A final salary pension determines your pension pot based on how much you earn in the last (or last few years) of employment and your length employment.

While many companies are no longer offering the generous final salary pension schemes due to longer life expectancies, falling stock markets and low inflation, there are a number of UK employees that have invested in final salary pensions for their retirement.

There are around 8,000 final salary pension schemes in the UK with a combined loss of £226bn in the last year owing to weaker investments. Aon consulting says the outlook for final salary pension schemes in 2009 is the bleakest ever.

Stock market falls and the economic downturn are making it more difficult for companies to contribute extra cash needed to fund final salary pensions, 64%of the biggest 200 final salary pension schemes, are now in deficit.

Companies carry the risk of any reduction in the value of the final salary pension pot in privately sponsored pension schemes and need to determine a long term financial solution to the combat the potential shortfall in final salary pensions.

The economic downturn combined with and final salary pension costs are hitting employers when they can least afford it.  But the general feeling is still and has long been, if you can find a final salary pension, grab it with both hands.

According to UK pension consulting company Aon, in the last year, millions of pounds have been wiped off the value of the UK pension pot as shares have fallen as the pension UK pension crisis deepens.

Aon estimate the value of employees UK pension defined contribution has dropped by nearly a third from £552bn to £395bn signaling a sharp decline in UK pension funds.

About four million people with a UK pension have “defined contribution” pensions provided by employers. Defined contribution pensions see employees and employers make contributions to a UK pension and funds are invested in shares and bonds, however the size of the final pension depends on market performance is not guaranteed.

While many workers with a UK pension are years away from retirement, those looking to retire in the next few years are likely to be concerned unless they are part of a UK pension final salary scheme which guarantees a pension based on end-of-career earnings and length of service

Helen Dowsey, Aon Consulting says “It may appear a double blow to workers that not only are they facing more of a struggle to make ends meet, but the economic turmoil is also seemingly eating into the money they have been putting aside for retirement,”

Anyone with a UK pension approaching retirement should speak to a professional when consider delaying their retirement or modifying their investments.

AWD Chase de Vere Wealth Management Ltd has been fined £1.12 million by The Financial Services Authority (FSA ) for pension mis-selling. The firm failed to provide pension transfers, pension annuities and income withdrawals for its customers resulting in pension mis-selling.The FSA found that the firm had been mis-selling pension transfers and pension annuities.

People with adequate pension provisions were recommended to purchase additional pension products, while other consumers were sold products that did not fulfill their pension requirements, recognising significant numbers of pension mis-selling.

On occasions the firm failed to disclose the risks and costs associated with recommended pension products. The FSA found that 28 % of transactions reviewed resulted in pension mis-selling as AWD were unable to show suitability of its advice to its customers

The firm estimates that up to 800 customers may have received unsuitable advice and been the victim of pension mis-selling between February 2006 and October 2007 AWD Group says customers were not provided with “complete and accurate information”.

AWD Group CEO Mike Kirsch regrets the pension mis-selling and has ensured that all affected customers would receive an apology and be compensated. “Our new management team has worked very closely with the FSA to correct matters,” he said. “We regard any lapse in our standards as unacceptable; however fewer than 1% of our clients have been affected.”

The FSA is preparing to report on the state of the pensions transfer market, and issue a blueprint of acceptable standards expected of firms in the industry to combat pension mis-selling within the financial services industry.

Traditionally, property investment has been a popular tool to fund retirement. People have long viewed property investment as safe, partly due to the ownership of something tangible, but people seek comfort in receiving regular rental income from a property investment.

According to Baring Asset Management more than two million people in the UK have reviewed their property investment and topped up their pensions in the last year. Decreasing house prices are to blame for the property investment slump, but of the current working age population, one third has no pension plan at all.

In 2007, over 13 million people were relying on property investment to fund part, or all of there retirement, but just one year later this figure has almost halved, with an estimated 7.5 million people in the UK now using property investment for their retirement planning.

Over 3 million people were reported to be relying on property investment as the sole funding of their retirement in 2007, but in 2008 this number has been slashed to under a third, with just 878,000 Britons planning to use property investment as their sole source of retirement funding.

Around 1.2 million people are now supplementing their pension plans. I addition to topping up their pensions more regularly people are searching for improved financial investments, in addition to existing property investment.

