a happy retirement........

More than ten per cent of people who had planned to retire during 2012 are making alternative arrangements and putting off drawing their pension for the time being, according to the latest results from Prudential’s Class of 2012 research.Now in its fifth year, Prudential’s research focuses on the finances and aspirations of people planning to retire.Of those deferring their retirement, a third (32 per cent) claim they do not want to retire yet, while two thirds (68 per cent) say they are putting it off because they can’t afford to retire as originally planned.

However, showing that giving up work before growing too old is still an aspiration for many, the average age of people planning to retire this year is 60 years old – a similar age to last year’s survey and seven months younger than in 2010. Vince Smith-Hughes, Prudential’s retirement income expert, said: “One thing this year’s retirees have in common is actively making choices about when and how they will retire. Although many people think the idea of retiring as early as 60 is out-dated, the majority of this year’s retirees are defiantly sticking to that plan. It’s likely that many of these people will have accumulated benefits in final salary pension schemes that generate an acceptable income in retirement – perhaps signalling that the golden era of retirement for baby boomers isn’t over yet.

“It is, however, undeniable that there is a new retirement reality for a significant number of retirees. People are living longer, and for many, the very real prospect of a thirty year retirement is either unpalatable or unaffordable, hence the decision by many to continue to work. Retirement is also becoming a more opaque concept, with many people working part-time, either out of necessity or desire.

“To stand the best chance of having a comfortable retirement, which starts when you want it to, it’s important to seek professional financial advice on saving for a pension and on what post-work income options are available. Saving as much as you can as early as you can will help you to gain more control over your retirement. “

IFAs are consumers’ most popular and trusted source of financial advice, according to research from the Financial Services Authority (FSA).

The FSA’s Consumer awareness of the FSA and financial regulation report showed that just under half, 47%, of all consumers who received financial advice in the last 12 months saw an IFA.This compared to 41% who received advice from a bank or building society, with 12% seeking their advice elsewhere. Of those consumers who saw an IFA, 61% said they were very confident the advice they received was appropriate, compared to only 33% of bank or building society customers. The report said this could be due to the nature of client relationships.

‘The reason for the difference could be due to the nature of the relationship, with greater continuity of knowledge and personalisation by an IFA than a bank or building society,’ it said.

The survey research also suggested that only 17% of consumers received financial advice in 2011.

We have always known this, but please ensure that your friends and family are aware of this and ask them to contact us for professional, trusted advice

With further tax increases likely on the horizon, there really is no time like the present to take a step back and look at how you could reduce your taxes and improve your financial planning strategy.

The end of the current 2011/12 tax year is 5 April. We have provided an overview of the key areas you may wish to consider that could help you achieve a more secure future for you and your family.

• Make use of personal allowances

Every person in the UK is allowed to earn a certain amount of money each year without paying income tax, known as a personal allowance. This tax year, the personal allowance is £7,475, with higher allowances available to those aged 65-74 (£9,940) and age 75 and over (£10,090). If you become 65 or 75 during the year to 5 April 2012, you are entitled to the full allowance for that age group. If you earn income above £100,000 you start to lose the personal allowance (at a rate of £1 for each £2 you earn above this limit).

If you are married and one partner is not working, if appropriate, it could be beneficial to transfer savings accounts to them, so that you pay less income tax as a couple. If you don’t make use of your personal allowance in any tax year, you cannot carry it forward to the next year.

• Use your Individual Savings Account (ISA) allowance

ISAs allow you to save tax-efficient money. Within an ISA you pay no capital gains tax and no further tax on the income. You don’t even need to declare ISAs on your tax return. This tax year, you can invest up to £10,680 in a Stocks and Shares ISA or, alternatively, you can invest up to £5,340 in a Cash ISA and the balance in a Stocks and Shares ISA. Any allowance not used by the 5 April deadline will be lost forever. The value of tax savings depends on your circumstances and tax rules can change over time.

