Tag Archives: Retirement

Who Wants To Work Forever?!


Hardly a month goes by without the Government releasing another report on pensions and the past few weeks have been no exception. Analysis by the Department of Work and Pensions has suggested that people under the age of 30 may not get a pension until age 70. A second report by John Cridland CBE for the Department for Work and Pensions has recommended that those under the age of 45 may have to work a year longer to age 68.

The root cause of the problem is that life expectancy seems to be ever increasing with the average retiring worker now spending twenty plus years in retirement. When the State Pension was first introduced in 1908, retirement age was set at 70. However, only one in four people reached that age and life expectancy was only 79.

So, how do you avoid working until you are 70? Of course, the answer is to save more! As a rough rule of thumb take the age you start your pension and halve it, and this is the percentage of your salary you should set aside each year until you retire.

The above is of course simple in theory but much more difficult in practice, as life, children and mortgages get in the way! It is always better to be saving something rather than nothing and the magic of compound growth should not be ignored. For example, if you save £100 per month for thirty years and with an average growth of 6%, you should have a retirement fund of £104,608.

For further information on pension planning contact Antony Keen, PM+M Wealth Management Director, by phone on 01254 604303 or by email at antony.keen@pmm.co.uk.

State Pensions Update

shutterstock_151661894The Department for Work and Pensions (DWP) is writing to over 100,000 people with bad news about their state pension.

The single-tier state pension was introduced in April 2016, but the way in which it was announced has drawn criticism. The lack of publicity surrounding the flat pension of £155 has prompted the House of Commons Work and Pensions Select Committee to state in a recent report that government communications were “contributing to confusion about the new system.”

The DWP has now announced that it will be sending letters to over 100,000 people telling them that they will not qualify for any state pension at all. This loss is the result of a change to the qualifying requirements for a state pension.

Under the previous system, an individual only had to have had one year’s National Insurance contributions/ credits to accrue a small entitlement to a state pension. Under the new single-tier system, there is no entitlement until ten years’ contributions/credits have been clocked up.

Pension legislation is continually evolving and very rarely does it lead to an upgrading of benefits. For example, if you were a member of a final salary pension scheme between 1978/79 and 1987/88 you could also be on the losing side because under old rules your guaranteed minimum pension (GMP) would have been inflation-proofed by the state, but this is no longer the case.

These two examples are a reminder of the importance of obtaining projection of your pension benefits and reviewing whether your current provision is likely to meet your retirement needs. You may wish to seek expert advice to avoid potentially costly pitfalls.

If you have any questions or worries about your pension, please get in touch with our wealth management team on 01254 679131 or email wealthmanagement@pmm.co.uk.

PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.

Pensions – Good News And Bad News

Pension Tax

Over the last few years the Chancellor George Osborne has created a pension revolution that has been welcomed with open arms.  He has introduced freedoms that allow pensions to be accessed easily or passed down the generations free of inheritance tax. Higher and additional rate taxpayers continue to receive tax relief on contributions at 40% and 45%.

So what next? From April 2016 new regulations will be introduced restricting the amount high earners can pay into pensions to £10,000. And there is speculation that George is looking to further restrict the current tax relief system by introducing a flat rate of tax relief, possibly 25%, rather than the current system of claiming tax relief at the marginal rate.

We don’t know what the Chancellor will say on Budget Day but the advice is clear. Higher rate taxpayers planning on making pension contributions should do so before 16th March to make sure they maximise their tax reliefs and planning opportunities. And if cash flow is an issue, think about switching some ISAs or speaking to your friendly bank manager – it’s too good an opportunity to miss.

For help planning your retirement contact Tony Brierley (tony.brierley@pmm.co.uk), Antony Keen (antony.keen@pmm.co.uk) or Richard Hesketh (richard.hesketh@pmm.co.uk) for further information.

PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.

Latest Retirements – Linda Whalley & Colin Payne

Linda Whalley and Jane Parry

Linda Whalley (Retiring HR Officer) and Jane Parry (Managing Partner)

We’ve recently said goodbye two long-serving members of the PM+M team – Linda Whalley (HR & Training Officer) and Colin Payne (Caretaker).