CIO at Barings, Marino Valensise says “It’s great to see that less people are relying on property investment to fund their retirement, but it’s still remarkable that so many people are failing to plan for their retirement at all,” says

Source: Baring Asset Management

Once you have taken a pension you should receive a pension service guideline. The pension service will provide details of your pension and information about how the scheme operates. Each year you should receive a pension service statement detailing your contributions and the expected growth of your pension fund. If you have not received a statement from your pension service, contact your pension provider, as part of their pension service they should send this to you.

If you have a private pension or one that is not linked to your salary you will receive a pension service statement. The pension service statement shows the pension income potential based on the value of your pension fund and takes into account the future payments of your plan, how the pension funds are likely to mature and if future inflation will affect your final pension balance. The pension service will forecast but not guarantee your future return on investments.

If you contribute to a salary-related pension scheme, the pension service provides your pension service statement based on a percentage of your salary at the time the review is completed. As providers in the pension service expect your salary to increase inline with inflation, at a minimum, your pension service statement will reflect your pension’s potential investment options and returns based on your salary.

Between your pension service updates, you can use many online pension service tools look at what may be changing in the pension market and your potential retirement fund, based on your pension savings. As a reminder, your pension is without doubt a very complex financial product and it’s one of the most important so getting a regular pension service update, coupled with professional, independent advice is crucial to make the most of your pension.

People joining a pension scheme on or after 6 April 2006 can receive their pension from age 55. Those who joined prior to 6 April 2006 are able to start receiving their pension from age 50. The normal pension age for most people is currently age 60

Under current rules, to receive early pension payment from a company or personal pension you need to be aged 50 – this is dependent on the rules of your pension scheme and from 2010 the age to receive an early pension in 55.

Other than factors of ill health or redundancy, if you draw an early pension before the normal pension age, the early pension will usually be reduced to account for the early pension payments.

If you have a serious illness resulting in a life expectancy of less than a year, you can take an early pension at any age. If you are single you can take your entire early pension as a tax-free lump sum. But if you have a civil partner or are married, half of your early pension will be retained by your scheme for provision to your partner.

Taking an early pension could lead to a pension shortfall and there are some things to consider if taking an early pension; you could buy additional years if you are in a final salary scheme, increase the pension contributions you pay into your company or personal plan – you can save unlimited funds in a number of pension schemes, use any savings or cash investments (ISA’s) to support your early pension and trace pension funds from previous employers from previous jobs.

It’s important to get advice on taking an early pension from a financial adviser.

When researching your investments, it helps to have a clear investments objective. You will naturally attach a financial priority and goal to your investments and this will also form part of the protection your investments need. Whether you choose a mainstream savings plan, or investments that are more complex, investments will vary from person to person.

Over the lifetime of your investments, you are likely to tailor your choice of investments and method of savings to find the most effective way to meet your financial targets and aid your investments. A wide range of factors should be taken into account when choosing and assessing your investments, but one that can not be ignored is risk.

Numerous investments scandals have meant investors are being convinced that some products with exceptional returns promised at seemingly little or no risk. Occasionally government investments can offer such investments guarantees, but in reality risk and reward go hand in hand in the commercial investments world. High investments return, means a higher level of investments risk.
 
As your investments income earnings are directly linked to your investments, assessing the level of risk you are comfortable to undertake is crucial. Investments carrying minimum risk will provide safe, but minimum returns. As some of your investments begin to mature, you may feel more comfortable in trialing a high risk product, In any case, testing high risk options, is much safer for your overall investments if you allocate a small budget to this, and not stake your total investments portfolio.

Financial planning is not as simple as starting a pension and letting it mature. If you have started a pension fund or commenced saving for retirement you should be reviewing your financial planning regularly. To ensure you are maintaining beneficial contribution levels for your retirement, and that your investments tie in with your longer term financial planning goals you should review your financial planning annually.

Obviously when determining your financial planning goals, the amount of money you allocate to your financial planning will be reflected in the projected returns. From a financial planning view point, the more wisely you invest the harder your money will work for you, and if you can maintain solid contribution levels, there is a greater opportunity for healthy returns from your financial planning.

Financial planning can be impacted by many factors and such factors should prompt a review and possible change of your financial planning goals. You should also review your financial planning if your financial circumstances change. If you change employers, become self-employed, or are made redundant you may be able review your financial planning and take advantage of these changes. Similarly, getting married or divorced may impact your financial planning.

It is also important to be aware of the external factors impacting financial planning, such as pension’s provider changes and changes made to pensions and benefits by the government. Often these changes can not be preempted but keeping up to date with your financial planning will benefit you in the longer term.

