Pensions information by Chris Bishop on retirement-matters

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by Chris Bishop, MLIA (dip)

Information provided by our resident Independent Financial Advisor (IFA), Christopher Bishop, MLIA (dip), of Coastal Insurance & Mortgage Services, Sussex. This firm is an appointed representative of Countrywide Independent Advisers Ltd, which is regulated by the Financial Services Authority
Information given is general in content, and should not be seen as specific. Please contact a local IFA if you have any queries, alternatively keep an eye out for our upcoming - Ask the IFA feature - coming soon.

FINANCIAL TIPS RE: PENSIONS FOR THOSE APPROACHING RETIREMENT

When you retire your pension may be made up of a combination of the following:

Basic Pension, SERPS, Graduated Pension, Over-80's Pension, Age-related additional, Invalidity addition

Basic Pension, SERPS & Graduated Pension are all subject to Income Tax

When is the State Pension paid?

Under current legislation:

Males age 65 Females age 60

(women born after April 1950 will be affected by the Government's decision to equalise the pension age to age 65 - this will be phased in gradually)

This can still be paid to you if you go and live abroad - contact Benefits Agency and ask for leaflet NI38

Brief summary of what these pensions are:

Basic Pension known as State Pension - depends on your NI contributions, and what you get depends on how many 'qualifying years' you have. This pension has to be claimed; you will be sent form BR1 before reaching State Pension Age (contact Benefits Agency if not received within approx. 4 months of retirement age) - complete immediately and return. You can defer pension until age 70 (men) and age 65 (women). You can still draw this pension and continue working (no further personal NI contributions need be paid!)

SERPS State Earnings-related pension scheme. Not applicable to self-employed. Based on earnings since 1978. Do not have to be receiving Basic Pension to be entitled to SERPS

Graduated Pension Based on amount of graduated NI contributions paid between April 1961 - April 1975. Again, do not have to be receiving Basic Pension or SERPS

Over-80's Pension No NI contributions needed to receive this. Over-80's pension makes up the difference between Basic Pension and (currently) £40.40 per week per individual. Claim from Benefits Agency when the time comes!

Age-related addition and Invalidity addition - check with Benefits Agency for entitlement

Dependants, If in receipt of some Basic Pension, you could receive some extra pension if your spouse is dependent on you - again check with Benefits Agency State

Find out how much basic retirement pension you can expect

How? Phone your local Benefits Agency (see local phone directory), and ask them to send you a form BR19. Complete and send to the address on the form, and approximately 6 - 8 weeks later you will receive a forecast of your basic retirement pension, and this will include any SERPS benefit / Graduated Pension benefits. This forecast takes account of National Insurance contributions already paid, so it is most accurate for those who are nearing retirement.

Are you a married woman, widow or widower, divorced?

You can still be entitled to a Basic Pension based on someone else's contributions. How? Complete the form BR19 as above

Find out how much your occupational pension scheme will be

How? If you have been a member of an occupational pension scheme, ask for a projection of your pension at retirement. Your employer can provide this. This will be based on contributions made from both you and your employer if applicable. It will also show widow / widower's anticipated pension, and this is important when planning your future finances. Make sure that you give the correct date of birth for your spouse when asking for this projection

If your pension projection is disappointing, and you are still in receipt of taxable earnings, you can improve the position

How? The projection provided by the benefits agency would advise if you could make top-up contributions, which must be paid before you reach pension age. However, think carefully about this, as it may be preferable to consider other methods of improving your pension. You could consider 'topping-up' your personal pension contributions by a single premium or increasing your present contributions - all tax relievable - please discuss this with an Independent Financial Adviser (IFA). If you are a member of an occupational pension scheme, speak to your pension department about making Additional Voluntary Contributions (AVC's) to the existing scheme - again tax relief is available on these contributions. Alternatively consider starting saving via an ISA - this form of investment can provide an income stream in the future, and the advantage here is that income is tax exempt.

Be aware that you may be able to 'shop around' for a better pension when you retire

How? Some occupational and some personal pension schemes (typically effected by self-employed or those who didn't have an occupational scheme) allow you to purchase an 'open-market option'. This means that you may purchase your pension / annuity from another insurer, and this would be beneficial if another insurance company offered a better annuity rate at that time than your current provider. It is not always the case, but there is no harm in investigating this, and you will not be penalised by moving the fund to do this. Ask an IFA, or a specialist annuity company to investigate this for you - to not do so could mean that your income for life could be less than if you take this step! Once your pension commences payment, there is no opportunity to change - so investigate all the options before making that final decision

Do not forget any previous pension schemes - ask for a projection of these too!

How? Write to the previous employer's address for occupational schemes, stating your full name, d.o.b. and National Insurance number. If you have lost track of the Company, see the 'useful contacts' section at end of this piece

If your scheme was affected via an insurance company, and details are mislaid, refer to the 'useful contacts' section at the end of this piece

Be aware That your present pension scheme may provide life assurance (known as death-in-serve) and this will cease when you start taking your pension. It is possible to replace this - speak to an IFA to ensure that advice given is sound.

Also,

Be aware That if you die after taking your pension, your spouse's pension may reduce. Try and plan for this

How? Is your spouse younger than you? Will they still be working after your retire? Can they top-up their own pension arrangements? Have you adequate alternative savings, e.g. ISA's, Building Society / Bank accounts. Look in 'Money Facts' for the latest rates (sold in most newsagents)

Useful contacts:

DSS Pensions, Freepost BS5555/1, Bristol BS99 1BL
(Pensions Info-line 0845 7313233)

Pensions Direct (run by Benefits Agency) 0191 203 0203
(advice re State Retirement Pension)

Financial Services Authority 0845 6061234
(advises re insurance companies)

Pensions Schemes Registry (OPRA) 0191 225 6316 (tracks down occupational schemes)

Pension Advisory Service (OPAS) 020 7233 8080
(assists with resolving problems re pensions)

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