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    Tag: Pension

    As a director or business owner, are you aware of all your pension options?

    Posted on by Katie Heaton

    Although most are fully aware of the more traditional personal pension options, as a director or business owner, there could be further options to consider for maximising your retirement savings. Two options which are often considered are a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS).

    Self-Invested Personal Pension

    A Self-Invested Personal Pension (SIPP) gives you the ability to invest in a wider range of investment options (within the rules of the SIPP provider). Your pension can be used to invest in stocks and shares, invest in collective investments as well as commercial property.

    A business owner is also able to purchase their business premises within their SIPP and then rent it back. This option gives you greater control over your future, unlocks higher potential returns than standard savings accounts, and may benefit from tax reliefs.

    Small Self-Administered Scheme

    A Small Self-Administered Scheme provides all of the investment avenues and potential benefits of a SIPP but there are a few differences.

    With a SSAS you and up to 10 others can also provide a loan facility back to your company. With a SSAS assets are pooled and members hold a proportionate percentage based upon their contributions or assets transferred into the pension.

    The benefits of the SSAS are three-fold: as well as establishing a diversified investment portfolio, you are also able to provide affordable financing for your business, which can help with day-to-day running costs or even help accelerate growth. Also, the sponsoring employer can pay the SSAS fees.

    Summary

    As with any investments, the level of return is never guaranteed, and it is essential to seek advice based on your individual circumstances to ensure any decisions you make are in your best interest. The complex nature of both the above pension structures and the rules that must be carefully followed mean that they are not always suitable for everyone.

    For further information on the above pension options or for more general financial advice, get in touch with a member of our financial planning team today by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    Time could be running out to increase your pension pot

    Posted on by Katie Heaton

    In order to qualify for a full State Pension, you will need a complete National Insurance (NI) record of 35 years or a minimum of 10 qualifying years to be entitled to any amount.

    There are various ways you will build up your entitlement, the main ones being:
    -Whilst you work and pay NI contributions
    -Receiving NI credits
    -Paying voluntary NI contributions

    You are able to attain a forecast of your state pension and a copy of your NI record through the Government Gateway, this will provide information on the State Pension you have accumulated to date and any extra NI credits that are needed in order for you to receive the full State Pension entitlement.

    Voluntary contributions

    If you find there is a shortfall in your NI contributions, there is the option to make voluntary contributions to fill any gaps in your NI record. This is usually only possible for gaps during the previous six years.

    However, there are certain extensions available to the six-year timeframe but only until 5 April 2023; so, if applicable to you, prompt action is advised. Until this date, men born after 5 April 1951 and women born after 5 April 1953 are able to pay voluntary contributions for any eligible gaps between the tax years April 2006 and April 2016. This essentially provides a potential window of 16 years for which to make up any shortfalls.

    The cost to fill in gaps in an NI record are up to £3.15 per week for class 2 contributions (£163.80 per annum) or up to £15.85 per week for class 3 contributions (£824.20 per annum). It is clear to see the benefit of making these contributions, given that each additional qualifying year equates to an extra £275.08 of State Pension benefit. Voluntary payments can be made as a one-off payment, by quarterly or monthly instalments.

    What should I do?

    If you think you could potentially miss out on utilising your voluntary contributions based on the above information, it is important that you seek clarification from an expert financial planner as soon as possible. With specialist advice, you can ensure you make the most of the potential benefit before the end of this tax year when the window of opportunity will be reduced to the previous six years for everyone.

    Get in touch with a member of our financial planning team today to discuss your personal circumstances by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    Many over 50s regret not paying into their pensions sooner

    Posted on by Katie Heaton

    A recent study has suggested that more than half of over 50s regret not saving into their pensions sooner, and a huge 64% wish they had contributed more into their retirement savings at an earlier stage. The study by Aviva also found that a quarter of participants only started paying into their pension after they turned 30 because they did not feel financially stable enough to contribute any sooner.

    Has auto-enrolment solved the problem?

    Although there has been a much greater uptake in pensions since the introduction of auto-enrolment (where your employer must contribute when you earn more than £10,000), there are concerns that many are presuming this will be sufficient and not considering thoroughly the amount they must be paying in to achieve the retirement they desire. Auto-enrolment is something that over 50s did not have as an option in their younger years and is definitely seen as a positive step, but it is still vital to ensure you are carefully forward planning for your retirement before it’s too late.

    How much should I be contributing?

    Whilst there is a minimum amount that must be paid in with auto enrolment (8% with 3% coming from your employer), it should certainly not be presumed that this is a sufficient amount to give you a comfortable retirement.