The Pension Protection Fund (PPF) was set up in April 2005 to protect employees if their employer goes out of business and its pension scheme can no longer afford to pay you your promised pension.

The Pension Protection Fund is an independent body and the taxpayer does contribute to the Pension Protection Fund. The Pension Protection Fund has more than one source of income and the staff at the Pension Protection Fund comes from a wide range of backgrounds in both private and public sectors. Contrary to popular belief the Pension Protection Fund is not a pension’s regulator.

The Pension Protection Fund does not seek to drive employers with weak or poor performing pension schemes into insolvency similarly, a major employer in financial trouble should not threaten the Pension Protection Fund own solvency. The Pension Protection Fund does not envisage extreme fluctuations in the levy estimate year-on-year, or intend to reduce compensation paid to scheme members. The Pension Protection Fund pays 100 per cent compensation to some scheme members depending on circumstances.

Source: Pension Protection Fund

Savings are a comfort to many people. Using a salary allocated savings plan can help with your financial security. Leading experts argue that people are driven to start their savings by just a few factors including; fear of not having enough in retirement, a credit crunch and home buyer savings.

The savings fear factor among people is on the increase according to Scottish Widows. In 2007, 34% of people were concerned about their lack of savings for retirement; compared with 37% in 2008.

Head of Pensions Market Development at Scottish Widows, Ian Naismith said: “While pensions savings are slowly starting to rise, there is still the real worry that in the current economic environment the nation is not doing enough savings to prepare for retirement.

While the savings message that we have been campaigning on for several years is getting through, with people scared that they will not have enough savings to live on in retirement, this hasn’t necessarily translated into pensions savings.”

A credit crunch sees many people make additional contributions to their savings. A reported economic downturn tends to lead to caution with spending resulting in more for savings. While economic upturn leads to increase spending and a decrease in savings.

David White, CEO of Children’s Mutual said: “I suggest that, actually, in times of negative press around financial things, people actually consider savings much more than they do when everything seems fantastic.”

Most people use the majority of their initial savings on buying their first home and see this as a future savings investment rather than a retirement investment. The theory being you own the home and your savings is the money you are not spending on rent.

Source: Scottish Widows Pensions Report 2008

John Jory, Deputy Chief Executive, B&CE Benefit Schemes  says “Just as holiday pay does not cover the cost of a holiday, the basic state pension will not cover more than a basic level of subsistence.”  Recent pension research undertaken by the employee benefits provider says that over 90% of people don’t understand what the basic state pension is or the value of the basic pension. Over half of those surveyed were unaware of their pension entitlement at pension age.

“Perhaps we need to step away from the term ’pension’ and re-name those funds ‘retirement pay’.” To encourage a more pension aware population it has been suggested that term ‘retirement pay’ should replace ‘pension’ in educational and marketing materials to emphasize the importance  of a pensions and saving for retirements through a pension.

 “We need to do more to educate people about the reality of the state pension and what this means in monetary terms.” Pension knowledge and pension understanding is lowest among young people and it is feared that the lack of pension education at levels young people understand is a contributing factor to the ignorance of pension saving

“People should not expect to continue the standard of living they have enjoyed throughout their working life at retirement unless they have saved in a pension.” People need to start pension saving now if they expect to maintain their lifestyle throughout retirement. Too many people are relying on state pensions, or chancing future success to cover their retirement years. The right pension funds and pension savings are important tools in ensuring a comfortable and enjoyable retirement.

Source:  IFA Online

A pension mortgage is a type of investment mortgage. You pay interest of the loan each month but the actual pension mortgage amount remains the same. The pension mortgage is then repaid from the tax-free lump sum that a pension provides on retirement.

The main advantage of a pension mortgage is tax efficiency. Under the current legislation you do receive tax relief on your pension contributions at your highest marginal tax rate. However, a pension mortgage is not flexible and there are a few things you need to consider:

You can not draw on your pension fund until you turn 50, so you unable to repay your mortgage before then. You will need a contingency plan if you become unemployed, or unable to pay your pension mortgage.

A pension mortgage tends to be expensive, and costs more than a repayment mortgage because currently only one-quarter of your pension fund can be taken a cash lump sum at retirement age. Three quarters of the cash lump sum must be used to purchase an annuity and the pension mortgage can be paid off only from the cash lump sum.

