... I finally came across Citibank, I got to speak to a fully trained financial advisor free of charge, who basically went through all possibilities for me, they didn't tried to complicate things for me and spoke in a language that I understood.
He suggested that at my age (19 at the time) I ... Read review
Advantages: Making sure there is enough money at retirment Disadvantages: you need to invest alot for a good return.
With the new "A Day" legislation that came is April 6th 2006 by 2010 you are unable to take any personal pension until the minimum age of 55.
The rules that surround pensions are very strict, and complicated, it has taken me well over a year to learn just the basics!!
I believe that pensions are a good idea if started early enough, and the investment is a reasonable amount. At the time I opted for a personal pension I had ... ...was an ideal solution.
I hunted around looking for the type of pension that would suit my financial situation best, I went to many different companies which all tried to sell me a product that I didn't need or was not the right product for my situation. I finally came across Citibank, I got to speak to a fully trained financial advisor free of charge, who basically went through all possibilities for me, they didn't tried to complicate things ... more
With the new "A Day" legislation that came is April 6th 2006 by 2010 you are unable to take any personal pension until the minimum age of 55. The rules that surround pensions are very strict, and complicated, it has taken me well over a year to learn just the basics!! I believe that pensions are a good idea if started early enough, and the investment is a reasonable amount. At the time I opted for a personal pension I had no company pension scheme to join, so to me this was an ideal solution. I hunted around looking for the type of pension that would suit my financial situation best, I went to many different companies which all tried to sell me a product that I didn't need or was not the right product for my situation. I finally came across Citibank, I got to speak to a fully trained financial advisor free of charge, who basically went through all possibilities for me, they didn't tried to complicate things for me and spoke in a language that I understood. He suggested that at my age (19 at the time) I should go for something unit linked (stock market based). I should spread my investment through 4 separate funds, at vary the amounts of risk. All I needed to do was to complete the illustration provided and send it off with my direct debit mandate, it was that simple! I decided to investigate pension legislation in more depth, and find out what I could and couldn't do at retirement age. My findings were as follows
If you were born after the year 1960, the earliest you can take your pension is 55, if you were born before this year it can be taken as early as age 50
Your pension does need to be taken before the maximum age of 75, if it is not taken before your 75 birthday you may lose certain options available on your pension and may be automatically set up.
When you decide to take your pension you are entitled to 25% tax free cash (of the fund value) and then receive a reduced pension (annuity as it is known)
If you are age 60 or over you may be entitled to take what is called a trivial pension (the entire amount of the pension value in a lump sum, 25% tax free 75% taxed at your normal rate) you are only eligible for this if you total fund value of all your pensions with every provider (excluding the state pension) is less than £16,000 for 2007, £16,500 2008, £17,000 2009 £17,500 2010.
There are many additional choices you can have you pension set up in, these are:
Escalation either at RPI (Retail Price Index) 3% 4% 5%. This basically means that you can apply this to your income from your pension and each year your pension will increase by the above. Although BEWARE with some providers they made decrease the amount of pension at the beginning (so you start off with a lower amount)
Single life means that when you die your policy would seize and no further pension payments would to be made.
Joint life means you are able to nominate your spouse (some companies will only do this if you are married or have a civil partnership) to receive any income that you were receiving until they die. (This again may reduce the amount of pension you would be receiving).
Payment in arrears means that you will NOT receive your payment straight away, you will need to wait (dependant of the frequency of payment for how long)
Payment is advance means that you will receive your payment straight away, you will not have to wait. For example if you decide to take tax free cash then you will also receive you income payment at the same time. (BEWARE this can reduce the amount you will receive).
Guarantee period give you a choice of how long you want to guarantee your income to be paid out. Most companies give a guarantee of 5 or 10 years, what this means is if you die within the guatenteed period it will pay out for the remainder of the Guarantee, but then stop after this. If you do live past your guarantee period it will pay out until you die (if you have a spouse on the policy it will pay out until they die).
BEWARE
There are many options available and most pensions are very flexible, for example you are able to stop paying into a pension at anytime. You can also start a pension back up at any time (Personal Pensions only) and not have to pay any outstanding premiums.
With Unit linked (Stock Market based pensions) they do fluctuate daily. This does mean that if you are in a more aggressive fund there is a higher risk that the value could drop, but obviously that does work both ways so you could make a profit as well.
Pensions CANNOT be cashed in until retirement age. If you do decide to take your pension early (specified at the beginning that you wanted to retire at 60 and then decide you want to retire at 55) they made be a penalty on the amount you receive. You would need to ask your provider about "transfer values".
Some companies can charge for the upkeep of the policy. The adverage policy fee is about £3.50 a month which is taken from the premuim(if you are no longer contributing it is taken from the fund value!!) Also there is normally an Annual Management Charge. These are from the funds you are invested into. Accumilation funds have lower charges then capital funds but some policies only allow you in capital funds for the first two years.
In conclusion I feel that pensions are generally I good idea. I would recommend speaking to a financial advisor before making any decisions. If you are looking to receive roughly £15,000 as a pension you would need to roughly invest about £200,000 over you lifetime. I realise these figures are rather high but the earlier you start the better pension you will receive. You will also receive tax relief on your policy. Pension providers as standard give the standard 22% tax relief on your premium. If you are a higher rate tax payer you will need to contact HMRC so they can add this on. Higher rate tax payer is eligible to receive 40% tax relief.
