Pension seminars

Martin Lewis of Money Saving Expert fame has described 2020 as a ‘savings horribillis’ and it is hard to argue! A major high street bank has cut its main savings rate by 0.5% with cash savings rates at record lows.  Most people’s average savings earnings are now around 0.4%!

Often people are unwilling to invest cash savings yet are happy to invest in pension. This is despite many of the underlying assets and risks can be similar. There seems to be an acceptance that pension ‘has’ to be invested but savings don’t?

There still remains a great deal of confusion with investors in regard to pensions and what options are available with their pension, on retirement, in regard to income and lump sum. The danger of pension freedoms is that many people are considering cashing in pensions, paying large amounts of tax and then putting that money in a bank when savings rates are at record lows!

For this reason Approachable Finance will be running some free, no obligation Retirement Seminars at our offices at 6.30pm on Tuesday 31st March and Thursday 23rd April. This is a perfect opportunity for anyone to come along in a group environment and get some information on retirement and savings planning. We look forward to seeing you and if it is of interest please RSVP as places are limited.

Flexiable access to your pension

A common enquiry over the last few years is a request for us to ‘sign a form’ to cash in or transfer a pension in its entirety into a bank account.

Often, we are contacted by people who simply do not understand that there are often better ways of taking pension. Whether it be using ‘guarantees’ associated with their pension that they were not aware or exploring options such as buying an annuity or flexible drawdown.

Whilst it may appear like the easy option of cashing in your pension, you have to consider that a full encashment will often mean a large ‘emergency tax’ bill of at least 20% of the fund value (after tax free cash).  Often the cashed in pension will sit in a bank account earning little or no interest. Not to mention the ‘opportunity cost’ of reducing the figure that gains interest by 20% paid out in tax.

If your pension is in a ‘pot’ which is invested on the stock market, it usually means it can be switched into a ‘Flexible Access’ or ‘Drawdown Pension’.  This means that the pension becomes flexible, meaning it can provide an income, or lump sum, or both. It is also accessible for the term of the pension and doesn’t tie money up like an annuity.

It is always recommended that at the point of retirement, it is worth speaking to a good independent financial advisor about your options.

New Year New Protection

A new year often means that you are setting yourself goals to achieve in the coming year and in financial planning it is important that your family is looked after if anything should happen to you. If you are in a couple and have kids, the focus should be on whether both incomes would still be required if either party was to pass away or become seriously ill?

All ‘protection planning’ should be bespoke to an individual’s circumstances. The three main covers are life and/or critical illness that tend to pay a tax-free lump sum and income protection that pays out an income if you cannot work due to accident or illness.  A general rule of thumb is to take out life and/or critical illness cover for any mortgages you may have, to make sure your house is paid for. However often this is insufficient in itself as it does not take into account how the running costs are to be met by continuing to live there.

It is also important to make sure any pensions have a completed ‘Nomination of Beneficiaries Form’ so that benefits are paid to the correct person on death. As a general rule all of the above should be covered off within a Will.

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We are specialists in providing independent financial and insurance advice for Medical Professionals and Practices across the UK.

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