Pensions/Annuities and Retirement Planning

A pension or annuity is a means of converting capital into a regular income guaranteed for life.

This capital, in the majority of cases, is accumulated over the years within one or more pension plans.

Under current legislation, you must vest your pension plan before age 75 and in our experience, a high percentage of pension plan investors think they must take the benefits offered by the company who manages their plan. This is not so!

PJ McIlroy & Son can, and have on many occasions, secured increased benefits for our clients by utilising an ‘OPEN MARKET OPTION.’ This option allows us to check the whole market based on your specific needs and circumstances. If you have health problems - not something anyone wishes for - this could enhance your pension income by means of an enhanced or impaired annuity.

Typical circumstances:

• Overweight
• High blood pressure/cholesterol
• Insulin Dependent Diabetes
• Smoker
• Angina
• Heart attack
• Cancer

Exact enhancements are dependent on each individual's circumstances.

Do you want to rely solely on state benefits for your retirement?

The average investor cannot rely on one type of investment for retirement planning. To accumulate a realistic fund capable of sustaining your standard of living into retirement, it will take time and regular investment into a broad asset spread. This will help create and protect wealth throughout your working life.

Retirement planning utilising different types of investments and their tax benefits is essential, as is the necessity to alter your strategy depending on your risk profile and term to retirement.

Pensions - Basic Facts

When should you start a pension?

You should start a pension as soon as possible; the earlier you start, the more you will have when you retire. However, it is important to maintain a sense of balance: if you’re young and earning a small wage, it’s not sensible to put a huge slice of your earnings into a pension.

With personal pensions, you can contribute as little as £25 per month. Most personal pensions, and even company pensions, allow you to stop contributing or take breaks if required, without imposing penalties.

If you get into the habit of paying an amount you can afford – by direct debit just after payday for example – it becomes a very painless way of preparing for the future. But don’t just forget about it: if you get a pay rise, then you should also increase your contributions.

Tax breaks

Tax relief is given on most of all private and company pensions. The higher your tax rate, the more valuable the tax relief will be. In other words, if you pay the basic rate of tax, for every £80 you contribute from your final salary, £100 will go into your pension. If you are in the top tax bracket, every £60 contributed will result in £100 in your pension. For basic rate taxpayers, tax relief is applied automatically; however, it is slightly more complex for the higher rate taxpayer.

How much should I pay into a pension?

There is an annual limit to how much you can contribute to your pension 08/09 £235000 rising to £255000 in 2010/2011 which are tax deductible, individuals may draw benefits at 50 (55 from 6th April 2010) and there is a lifetime allowance fund cap currently £1650000.

You should remember one simple fact about pensions: the more you can pay when you are younger, the easier life will be when you are older.

Please contact us to discuss in person the retirement plan most suitable for you.