Pensions are intended to provide you with an income during retirement and using a portion of your pension lump sum to pay your pension mortgage reduces the amount available to you later. Pension mortgages can only be linked to a personal pension policy.
 
Remember a pension mortgage is still an investment so it is important to find a pension provider with sound investment performance. With many companies competing to provide pension mortgages you need to do your research to avoid paying too much, and to ensure the tax free lump sum ill cover the pension mortgage repayment.

A pension mortgage can be complex and before making a decision on which mortgage is right for you it is essential to seek professional advice.

Life insurance offers many people comfort. Knowing your loved ones have life insurance and will be cared for provides security and peace of mind. Sometimes known as life or term assurance, life insurance can be a tough topic to approach as illness and death are never easy subjects, but our families and loved ones can benefit from the support of life insurance once we have gone.

The sudden loss of a loved one is upsetting but the worry of financial burden can be alleviated with life insurance. Life insurance will help your family and beneficiaries after you die and allow them to make an easy transition back to normal life. Reasons for taking life insurance vary, depending on the individual and their circumstances;

• Mortgage – a life insurance policy can be used to cover your mortgage payments
• Salary – life insurance can provide an income for your family, replacing your salary
• Business – life insurance can provide financial funding for a business you leave behind
• Education – Life insurance could cover educations fees

Life insurance can be available on a single or joint life basis with benefits many benefits and pay out options. Generally there are some things to be aware of; if a policy expires and the policy holder is still alive no pay out will be made, if at any stage (without agreement) the policyholder does not pay a premium, the policy will be redundant.

There are several life insurance options, but the most common are ‘term insurance’ and ‘investment insurance’:

Term insurance pays out an agreed sum if you die within a chosen period of years. If you out live the policy it does not pay out the agreed sum. Term insurance is the most inexpensive way to purchase the cover you need. There are many variations of term insurance. 

Investment insurance provides cover for as long as you’re alive. As the policy eventually pays out, it compounds your premiums at an investment value that is cashed in by yielding the investment insurance policy. However, it takes many years for the yield value to build up and, in general; investment insurance policies can be expensive as a means of protection.

Before purchasing life insurance, it is important to understand how life insurance companies operate and how your personal circumstances determine the cost of your life insurance.

An annuity is a financial offering that turns your pension fund capital into an income during retirement, annuity rates determine the amount you will be paid. Purchasing an annuity should be based on annuity rates, in return for payments over the remainder of your life, or for a defined period of time. The level of income you receive from your annuity is usually quoted as an annual percentage return (annuity rate) on the sum you have.

Once your pension fund matures, you can buy your annuity and other pension products from the same or a different pension provider. It is not compulsory to purchase your pension annuity from the provider you used for your pension fund, although it is wise to compare their annuity rates.

Irrespective of how well your pension fund performed prior to maturity, annuity rates may not be competitive upon reaching retirement. Annuity rates can vary between annuity providers providing conventional annuities can vary in annuity rates by up to 25%, its important to shop around for the best annuity rates you can find.

Generally, annuity rates are payable monthly in arrears and show the gross income (before deduction of tax). Annuity rates pay the same income per month for the whole of the annuitants life. The annuity rates available to you may vary if:

• You opt for a an index-linked annuity that will keep annuity rates up with inflation
• You choose joint life annuity that provides your partner with an income after your death
• You are eligible for a partial life annuity if you are in poor health or you are a smoker

To maximise your income in retirement shop around to find the best annuity rates available to you. Remember, making the right decision about your annuity rates has the potential to increase your retirement income by up to 25%.

Today’s retirement planning is different to that of our parents. The current life expectancies rate are high and most people remain active and healthy for many of years their retirement – making retirement planning more important than ever before. But still, it seems people spend more time holiday planning than retirement planning!

There is so much retirement planning to be done to ensure that your lifestyle choices are maintained and you can enjoy your retirement. Views on retirement and retirement planning have been transformed in recent years. Retirement planning used to signify a persons inability to work as productively as their younger peers, but today we view retirement planning as a new beginning, a renewal stage, that we should aim to move through comfortably.

When undertaking your retirement planning, you should tackle this in the same way as any job or lifestyle change. Retirement planning allows you to evaluate your finances and analyse your lifestyle to help you prevent any financial concerns that may arise. Retirement planning should not be seen as a hindrance in the present, but as helping you to achieve happiness in retirement.

