Whitechurch Pension Service

One of the most important financial decisions that you will have to make is how best to save for your retirement. This is made all the more complicated by the different styles of pensions that are available and the amount of legislation there is to take in.

This is where Whitechurch Securities can help. We have a highly qualified pensions team on hand to provide you with the help and advice required to guide you through this very complex area. Our service provides advice on all aspects of pension planning via a thorough review of your current pension plans. Contact us for more information.

Can you have a pension plan?

In reality, most people can. Provided you are under 75 years of age, some form of planning could be available to you. In reality though, many people are confused by the options available and fail to make adequate or appropriate provisions.

Most people are in one of three positions. They might have a pension plan that they are happy with, but might want to make some additional provisions. Some have pension plans that they are not happy with and might not be aware that there are alternatives available to them. There are also those that have no pension provision at all, many people in this position are also unaware of the wide range of options that might be available to them.

• Advantages of Pension Planning
• Disadvantages of Pension Planning
• Contribution Limits
• Different Types of Pensions
• Whitechurch Pension Service and what it costs

Advantages of Pension Planning

Our view is that pensions should still be seen as an important part of your retirement planning, and they offer advantages for those who make savings in this way.

• Income tax rebates - you receive an income tax rebate on contributions made (non-taxpayers enjoy a 20% tax rebate for contributions up to £3,600 gross p.a.)
• Tax-free growth - investments held within your pension grow tax-free
• Pension commencement lump-sum - when you retire you can take up to 25% of your fund as a tax-free lump-sum.
• Competitive costs - although traditionally expensive, the introduction of Stakeholder pensions has driven down costs significantly, making many pensions a cost effective way to save
• Discipline - because your savings are locked away until at least age 50 (rising to age 55 from 2010), it removes the temptation to spend the money before then!
• Investment choice - pensions allow a wide range of investments to be held, and this has widened further from April 2006 when the pension simplification bill was introduced

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Disadvantages of Pension Planning

There are also some disadvantages that should be borne in mind when pension planning, which are as follows:-

• Inflexibility - your investment is locked away until at least your 50th (rising to 55th from 2010) birthday
• Pension income is taxable - although pensions grow tax-free, when you eventually retire the income paid will be taxable

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Contribution Limits

As from the 6th April 2006, the contribution limits have changed. There is now an upper limit for contributions in any one tax for every one known as the annual allowance, which is as follows:

However you will only receive full tax relief up to your current income, for example if you earn £30,000 you will receive full tax relief if you contribute £30,000. You are able to contribute more than your salary but you will not receive tax relief.

If you do not have an income you can still contribute up to £2,880 net (£3,600 gross) per annum and receive basic rate tax relief of 20%.

In the year before you take your benefits there is no maximum contribution limit.

Lifetime Allowance

With effect from 6th April 2006 there is a maximum fund value you can have in your pension plan, which is as follows:

If your fund value exceeds this limit there will be a tax charge of 55% of the amount over the lifetime allowance.

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Different Types of Pensions

We cannot cover all of the technical points of each type of pension policy here, but what we aim to do in the following section is to give a broad-brush picture including the main benefits and disadvantages of each.

Stakeholder Pensions

Launched in April 2001 with the aim of encouraging more people to fund for their own retirement. Advantages of these schemes are that the minimum premiums are low at £20.00 and charges are capped at 1.5% for the first 10 years, and then reducing to 1% thereafter.

These plans provide a great deal of flexibility in terms of when benefits can be taken, any time between 50 (rising to 55 from 2010) and 75 years of age. They also offer very flexible contribution arrangements, whereby one can stop, restart or suspend contributions as well as transfer funds between providers without penalties.

Stakeholder plans can be used by companies to provide pensions for their employees, as all employers with 5 or more staff must offer access to a pension scheme, although the company does not have to contribute.

The major drawback for some clients is that stakeholder arrangements tend to offer a more restricted choice of investments than Personal Pension Plans.

Whitechurch have researched the market and are able to provide details of our favoured Stakeholder providers with competitive terms. For more information please contact us.

