remain fully protected as both an individual and business moving forward. If you would like to arrange a consultation to discuss how our services could help you, please don’t hesitate to get in touch. Call us today for more information.