Pensions - Choosing a pension and pension advice

Commodore Finance Ltd

There are primerily three types of non-state pension scheme. Some of these schemes are offered by employers and some you can start and implement yourself. Through our professional links with Personal Touch Independent Financial Management Limited we are able to provide quality products and serices.

The Schemes are as follows:-

Occupational salary-related schemes (sometimes refered to as defined benefit scheme – These are normally offered by employers but its not guaranteed that your employer will offer such a scheme

Occupational defined contribution schemes (Often called money purchase pensions) – These again are normally offered by employers and in the same light, its not guaranteed that your employer will offer such a scheme.
Stakeholder pensions and personal pensions – These are offered by some employers, and in some cases the employer may contribute into the scheme on your behalf. You can implement a plan yourself on an individual basis. In some cases your employer may offer a group personal pension within the workplace. These types of schems are also money purchase pensions

If you work for a business with fewer than five employees, your employer does not have to offer you access to a pension scheme. However you should still check what’s available, as some small employers may still offer a scheme anyway and they may even contribute into the scheme as well.

The government is currently planning changes that will mean that all employers will have to offer and contribute to a pension scheme in future. Employers who haven't offered a pension in the past may set up their own scheme, or may pay pension contributions into a new central scheme that is being set up. This is expected to come into effect from 2012, however this date is not guaranteed as yet. The Pensions Advisory Service website has more information on this matter.

Although you don’t have to join a pension scheme that is offered through via your employer, it’s usually a good idea to join an occupational pension scheme if one is available to you, this is because: -

your employer normally contributes; and
often you also get other benefits, such as death in service benefit, (this is life insurance which pays a lump sum and / or pension to your dependants if you die while you remain an employee of the company).
pensions for your spouse and other dependants when you die.
A pension paid if you have to retire early because of ill-health.

It must be noted that not all pensions offered by employers are occupational pension schemes. Your employer may offer a stakeholder pension, a personal pension or a group personal pension arrangement. These pensions are not called occupational pensions even though the employer may contribute into the scheme on your behalf.

At all times we would always recommend that you Find out whether your employer offers a pension scheme, what type it is and if and when you can join it.

Most importantly don't delay starting or joining a pension scheme – you could end up with a much smaller pension income upon reacing your retirement age and this could impact on your standard of living.

Stakeholder pensions have to meet minimum standards as laid down by the Government. Some employers do offer them or you can implement one yourself. They are known as money purchase pensions. The minimum standards that have to be met are:-

limited charges applied by the provider
A low minimum contributions;
flexible contributions;
penalty-free transfers; and
a default investment fund – a fund that your money will be invested into if you don't want to choose one personally.

If one of these schemes is offered through your employer, they will have chosen the pension provider already and they may have arranged for contributions to be paid from your wages or your salary. The employer may in certain circumstances contribute to the scheme on your behalf as well.

Your employer would deduct your contributions from your pay and send them to the pension provider on your behalf together with any contribution that the employer may be making. The pension provider will claim any tax relief allowable at the basic rate and will add this into your fund. If you are a higher rate taxpayer, you will need to claim any additional tax rebate through your personal tax return.

Questions?

Money purchase pensions build up a pension fund using the contributionspaid in, investment returns and tax relief. It helps to think of money purchase pensions as having two steps:

(Step 1)

The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years up until you retire. You can usually choose from a range of funds to invest in. Remember though that the value of investments may go up or down.

(Step 2)

When you retire you can take part of the fund value as a tax-free lump sum. The Remainder of the fund is used to secure an income – usually in the form of a lifetime annuity.

The amount of pension income you’ll get will depend on:

How much you pay into the fund;
How much, if anything, your employer pays in;
How well your investments have performed (Grown);
What charges have been taken out of your fund by your pension provider;
How much you take as a tax-free lump sum;
What the annuity rates are at the time you retire
The type of annuity you choose.

If you change jobs, you should always check whether your new employer offers a pension scheme. If you choose you can continue paying into your stakeholder pension but you may find that you would be better off joining your new employer's scheme, especially if the employer contributes.

Compare the benefits available through your employer's scheme with your stakeholder pension. If you decide to stop paying into a stakeholder pension, you can leave the pension fund where it is to carry on growing, it is always arcommended that you check whether there are any extra charges for doing so and what the ongoing charges are going to be.

You can get a free copy of the Financial Service Authority Stakeholder pensions and decision trees booklet. This can be download from the following site:-

http://www.moneymadeclear.fsa.gov.uk/tools/publications/publications.html

A personal pension is one that you take out yourself, for example if you're self-employed or your employer doesn't offer a pension arrangement. They are a type of money purchase pension.

Eitrher you or your financial advisor will help you choose the provider and make arrangements for your contributions to be paid. The provider will claim tax relief at the basic rate and add it to your fund. If you are a higher rate taxpayer, you will need to claim any additional tax rebate through your annual tax return. You can also choose where you want your contributions to be invested into from the range available from your chosen provider. You can get a free copy of the financial service authority Pensions booklet. This can be download or you can order this online at:-

http://www.moneymadeclear.fsa.gov.uk/tools/publications/publications.html

The fund builds up using your contributions, investment returns and tax relief. It helps to think of money purchase pensions as having two steps:

(Step 1)

The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire. You can usually choose from a range of funds into which your contributions can be invested in. Remember though that the value of investments may go up or down.

(Step 2)

When you retire, you can take a tax-free lump sum from your pension fund and use the remainder to secure an income – usually in the form of a lifetime annuity. Under current legislation you can take up to 25% of the fund as a tax free lump sum.