Linda Whalley

How long have you been with PM+M?  
I joined PM+M on the 7 January 1991, so over 24 years.

What made you stay so long?  Several things. My work has always been varied and interesting. I’m part of a highly respected firm that’s going places and my colleagues are a great bunch of people to be around.

One thing you’ll miss?  The PM+M people and the many contacts who’ve become friends.

One thing you’re looking forward to?  Whatever new and exciting things come my way.

How will you be spending your time?  I will be continuing with my two afternoons a week as a voluntary teaching assistant, going to the gym and long walks. I also want to spend more time out and about on my narrowboat and catching up with my friends. I also intend to explore new volunteering opportunities – I like to keep busy.

Colin Payne

How long have you been with PM+M?  Just under 16 years.

What made you stay so long?  Friendly atmosphere and great people.

One thing you’ll miss?  Getting up on a cold winters morning to defrost the bollards in the car park… Joke!

One thing you’re looking forward to?  Putting my feet up (if I can).

How will you be spending your time?  I will be out on my motorbike a lot more. It will also be great to get out fishing and spending more time pursuing my hobby of drawing and water colouring.

Everyone at PM+M would like to wish Linda and Colin a very happy and well deserved retirement.


Pension Reform: Huge changes to retirement benefits

July saw the Finance Bill 2014, proposed in the Spring Budget, come into effect. This bill introduced major changes to how retirement benefits can be taken from your pension. The biggest change was the proposal to allow individuals aged 55 or above to take the whole of their pension pot as a cash lump sum from April 2015.

The way we take our pensions has been evolving for a number of years. The option to take 25% of the fund as a tax free cash lump sum has been with us for some time and it hasn’t changed. Commonly, those without a final salary pension would use the rest of their accumulated pension pot to make the one-off purchase of an annuity – an annual retirement income that is paid to them for the rest of their life.

However, falling annuity rates and the increased desire to phase retirement saw the introduction of income drawdown whereby you could draw your income directly from your pension fund, deferring a decision on annuity. Whilst this arrangement worked well for many, income available under drawdown remained restricted. Under the new rules, these income restrictions will go and you now have the choice of how much you wish to take. After you have taken the 25% tax free cash you will be able to access all the balance of the fund but it will be taxed at normal income tax rates. You can also elect to take just the tax free lump sum and draw no income – perhaps using the lump sum to pay down a mortgage or to meet children’s university fees.

Of course, such decisions are dependent on individual circumstance therefore we recommend that you seek professional advice before deciding on such a course of action. After all, a pension is designed to give you an income in retirement – stripping the fund prematurely may have repercussions for your lifestyle later on! If you’re looking to develop a retirement plan, it is likely you will need guidance as to what represents the best path.

Even at their current levels, annuities do provide a certainty of income and may still be your best option. However, you must be aware of the rates on offer;

  • You may qualify for an enhanced annuity if you have a condition that affects your life expectancy.
  • Perhaps you possess a policy that contains a valuable guaranteed annuity rate?

Similarly, drawdown may be more appropriate for your situation. However;

  • You may need to change your pension plan as many older contracts will not offer drawdown as an option.
  • What may have been the best available pension vehicle when you set it up is unlikely to be the best option for you going forward. It could be time for a review.

Whatever your circumstances, we can help. If you have any questions about these new changes to pension benefits contact the Wealth Management team on 01254 679138.

Richard Hesketh – PM+M Wealth Management

During 2014-15 PM+M will be running a number of important FREE seminars aimed at helping people plan their financial futures and achieve peace of mind.  Click here to find out more and book your place.

How to manage your personal finances effectively – new seminar series from PM+M

seminar Can’t see the wood for the trees?

It’s certainly true that nothing stands still and in the world of personal finance that’s as true as ever:

  • This year’s budget in March introduced the biggest change in a generation to the pensions regime.
  • ISAs have become NISAs.
  • The UK stockmarket approaches a high at a time when European performance looks decidedly rocky.
  • Lifetime expectancy increases inexorably and interest rates are at an all time low.
  • The government needs to find ways of funding the health service and long term care with a rapidly ageing population.
  • And to cap it all, regulatory change ushers in changes to the way charges are levied on investments leading to a revised cost to the consumer.

So how do you make sense of it all?