For some people retirement planning is very simple, they have a clear indication of what retirement means to them and have been retirement planning and working towards this for some time. Yet other people can not see beyond their day to day working life, but retirement planning is imperative to ensure they are not left short when they reach retirement.

Retirement planning could help you retire sooner, many workers would like to retire early, but with the current pension crisis and financial market instability they are unable to. Retirement planning allows you to gain insight into your readiness to retire. The transition into retirement is made easier through retirement planning as you are able to discuss the issues and concerns and plan for the life you really want.

It’s possible to free yourself from pension providers and investors and take control of your own pension planning through a SIPP. A SIPP is a self invested personal pension, using a SIPP allows you to manage your investment options.

Do your research and a SIPP could have you saving costs associated with a personal pension and allow you to invest these savings in your SIPP. A SIPP allows you to tailor your SIPP to your needs and select investments yourself. Effectively, by using a SIPP you are creating your own ISA and like an ISA there is no Capital Gains Tax to pay on profits from a SIPP.

A SIPP is subject to the same basic rules as a personal pension. The limit on SIPP contributions, the 25% restriction on a SIPP tax-free lump sum at retirement and restrictions on taking your SIPP funds at retirement remain the same for SIPP users as for personal pension users. A SIPP allows you’re the freedom to make your own decisions about SIPP options and the ability to purchase your own annuity upon retirement.

Traditionally a SIPP was only an option for those with large pension funds as a SIPP had very high, flat-fee charges and few people could afford them. The launch of the online SIPP, with much lower charges and more SIPP options a SIPP is now more accessible for so many more people. It’s estimated up to 200,000 people are currently using a SIPP for their retirement planning.

If you start a SIPP you will be controlling your own pension finance and should have investing experience. Low charges and flexibility in a SIPP allow for current and future needs and are attractive elements of a SIPP. There is also added benefit to selling shares outside an ISA you can release capital gains and buy them back within a SIPP and gain tax relief.

A good independent financial adviser can make your money work harder for you. There are different three types of independent financial adviser; tied, multi-tied and independent financial advisers.

In any case you are likely to receive the most suitable advice from an independent financial adviser who reviews the entire market-place rather than a tied or multi-tied adviser who reviews only segments.

Choosing the right independent financial adviser is very important. Acting on advice from your independent financial adviser will make help you reach your financial goals. There are a lot of financial circumstances to think about and an independent financial adviser can help you understand your financial position, prioritise your needs and recommend the financial products to help you.

An independent financial adviser gets paid for the work they do. Your independent financial adviser will offer services in exchange for fees or commission and sometimes both. Fees mean you pay a fixed up front amount to the independent financial adviser and depending on the level of advice, sometimes this is an hourly rate. Commission means the provider of any products you purchase pay commission to the independent financial adviser, and this is cost is deducted from the value of your product.

Throughout our lives, our finances change dramatically, what is important today may be imperative tomorrow and an independent financial adviser can make the necessary modifications to your product portfolio.

Always ensure your independent financial adviser knows enough about your circumstances and has considered all suitable alternatives. An independent financial adviser should give you reasoning for their recommendations and this should be clear to you. An independent financial adviser will be prepared to make sure that you fully understand what you are being told.

A pension release allows you to take the benefits from your pension fund prior to retirement and receive the maximum tax free cash or income. A pension release is also known as ‘unlocking’ a pension.

Some people opt for a pension release long before retirement because they need some money now, or you may be assessing alternative retirement options to that of a pension scheme.

Choosing a pension release allows access to your pension funds early and reduces the amount available to you in retirement. A pension release is suitable only for a limited number of people and is entirely dependant on your circumstances.

You can take a pension release as a cash sum of up to 25% in your first year and the majority of this is tax free. Funds remaining in a pension fund after a pension release can be taken immediately or left to a later date and where they will be taxed as earned income.

If you are in a UK pension scheme and are over you may be eligible to receive a tax free cash sum and/or income via a pension release. You may be eligible for a pension release if you are:

• Over 50 years old
• Have a UK pension
• Are not taking government benefits yet
• Not still contributing to the pension scheme

If you are 50 plus and have a pension fund that you are not receiving you can take a pension release, even if your pension was designed to mature at 60 or 65 years of age. However; carefully consider your pension release options because in April 2010 the minimum age you can complete a pension release from any pension scheme is increasing from 50 to 55 years of age.