• Top up your pension contributions

The annual allowance for the tax year 2011/12 is £50,000, inclusive of your own contribution and any other amounts paid into an approved pension scheme. Contributions paid by you to a personal pension plan or a stakeholder pension scheme are made net of 20 per cent basic rate tax. This means that for every £100 you want to save, you pay only £80. Tax relief of £20, topping your contribution up to £100, is then added by HM Revenue & Customs (HMRC).

If you are a 40 per cent higher rate tax payer, you may be able to claim additional tax relief. If you are a 50 per cent additional rate tax payer, you may also be able to claim additional tax relief at your highest rate. Depending on how much you earn over the higher rate tax band, and your level of contribution, any additional rate tax relief would range between a further 1 per cent up to a maximum of 30 per cent.

• Plan for Inheritance Tax (IHT) 

Effective IHT planning could save your family hundreds of thousands of pounds. If you haven’t done anything about a potential IHT bill, now is the time to take action. Currently, IHT is charged at 40 per cent on anything you leave over £325,000 when you die (£650,000 for married couples or registered civil partnerships). With rising property prices in recent years, this has resulted in more people being subject to IHT.

Start by writing a will, making it clear to whom you want to leave your money and possessions when you die. You may then want to try and minimise any potential IHT bill by giving regular small gifts away. Currently, you can give away a lump sum of up to £3,000 in each tax year without paying IHT – known as your ‘annual exemption’ – or £6,000 this year if you haven’t used last year’s allowance.

You also have a ‘small gifts exemption’, which means that you can make small gifts of £250 each year free of IHT. There is no restriction on the number of small gifts but they must each be to separate individuals. You cannot use your annual exemption and your small gifts exemption together to give someone £3,250.

• Reduce your capital gains tax (CGT) liability

If you have made a taxable gain from the sale of property, shares, investments, businesses or any form of capital gain, make sure you don’t make unnecessary CGT payments. CGT is a tax charge that arises from the disposal of assets, such as shares or buy-to-let properties, charged at 18 per cent for lower and 28 per cent for higher rate tax payers. Every individual has an annual CGT-free allowance, which currently stands at £10,600 for the 2011/12 tax year.

The limit applies to each individual, so if you are married or in a registered civil partnership you each have an annual exemption and should ensure that each of you maximises your CGT-free gains.

There are different ways to reduce CGT bills, for example, equalisation or joint ownership of investments will transfer income to the lower-taxed one. This can be done CGT-free for married couples and registered civil partnerships. By transferring an asset into joint names, you could both make use of your tax-free allowance so that up to £21,200 of any gain can be tax-free in the current tax year. But the transfer to your spouse or partner must be a genuine outright gift, so this might not be a suitable strategy for everyone.

It may also be appropriate for some unmarried couples to equalise non-CGT assets such as bank accounts, which could mean that it becomes possible to equalise or transfer assets on whichever gains are less than their annual CGT exemption. Even if an asset is only put into joint ownership the day before it produces income – for example, through interest or a dividend – that income will still be split equally between both owners.

If you immediately sell employee shares that you get through a Save-As-You-Earn share option scheme, company share option scheme or enterprise management incentive scheme, you may have a CGT bill. Consider selling in several tranches, so that each year’s gain is within your annual tax-free allowance.

Speak to us if you want to discuss any of the above topics

Self-assessment tax deadline Self-employed people must file their tax returns online and pay any outstanding tax for the year ending April 2011 by 31 January. The deadline for paper returns was 31 October 2011. Contact us for advice on Tax planning and ways to reduce your future Tax liabilities

21 March

The Budget. The yearly raft of changes usually has something that affects everyone in it, from changes to income tax levels and benefits uprating to how much more we will all pay for a pint. The Budget is always worth keeping an eye on.

5 April

Two pension changes

Firstly, the’ Fixed protection’ application deadline. Only affects those fortunate to have large pension funds over £1.5 million

Secondly, the end of contracting out Contracting out. Contracting out of the State Second Pension (S2P) into a defined contribution pension will be banned from this date.