Personal Pension Plans

These were launched in the 1980s to replace Retirement Annuity Plans. Most policy conditions would in fact be very similar to Stakeholder plans in terms of flexibility of benefits and contributions. When compared to Stakeholder schemes, most, but not all Personal Pensions would have higher charges. But with these higher charges, one can gain access to a much greater range of available investments.

Personal Pension Plans can either be set up by individuals such as the self employed, or can indeed be used by employers to establish group schemes for their employees. Again, there is no compulsion on the company to contribute.

Whitechurch have researched the market and are able to provide details of our favoured Personal Pension providers with competitive terms. For more information please contact us.

The following pension options are extremely complex and we would certainly recommend you seek professional advice before entering into any transaction.

Executive Pension Plans

These have to be company schemes. Unlike Personal Pensions or Stakeholder schemes, the employer must contribute. Benefits are capped and predetermined according to formulae laid down by either the pension provider, or the Inland Revenue.

A significant feature is that past service can be taken into account. This means that benefits can be topped up to the maximums by allocating contributions retrospectively for years when no contributions were made.

Because the premiums come from the company, these qualify as business expenses and therefore are eligible for Corporation Tax Relief at the company's marginal rate. This is extremely efficient in terms of Tax Planning.

Please contact us for tailored advice in this area.

Additional Voluntary Contributions (AVC)

There are two types of AVC. Both allow you to contribute extra money into your employer's pension scheme. A money purchase AVC simply builds up a pot of money, which is used at retirement to provide an additional income.

An added years AVC only applies to what are known as final salary schemes. These schemes provide benefits based on the number of years' service as a proportion of final salary. Such an AVC therefore allows benefits to be topped up, much as you would have had, if you had worked for the company for a longer time.

Free Standing Additional Voluntary Contribution (FSAVC)

This route allows clients to boost their retirement benefits by making additional contributions, alongside but separate from their company pension scheme. By following this route, there tends to be more investment choice than an AVC although the charges tend to be higher.

Self Invested Personal Pensions (SIPP)

One of the most interesting developments in the pensions market in recent years. These have exactly the same rules as personal pensions and are open to all of the same people. The big difference is in what you can actually do with the money. As the name suggests, the client has direct control over what investment assets are bought.

The principal advantage of these schemes is that a huge range of investments is possible including not only stock or bond type holdings, but more tangible investments such as property. Many clients choose to have their investments managed for them within such an arrangement, either on a discretionary or advisory basis.

In recent years, more providers have entered this market, charges have fallen and such schemes have therefore become a viable proposition for many clients whose funds might have been considered too small in the past.

Please contact us for more information on our favoured SIPP providers.

Small Self Administered Schemes SSAS

Normally, these are only used by company directors, as they fall within the scope of the occupational pension scheme legislation. In essence, these have many similarities to a SIPP, written under different rules, whilst still giving the client the power to control their own investments.

Please contact us for tailored advice in this area.

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Whitechurch Pension Service and what it costs

How can the Whitechurch Pensions Service help?

We have put a great deal of resources behind our pension service. Our primary aim is to provide you with as much information as possible, but put in plain English. Our regular pension newsletter can keep you up to date with developments and give you access to our rating service, which ranks the various pension providers.

We take into account not only their investment performance, but also other important features such as their financial strength, along with some less tangible aspects such as size and name awareness. This rating therefore sums up all of the factors that are important when choosing a pension company.

What does it cost?

In order to be as cost effective for you as possible, we have negotiated very attractive terms with leading pensions companies. To keep costs to a minimum, we act for our clients on two levels.

Execution only

If having read our various guides and done some of your own homework, you feel able to make your own decision, we can arrange your pension for you for £100. Any initial commissions that would have been paid to us for your pension would be used to cover our fee, with the balance rebated to enhance your investment. No advice can be given under this arrangement, but you still have access to the guides mentioned above.

Individual Advice

If you need advice, our fees start at £150.00. Once we have obtained full information from you regarding your circumstances and the type of advice required, we would tell you the level of fee that we would require to act for you and would only continue with your prior agreement. Again, we would reinvest any commissions over and above the level of our fee.

Please read our company Terms of Business (TOB) for further details of remuneration.

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