Pension advice should be fairly straightforward because in the simplest form a pension is really just a savings plan. But still most people seeking pension advice do not think pensions are easy to understand. Some experts believe that teaching young people how to manage their own finances will allow them to better understand the pension advice they receive. Mark Dampier, Head of Research at Hargreaves Landsdowne says “Until the government makes personal finance education at school you will continue to have problems because there is a huge mis-match between what people understand and what pension advice is expected from advisors. The FSA is trying to put consumers in charge of pension advice, but is not equipping them for the job”.

The Department of Work and Pensions have tried to raise the financial awareness of researched pension advice among young working people. The Pensions Education Fund was introduced by the DWP to assist them with pension advice and making good plans for their retirement.

The fund was intended to develop innovative ways to engage with working people about pension advice and retirement planning - giving them the information they need and the pension advice to help them to make their own decisions about their retirement.

To date, results are not available on the success of the pensions education fund – but as pension advice funding was only available up until March 2008 it remains to be seen as to what will happen next in the young people’s quest for education on their own pension advice.

A pension scheme is a financial plan to provide people with an income, or pension, during retirement, or when they are not earning a consistent income from employment. Pension schemes may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions. Such plans for retirement are commonly referred to as pension schemes in the UK and Ireland and superannuation in Australia.

People need to plan for their retirement and a joining pension scheme is one way of doing this. People are living longer and healthier lives, so it’s important to think about saving for your pension scheme and how long to continue working in order to contribute to your pension scheme.

A pension scheme can be confusing with many not knowing where to start, and its easier for those with more disposable income. A pension scheme is one of the most effective ways to save as you can receive tax relief on money contributed to a pension scheme.

You need to understand the basics about pension schemes, including:
• your State pension scheme provision available on retirement
• financial contribution options available in your pension scheme
• resources available to help you select a beneficial pension scheme
• steps you can take to maximize your pension scheme return

With some careful planning and some pension comparison, you can choose the pension scheme that’s right for you. Small changes in your day to day money spending can make a big difference to your pension scheme contributions - without blowing your monthly budget.

There are over £1 billion in unallocated state women’s pension benefits for up to half a million women who took time off work to raise their children. As The Times reports after an investigation, the UK government has admitted there are flaws in the state pension system and thousands of women’s pension funds have not been allocated correctly. 

The Pensions Reform Minister  has said the national insurance records of women’s pension funds for women of or over pension age that are not entitled to a state pension will be reviewed. Mike O’Brien says “We are going to review the national insurance records of vast numbers of women approaching or over pensionable age who are not entitled to the full basic state pension” 

There are thought to be two women’s pension groups of  affected that are missing out on pension payouts. Those women who stopped working and received a benefit to raise their children should have the minimum number of years to the women’s pension national insurance contributions reduced to allow for a full state pension. In addition the government is set to write to more than 73,000 women that may be entitled to £1,400 in unpaid women’s pension funds; in 2004 a scheme began allowing women with gaps in their national insurance contribution between April 1996 and April 2002 to ‘buy back’ the missing years of women’s pension contributions at a special rate – these women were never notified at the time.

Mike Warburton, senior tax partner at Grant Thorton said “This is nearest thing that many pensioners will get to free money because the entitlement to backdated pension is greater that the [women’s pension] money they have to pay to that back” 

Source: The Times, 5^th May 2008

When considering a pension scheme options its worthwhile doing a pension comparison. A pension comparison will allow you to gather pension and investment information and compare pensions available. Completing a pension comparison will help you determine which pension scheme is the best for you.  

With an increasing range of pension schemes and alternative investment opportunities a pension comparison will help you get a good overview, but completing a pension comparison you should consider a number of factors; 

• How much can you afford to contribute each month
• The age you plan to retirement
• How long you will be able to contribute to a pension scheme
• Benefits and charges of each pension scheme

According to the Pensions Advisory Service, the number of complaints about pension mis-selling or bad administration has increased dramatically, some of which could have been avoided if individuals had opted for a pension comparison.  

The service which reconciles pension disputes has handled over 6,800 complaints about pensions in the last year which is a 15% increase on the previous year. Remember a pension comparison can save you a lot of time and money. 

In addition to your own pension comparison research, it may be worth getting a expert pension advice from and independent financial advisor, who will help you achieve the best return on you pension scheme.

An increasing number of people are looking at pension transfers. Reasons for pension transfers may vary; some people want improved fund performance with lower charges and others are comparing options post redundancy. 