The fundamental questions we are asked are the same as ever:

  • How much do I need to retire?
  • How can I keep my tax bill to a minimum?
  • Will I have enough to live on if I give money to my kids?
  • How do I get a decent return on my savings without losing my shirt?
  • How do I know I’m paying a fair price for the advice I receive?
  • How do I know I am up to date and haven’t missed anything?

It’s all about peace of mind, which is where our new wealth management seminar series comes in. The monthly seminars, which are free of charge to attend, will provide answers to all the most important questions about your personal finance, so that you can see the wood for the trees!

To find out more and book your free place click here.

Tony Brierley – Managing Director of PM+M Wealth Management

Pensions your flexible new friend!

In the recent Budget, George Osborne finally achieved something that has eluded many Chancellors over the years.  He managed to simplify the rules surrounding pensions and, dare we say, even make pensions interesting! (In the same way Steve Davies made snooker interesting!)

From April 2015 gone is the requirement to purchase an annuity and the restrictions on how much you can withdraw from your pension fund.  The Government has recognised that in order to encourage people to save for their future, greater flexibility is required.

The tax free cash element remains the same and you can still take up to 25% of your fund value as a tax free lump sum.  The remaining fund can be withdrawn whenever you wish and is taxable at your marginal rate.

What’s the catch?  The price for savers will be that access to their pension pots will be pushed back, at the same pace as the State Retirement Age.  Initially it will move from 55 to age 57 in 2028. This could affect those around age 40 and under.

These new rules apply only to those who have money purchase arrangements and who have not already used their entire fund to purchase an annuity.  Whilst the new rules undoubtedly provide greater flexibility, care will need to be taken to make sure you have sufficient assets to last throughout your retirement.  Holistic and cash flow planning has never been more important and advice should be sought to make sure you maximise your investment returns and minimise the tax payable.

The main pension points from the budget are:

Transitional arrangements from 27 March 2014

  • Capped drawdown increased from 120% GAD to 150% GAD. This is the maximum level of income that can be taken.  The rates are based on tables issued by the Government Actuary’s Department (GAD) which equate very approximately to single life annuity rates.
  • Flexible drawdown guaranteed income requirement reduced from £20,000 to £12,000 – that is providing you have a guaranteed income of £12,000 per annum you can draw whatever level of income you like from your pension fund.
  • The limit for trivial commutation for small funds increases from £18,000 to £30,000.  For these small pension pots you can take 25% tax free and pay tax on the balance at your marginal rate.
  • 25% tax free cash is staying.

From April 2015

  • 25% tax free cash remains
  • From April 2015 if aged 55 or over you can take benefits how you wish.  You could take your whole pension fund in one go as income drawdown if you wish, subject to paying your marginal rate of income tax.

Future proposals

  • The age at which you can access your pension will increase from 55 to 57 in 2028 (at this point State Pension age is increased to 67).  In future, this minimum age will increase in line with State Pension age.
  • The tax charge on funds remaining in your pension scheme when you die is to be reviewed.  The Government believes 55% is too high.  Details will be announced after a period of consultation.
  • The Annual Allowance governing how much you can put into your pension is reduced from £50,000 to £40,000, as previously planned.
  • It will still be possible to carry forward any unused annual allowances from the previous three years.
  • Lifetime Allowance still reduced to £1.25m.
  • Intention to introduce legislation to remove option to transfer from public service defined benefit schemes (except in very limited circumstances).

For further details or to discuss your retirement planning please contact Antony Keen, Tony Brierley or Richard Hesketh.



Auto Enrolment – not just compliance!

Much has been written about auto enrolment over the past few years.  The majority of articles have focused on the costs to employers and the potential penalties payable for non-compliance, this in turn has created a negative view of auto enrolment in general.

Whilst there is no doubting the new legislation is an additional cost to employers, and the legislation can be onerous, it is not all bad news!

Auto enrolment is an opportunity for employers to engage with their employees and provide a benefit that is of real value.  It is worth remembering that auto enrolment was introduced to combat the duel effects of increasing longevity and low pensions savings.  In our experience the vast majority of people know they need a pension, intend to join one, but never quite get round to it!