    The level of payments you should be making into your pension now will differ dramatically on the type of retirement you would like to achieve and how comfortably you would like to live in retirement, the best way to work this out is to sit down with a financial planning expert who will know the exact questions to ask to make sure your retirement plans will be appropriate for you. It is also important to regularly review your plans and consider whether any other changes in circumstances are going to impact your retirement plans.

    Get in touch

    If you would like advice or assistance on retirement planning, get in touch with a member of our financial planning team by emailing enquiries@pmm.co.uk or calling 01254 679131.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    Xero Payroll introduces new automated pension re-enrolment feature

    Posted on by Rebecca Campbell

    Xero have recently introduced a new pension re-enrolment feature in Xero Payroll.

    The new feature helps business owners save time and eliminate some of the administrative burden of pension re-enrolment.

    What is pension re-enrolment?

    As an employer in the UK, every three years you must assess any employees who have opted out of your workplace pension scheme and re-enrol them if they are eligible.

    Even if you have no staff to re-enrol onto the scheme, you must still select a re-enrolment date and complete a re-declaration of compliance to inform the pension regulator of how you have met your obligations.

    Remember, pension re-enrolment and re-declaration are an employer’s legal duty, and if you don’t act, you could be fined.

    How will the new Xero Payroll feature help?

    The automated pension re-enrolment feature will:

    • Automatically assess and enrol employees onto your workplace pension scheme,
    • Reduce manual processes and therefore errors; and
    • Ensure secure integration with pension provides

    Find out more including how to update your workplace pension settings by clicking here.

    Get in touch

    For any further information, help or advice with Xero, please do not hesitate to contact us on 01254 679131 or email cloudaccounting@pmm.co.uk.

    Increasing number of over-50s heading for a retirement crisis – are you one of them?

    Posted on by Rebecca Campbell

    According to the latest report by the Pensions Policy Institute (PPI), up to a quarter of individuals nearing retirement (over five million workers) will not have enough money to pay for an ‘adequate’ standard of living.

    Worsened by the pandemic – a large number of over-55s faced increasing levels of redundancies compared to all other age groups*, leading to individuals ending their careers sooner than planned, or before they could afford to.

    The Pensions and Lifetime Savings Association recently reported that only one in three people can expect a ‘moderate’ life in retirement (highlighted in the table below), which is equivalent to £20,200 a year in income.

     

    Single householdCouple household
    Outside LondonLondonOutside LondonLondon
    Minimum£10,500£12,700£16,100£20,300
    Moderate£20,700£24,700£29,900£34,200
    Comfortable£33,900£37,300£48,800£50,600

     

    *Pensions and Lifetime Savings Association

    For a more accurate way of calculating how much is enough in retirement, try using the Money Advice Service’s pension calculator here.

    How to tackle a pension shortfall…

    Contribute more into your pension

    One way to ensure you will have enough for your retirement is to increase your pension contributions whilst you are still working. Current rules allow you to save up to £40,000 (or 100% of your earnings, if this is lower) into a pension, whilst taking advantage of tax reliefs. However, since 6 April 2020, individuals with an adjusted income over £240,000 or a threshold income over £200,000, will have their annual allowance for that tax year restricted – in this case, you may benefit from speaking to a financial adviser to determine the best course of action.

    The PPI have recently called on the government to double the current minimum auto-enrolment contribution to 16% of wages to ensure workers are saving enough for retirement. Stephanie Hawthorne, Pensions World editor, backs this up in her article for ICAEW, stating ‘auto-enrolment pension contributions must rise as a matter of urgency’.

    Why not take this opportunity to review the amount you are paying into your workplace pension and take advantage of employer contributions?

    Ensure you receive a full state pension

    Individuals are able to obtain a ‘state pension forecast’ by visiting the government website here. This tool can be utilised to ensure there are no gaps in your National Insurance contributions – if there is, it may be worth making these up, so you receive as much as possible upon retirement.

    Speak to a financial adviser

    If you are worried about a pension shortfall affecting you, speak to a financial adviser. We can help you consider the following:

    • How much you already have saved into your pension
    • The number of years you have left to work before retirement
    • How much you can afford to contribute to your pension, considering your other financial commitments
    • Whether you are expecting to increase/decrease pension contributions in the future
    • Do you have any other investments, and will they grow between now and retirement?
    • How much will your employer contribute to your pension?

    We also use cashflow modelling software that can consider your assets and expenditure, highlight how much you need to save, highlight what growth rates are required and and create a long-term plan to ensure you meet your needs in retirement.

    Get in touch

    With a complex array of pension legislation and products available, it is more important than ever to seek professional and independent advice to ensure you are making the right decisions for your future. Contact our wealth management team (01254 679131 / wealthmanagement@pmm.co.uk) who will happily arrange a meeting at no cost to help you achieve more from your pension and long term financial plans.

     

    • Analysis by Rest Less based on Office of National Statistics figures