Pension transfers involve forgoing the benefits of your existing salary related pension in return for a cash equivalent transfer value that must be re-invested in another salary related employer pension, stakeholder pension or used to purchase a buy-out contract. 

Salary-related pension transfers entitle you to a transfer the value of your pension to a new pension scheme. In most circumstances you can not take cash option for the value. 

Stakeholder pensions are a low cost, flexible option for people who are not in an established pension scheme because you contribute what you can afford, when you can. 

A buy-out contract is a personalised insurance policy providing pension benefits in the future. Pension benefit entitlements will depend on the performance of the investments in the policy. 

There are some important things to consider with pension transfers:

• Take some expert advice on your pension
• Evaluate your retirement options
• Examine the benefits of your current pension scheme
• Compare your current pension benefits with the new pension scheme
• Not all employer pension schemes or buy-out contracts accept pension transfers, check first

PensionComparison.com do not regulate advice about pension transfers, so please seek professional advice if you are assessing pension transfers.

A self invested pension, also known as a self invested personal pension scheme (SIPP) allows you to save for your pension in a tax efficient and flexible way. With a self invested pension you can choose when you take options on your pension, where to invest pension funds and how you invest the funds for your pension.  

Self invested pensions have been in place since the late 1980’s, but in April 2006 there was a marked increase in the number of investment options available, making self invested pensions an attractive alternative for many UK personal pension plan holders.  With a self invested pension you are now able to invest in:

• cash deposits
• equities - stocks and shares
• open ended investment companies  and unit trust
• investment trusts
• managed funds
• commercial land
• commercial property
• residential property
• gifts and other fixed interest securities
• luxury investments – in some cases fine wine, art and vintage cars

Along with improved investment options, the upper limit an individual can invest in a self invested pension has increased to 100% of their income up to a maximum of £215,000.  

A self invested pension scheme allows UK tax residents to have both an employer provided pension and a self invested pension. A self invested pension offers the same tax advantages as a personal pension plan. 

All contributions made to a self invested pension receive 22% - 40% tax relief depending on current tax rates and your personal tax band. The maximum contribution to a self invested pension on which tax relief can be claimed is your annual earnings or £215,000 - whichever is lower. 

Upon retirement, a self invested pension provides you with similar options to existing pension schemes in that you can opt for a 25% tax free lump sum, purchase an annuity or choose to reinvest.

A pension annuity is an income for life. Taken from the word annual, a pension annuity offers you an annual payment during your retirement and is provided by an insurance company in exchange for a pension fund or lump sum. Once you have reached 50 years of age, (the minimum age increases to 55 years of age in 2010) you can use your pension fund to buy a pension annuity and this pension annuity will pay you a regular income during your retirement 

Your pension annuity income will depend on the size of your pension fund and pension annuity rates at the time you take your pension. You may have to pay tax on your pension annuity income. The basic rule of thumb is the bigger your pension fund balance, the bigger the pension annuity income and therefore the higher your pension annuity payments. 

Before buying a pension annuity it is possible to take 25% of your pension fund as a tax free lump sum on retirement. You do not have to buy your pension annuity from the same provider as your pension fund, there are many alternatives and the difference between pension annuity payouts can differ substantially so it is worth shopping around. 

Before comparing a pension annuity you should have an idea on how you wish to receive payments. You may want pension annuity income to remain at the same level for life, increase each year, or fluctuate with inflation.  When choosing a pension annuity you must decide whether it should pay an income to your spouse or partner after your death and what percentage. Choosing a joint pension annuity will reduce the pension annuity income you receive because the annuity will need to be paid for longer.

There are many sources of pension advice in the UK. Numerous government regulated bodies have been established to ensure that pension seekers can easily find up to date and relevant pension advice for the UK market – the intention of these bodies is to provide you with accurate information and UK pension advice. 

You will find further UK pension advice, explanations of pension terms and jargon online at the Pension Advisory Service and the Pensions Service which is part of the Department for Work and Pensions. 

The Pension Advisory Service is an independent non-profit organisation that provides free information, pension advice for UK and guidance on the whole spectrum of pensions covering State, company, personal and stakeholder schemes. 

The Department for Work and Pensions is responsible for a range of benefits and services for pensioners and pension advice for people planning pensions in the UK. It is their aim to promote opportunity and independence for all through modern, customer-focused services. They help people achieve their potential through employment, so that they are able to provide for their children and to work and save for secure retirement. 

