Tai­lor­ing how you re­ceive your state pen­sion can boost in­come

The Press and Journal (Inverness) - - MONEY -

re­mains over whether the UK Gov­ern­ment will cut pen­sion tax re­liefs and al­lowances in an at­tempt to re­duce pub­lic spend­ing.

If you’ve still got a few years to go be­fore re­tire­ment, you should think about boost­ing your pen­sion sav­ings now so that you can ben­e­fit from cur­rent rates of tax re­lief and po­ten­tially en­joy a higher in­come when you stop work.

Ba­sic rate tax­pay­ers re­ceive tax re­lief at 20% of pen­sion con­tri­bu­tions, which is au­to­mat­i­cally added to their re­tire­ment pots.

If you’re a higher or ad­di­tional rate tax­payer, you can claim an ex­tra 20% or 25% through your self-as­sess­ment tax re­turn. A pen­sion con­tri­bu­tion of £1,000 can cost a top-rate tax payer as lit­tle as £550.

Fourthly, see if you qual­ify for higher an­nu­ity in­come.

If you smoke, drink heav­ily or have health prob­lems, then you could qual­ify for an im­paired life or en­hanced an­nu­ity.

Th­ese can of­fer much more in­come than stan­dard an­nu­ities as pay-outs re­flect your re­duced life ex­pectancy.

An en­hanced an­nu­ity pays you a guar­an­teed in­come dur­ing re­tire­ment which is guar­an­teed for the rest of your life.

Even if you think any con­di­tion you have is rel­a­tively mi­nor, it is al­ways worth find­ing out whether you could qual­ify for this type of an­nu­ity as it could give a sub­stan­tial boost to your re­tire­ment in­come.

Fi­nally, com­bine your pen­sion pots.

If you have sev­eral with dif­fer­ent providers, it may be a good idea to com­bine them.

This will make it eas­ier to keep track of your over­all sav­ings and es­ti­mated in­come at re­tire­ment.

There can be ben­e­fits to con­sol­i­da­tion as many older-style pen­sions do not of­fer ac­cess to the new range of pen­sion free­doms.

It could also be a good idea to con­sol­i­date if one or more pen­sion pot has an in­ap­pro­pri­ate level of eq­uity ex­po­sure, or is lan­guish­ing in a poor­lyper­form­ing fund.

Other schemes, such as de­fined ben­e­fit or fi­nal salary pen­sions, can be trans­ferred but this will not be suit­able for ev­ery­one. Any de­ci­sion to trans­fer should not be taken lightly as you could lose valu­able and some­times guar­an­teed ben­e­fits.

It is im­por­tant peo­ple take time to un­der­stand the pros and cons of con­sol­i­da­tion and are clear on whether it’s right for them. This is where pro­fes­sional fi­nan­cial ad­vice will re­ally add value. Scot­tish fam­i­lies seem to be shy­ing away from dif­fi­cult con­ver­sa­tions, with more than half (51%) never dis­cussing in­her­i­tance mat­ters, ac­cord­ing to new re­search from Brewin Dol­phin.

The poll re­vealed more than a quar­ter (29%) of peo­ple in Scot­land have not dis­cussed the sub­ject with loved ones be­cause they’re not old, so it’s not seen as a pri­or­ity.

While one-third (32%) of peo­ple in Scot­land don’t feel com­fort­able talk­ing about their legacy with any­one, there are some life events that may prompt peo­ple to talk to loved ones about this im­por­tant sub­ject.

Brewin cites health scares (54%), get­ting older (52%) and near-death ex­pe­ri­ences (49%).

Liz Al­ley, head of fi­nan­cial plan­ning at Brewin, said: “Peo­ple gen­er­ally don’t like talk­ing about money or death. How­ever, our re­search shows that around one in 25 peo­ple in Scot­land would like to talk about it but haven’t found the right time and some peo­ple just don’t know where to start (6%).

“We want to en­cour­age fam­i­lies to sit down to­gether and talk about their wishes.”

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