The amount of pension income you'll get will depend on:

How much you pay into the fund;
How much, if anything, your employer pays in;
How well your investments have performed;
What charges have been taken out of your fund by your plan provider;
How much you take out (If Any) as a tax-free lump sum;
What the annuity rates are at the time you retire
The type of annuity you choose.

For more information about annuities and other retirement options can be found via the Financial Service Authority Web site covering retirement options.

http://www.moneymadeclear.fsa.gov.uk/products/retirement/retirement_options.html

Your financial advisor can heklp you to compare the features and benefits of the various schemes.

Questions?

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Pensions at Work

Stake Holder Pension

Personal Pensions

Personal Group Pensions

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This calculator is for guidance purposes only, figures may differ according to your personal circumstance.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

We do not normally charge for mortgage advice, however this will depend on your circumstances. If a fee is charged our typical fee is £99.

Commodore Finance Limited is an Appointed Representative of Personal Touch Financial Services Limited which is authorised and regulated by the Financial Services Authority

You should note that by clicking on any of the links above you are departing from the regulatory site of Commodore Finance Limited. Neither Commodore Finance or Personal Touch Financial Services Limited is responsible for the accuracy of the information contained within the linked site.

Should you note that by clicking on any of the links above you are departing from the regulatory site of Commodore Finance Limited. Neither Commodore Finance or Personal Touch Financial Services Limited is responsible for the accuracy of the information contained within the linked site.

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Questions?

Some employers offer these schemes. They build up a personal fund for each employee which is converted into an income at retirement, but they differ from occupational defined contribution schemes. They are a type of money purchase pension.

The scheme is run by the pension provider that your employer chooses, but it is an individual contract between you and the provider. The provider claims tax relief at the basic rate and adds it to your fund. If you are a higher-rate taxpayer, you will need to claim the additional tax rebate through your personal annual tax return.

The pension fund builds up using your contributions and your employers contributions if they make any, in addition you may have investment returns and tax relief. It helps to think of money purchase pensions as having two steps:

(Step 1)

The pension fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire. You can usually choose from a range of funds to invest in. Remember though that the value of investments may go up or down. For more information read The Pensions Regulator’s guide Making pension fund choices – see Related links.

(Step 2)

When you retire, you can take a tax-free lump sum from your fund and use the rest to secure an income – usually in the form of a lifetime annuity.

The amount of pension income you’ll get will depend on:
How much you pay into the fund;
How much, if anything, your employer pays in;
How well your investments perform;
The charges taken out of your fund by your pension provider;
How much you take as a tax-free lump sum;
The annuity rates at the time you retire
The type of annuity you choose.

For more information about annuities and other retirement options can be found via the Financial Service Authority Web site covering retirement options.

http://www.moneymadeclear.fsa.gov.uk/products/retirement/retirement_options.html

Think carefully if you are planning not to join your employer's pension scheme. It is not usually a good idea to turn down a pension scheme to which your employer will contribute on your behalf.

Should you note that by clicking on any of the links to the above you are departing from the regulatory site of Commodore Finance Limited. Neither Commodore Finance or Personal Touch Financial Services Limited is responsible for the accuracy of the information contained within the linked site.

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The self-invested personal pension or (SIPP) as it sometimes known is a pension wrapper. This wrapper holds your investments until you retire or you start to draw a pension income.

SIPPs are generally designed for those people who want to manage their own fund or funds by admistering with and dealing with, their investments as and when they choose. This type oof pension plan may often have higher charges than other types of personal pension plan or stakeholder pension pension. For these reasons, they are more suitable for large funds and for people who are experienced with investing.

With standard personal pension schemes, your investments are managed for you within the pooled fund you have chosen. Self Invested Personal Pensions are a form of personal pension scheme that give you the freedom to choose and manage your own investments. Or you can employ and pay for an authorised investment manager to make the decisions for you.

Most Self Invested Personal Pensions allow you to select from a range of assets, such as:

particular stocks and shares quoted on a recognised UK or overseas stock exchange;
government securities;
unit trusts;
investment trusts;
insurance company funds;
traded endowment policies;
deposit accounts with banks and building societies;
National Savings products; and
commercial property (such as offices, shops or factory premises).

This list is not exhaustive and different Self Invested Personal Pension plan operators will offer different ranges of investment choices.

It’s unlikely that you will be able to invest directly in residential property within a Self Invested Personal Pension. Residential property can’t be held directly in a Self Invested Personal Pension with the tax advantages that usually accompany pension investments. But, subject to some conditions including restrictions on personal use, residential property may be held in a Self Invested Personal Pension through collective investment vehicles, such as real estate investment trusts or property trusts, without losing the tax advantages. However, not all Self Invested Personal Pensions operators accept this type of investment.

The Financial Service Authority offer some excellent impartial advice on all aspects of pension planning via their website Money Made Clear, you can access this web site from the following link:-

http://www.moneymadeclear.fsa.gov.uk/products/retirement/retirement_options.html

Pension planning and choices can some times appear somewhat daunting, At Commodore Finance Ltd we are able to offer you a full advisory service and help you navigate you way through the decission process to bring about a a healthy and financially strong retirement. Commodore Finance Ltd offer investment and pension advice from the whole of the market as such we ar enot tied to any one provider.

For further help and advice please feel free to call our office or complete the enquiry form below and a member of our team will contact you to discuss your requirements further.

Disclaimer: We are very please to advise that through our business link with Personal Touch Independent Financial Management Limited you will be able to source full independent advice on all your pension planning requirements.

Commodore Finance Limited do not offer advice in relation to pensions, savings and investment business.

You should note that by clicking on any of the links aboveyou are departing from the regulatory site of Commodore Finance Limited. Neither Commodore Finance or Personal Touch Financial Services Limited is responsible for the accuracy of the information contained within the linked site.

Terminology explained