1 September

Auto-enrolment begins Employers with 120,000 employees or more must notify staff of auto-enrolment before this date. The staging date to begin auto-enrolling for this group is 1 October 2012. Click here for detail about coming changes to workplace pensions

21 December

The use of gender as a factor to price insurance contracts will become illegal, meaning annuity rates and insurance quotes will not be different for men and women. If you are at or approaching retirement, and would like advice on Annuities then please contact us

Here is the BBC link

Here is a link to our Pensions calculator

Contact us to start planning for an enjoyable retirement

I am sure we all know someone who is currently, or has been in the past, affected by Cancer. Although the likelihood of developing cancer is now higher (presumably down to better detection rates amongst other things) the latest statistics also show that there is a dramatic increase in survival rates.

The lifetime risk of developing cancer is now around 1 in 2.5 (40.3% for men and 38.8% for women), according to Cancer Research, based on 2008 data. Although cancer is often a disease of older ages, incidence under age 65 is still 1 in 4 (25.7% for men and 24.4% for women).

Incidence is also expected to rise from 298,000 in 2007 to 432,000 by 2030, mainly because of our ageing population.

However, Macmillan Cancer Support reports that the median survival period for cancer sufferers is up almost sixfold in the past 40 years – from 13 months in 1971/2 to 69 months in 2007.

In other words, most people diagnosed with cancer will now survive for more than five years and more people are living with cancer than dying of it.

Whilst there is no cure for cancer, there are certainly ways of ensuring that at a time when you least need to worry about finances. You can have the peace of mind knowing that a lump sum and/or a regular income are available to you through a Critical Illness policy or Income Protection Plan, or indeed the cost of care and trestment could be funded through a Private Medical Insurance plan.

With these increased survival rates, having the necesary cover in place is now more relevant than ever. Please contact us and we can explain the options in more detail

You will have seen the recent furore over Public sector pensions and the proposed ‘reforms’. The reality is, that even after the changes and even with some people having to contribute more, that these Final Salary pensions are still very much at the gold plated end of the spectrum.

Yes, some people will have to pay a bit more, but that is because life expectancy is continuing to increase and so more money is needed to fund the increased longevity. The reality for everyone else, not fortunate enough to be an active member of a Final Salary pension scheme, is that we have to fund this additional cost ourselves.

What this debate should remind people who are funding their own retriement provision, or are thinking of doing so, is the need to continually review the level of funding, the fund selection, your anticipated retirement age, your expected lump sum and pension options, and the type of pension contract that you currently have, to name but a few. In short, you need ongoing advice.

So if you have an existing pension or are thinking about starting a pension, then make one of your New Year resolutions to get some professional advice

The National Employment Savings Trust, or NEST as it is known, is the latest version of what is going to be introduced by the Government over the coming years (phasing in depending on the size of the company) as a way of encouraging employees to contribute towards a retirement scheme.

What is clear, is that advice is required for both employer and employee, and that is where we can help. There are very good reasons as an employer why you should be talking to us in 2012 about this (last opportunity to have the cost of advice factored into the contract), so please contact us for further information and advice.

Click here for Employers guide

Click here for Employees guide

The retirement age was due to rise to 67 in 2036 and to 68 by 2046 but Duncan Smith (pictured) said the timescale, set out by the previous government, was ‘too slow’. Sources told The Observer the state pension age is likely to hit 67 in 2026.

‘People are living longer but they’re still retiring at the same age, so the purpose now is too look at that, and we’re reviewing that to see what might be reasonable, but always giving them good warning about what happens.’

Despite plans to speed up the increase in the retirement age, women may be given longer to prepare for the increase in their pension age to 65, due to happen in 2018, and another rise in 2020 to 66. Many, including independent pensions expert Ros Altmann, have argued the quick increase in women’s pension age to 66 is unfair.
She said: ‘Bringing forward the increase to 67 by 2026 will however allow the government to undo its terribly unfair plans that were hastily announced in the Pensions Bill.  Having promised in the coalition agreement that it would not increase state pension age beyond age 65 before 2020, it went back on that promise and announced increases for some women in their late fifties and they have not had enough time to prepare.

Source: New Model Adviser 12th September