Employers therefore have the opportunity to create a sizable amount of good will with employees, by providing access to a quality pension scheme and advice.

For most employees their first conversation on auto enrolment will start off with a negative statement, something along the lines of “you will have to put x% of your salary into a pension scheme and your employer and tax man will also contribute”.

Perhaps a more positive spin would be “for every pound you put into your pension another pound will be added and this will then grow tax free until retirement”.

Or to put it even more simply…………… double your money!

It is also true to say that many people will have purchased a pension and then never reviewed or met with a financial advisor since the day they made that first premium.  At PM+M we only setup quality pension schemes that include a regular review service, with every employee being given the opportunity to meet with an advisor on a regular basis, to discuss their retirement planning, utilising our bespoke one page pension planner.

The pension planner shows the employee their estimated income in retirement and can be used to look at “what if” scenarios, such as the effect of increasing premiums and or taking earlier or later retirement.

So whilst auto enrolment is something of a burden on employer, it can be turned into a positive by engaging with employees and providing access to a quality pension scheme and review service that employees will value and engage with.

If you want to provide your employees with a positive pension experience, coupled with a jargon free high quality regular review service, contact Antony Keen at PM+M.

Four tips for a smooth transition when a director retires

Recently I had the challenge of helping a client and its managing director with his retirement. It’s never easy when a long standing director of a relatively small business wants to retire – the many roles and positions they play and hold make an apparently simple end to employment into a complicated personal and corporate transaction.

I have been an accountant for an (awful) lot of years and had acted for the business for a long time so I assumed I knew how it needed to be done.  Reality showed that  as always when dealing with entrepreneurs, there are angles/negotiations/issues which appear out of the blue. Normally these are the personal points, but sometimes there are technical accounting/tax queries which challenge you unexpectedly.

The process gathered momentum slowly over an 18 month period.  It began with the business owners trying to find out the retirement plans of their MD, without triggering any employment law issues (as is usually the case the employment contract of the directors had not been updated with developments in the law, even when the shop floor terms and conditions had been changed).

Once agreement had been reached over a retirement date, there were two largely separate projects needed: succession planning and a financial settlement.  The role of the business adviser can vary enormously depending on the relationships amongst the parties in the business and between each of them and the adviser.

In my recent case, the biggest issue was the succession planning.  Operational roles needed filling (the managing director had key roles in technical development and in sales) and the supervision of the company required reorganisation.  My role here was largely as a sounding board for the various parties to check ideas, along with maintaining communication – passions can get high in these circumstances and it is often useful to have an engaged outsider to act as a mediator.

As you would expect for an accountant, I had a much bigger role in the financial settlement.  The underlying issues included the level of annual bonus due for the part year of retirement, the price to be paid for the options/shareholding held by the retiring director and the price of effective restrictions on him after he had left.  Each of these had a tax consequence for the retiring director and for the company. In addition, the terms of the deal with the retiring director were communicated through me, to avoid adding further friction to the already tense succession planning situation. Assessing and advising (to the extent possible) on the corporation tax, inheritance tax, income tax and capital gains tax aspects of various payments while maintaining good relations with all concerned was challenging and time consuming!

We (the company owners, the ongoing management, the retiring director and me) eventually reached an acceptable arrangement.  It was all signed up on the agreed retirement date and the business is progressing well.

I learnt a great deal from the process and my four tips for retiring company directors and businesses would be:

  • Early consideration of these things is best – try to have an established succession plan in place to avoid being caught short by an impending retirement.
  • Don’t underestimate the amount of time consumed by discourse between the various parties – these discussions can be sensitive and should be approached with appropriate tact and understanding.
  • Even relatively small transactions can become complicated in their accounting and tax implications.  This is not a matter of simply dotting I’s and crossing T’s, these are complex issues and should be treated as such and planned in advance.
  • A business adviser should be used as a sounding board or intermediary by which the process can be streamlined, advising wherever possible.  My experience tells me that an adviser should know when to take a step back and when to engage the parties.  If not, these boundaries should be established promptly.

I’d be interested to hear about your experiences regarding retirement of company directors, so please leave a comment on this blog, drop me an email at david.gorton@pmm.co.uk or call me at our Blackburn office on 01254 604308.

David Gorton – General Practice Partner