The Pension Service is a government website provides pension advice and pensioner benefits, for those planning for the future, about to retire or already retired that are based in the UK. 

Along with government organisations, you will find a broad range of pension advice for the UK by looking at various options offered by pension providers.

Stakeholder pensions are a private pension that you start yourself- it’s not a State pension that is provided by the government. The idea behind stakeholder pensions is to allow people to start saving for their own pension, without relying on an employer. You can buy stakeholder pensions from most commercial financial services companies, such as banks, insurance companies or building societies. 

Stakeholder pensions, allow you to make regular and relatively small contributions, but you can also make lump-sum contributions to stakeholder pensions if this is a better option for you, and you will benefit from tax relief on the contributions that you do make to stakeholder pensions. An employer can also make contributions to stakeholder pensions.

Your contribution to stakeholder pensions is then invested to create your own pension fund. Stakeholder pensions will usually offer a range of different investment options which will have differing degrees of investment risk and potential investment growth. There is no guaranteed balance for stakeholder pensions upon reaching retirement as there are many variables that need to be considered with stakeholder pensions, including; which type of investment fund you have chosen, how that investment fund has performed, how much has been contributed and the level of charges on stakeholder pensions.

Stakeholder pensions are regarded as low-charge pensions. Any stakeholder pensions you are looking to invest in must meet the minimum government standards about charges, flexibility and the regular information you must receive about stakeholder pensions. Such standards are in place to ensure that all stakeholder pensions provide good value for those taking out stakeholder pensions.

“Britons aged in the 20s and 30s find it very difficult to make savings for retirement a priority when it comes to arranging their finances. For many people more immediate financial matters, such as going on holiday or buying a new car take precedence over adding to a pension vehicle. “Most people, unfortunately, don’t see a pension as something serious until they’re at least into their forties and then it becomes very difficult.”  

Source: Des Hamilton, Technical Director of the Pension Advisory Service

Browns new tax rules have received much criticism, in recent months, over their inconsistency. Seriously wealthy individuals are able to reduce their tax bill to a tiny fraction of that paid by most people as opportunities to legitimately reduce your tax bill on the PAYE system is quite limited.

Children’s savings plans allows you to invest through shares in investment trusts, in worlds stock markets on behalf of and child and with simple trust options the child is the beneficial owner of the investments, giving you potential tax advantages whilst still retaining control over the plan. In many cases investments can be made from £30 a month or a £250 lump sum and should be regarded as a long term investment. There is no maximum investment limit.

The Financial Services Authority (FSA) would like to create three categories for Independent Financial Advisors (IFAs); primary, general and professional. Each level of advisor will have a clearly defined role and this will enable consumers to set their own expectations and know how much the advice and services of each will cost. 

Source: Financial Services Authority (FSA)

According to the National Audit Office in 2006/2007 95% of people paid the correct amount of tax. Pensioners and those with complex tax affairs were the most widely affected. The average underpayment per person was £250 while over half a million people paid an average of £290 much. 

Source: Moneywise Magazine

“I am proud of what the Government has achieved for pensioners. We said our first priority would be tackling pensioner poverty. There is more to do, but since 1997 two million pensioners have been lifted out of poverty” – former UK Prime Minister, Tony Blair. 

Source: Pensions White Paper

The Finance Bill 2008 will include provisions to implement inheritance tax on scheme pensions and annuities.  The provisions in Finance Bill 2008 will give IHT protection to pension savings which have had UK tax relief and also to all savings in certain overseas pension schemes. The IHT protection will apply to funds in overseas pension schemes that are tax-recognised and regulated in the country in which they are established. Or, if there is no system for tax recognition or regulation in that country, then the funds must be used to provide a pension income for life.  

Source: HM Revenue & Customs

The Finance Bill 2008 will see tax-relieved pension savings diverted into inheritance using scheme pensions and lifetime annuities are subject to unauthorised payment tax charges and, where appropriate, inheritance tax; and restore inheritance tax protection to savings in overseas pension schemes. 

Source: HM Revenue & Customs

Pension scheme providers, pension scheme administrators, members of pension schemes, insurance companies and financial advisers will all be impacted by the Finance Bill 2008 - Pensions Savings & Inheritance Tax. 

Source: HM Revenue & Customs

When the global stock market value dropped by more than $5 trillion in January 2008, available pension assets started shrinking quickly – and they will continue to decrease as long as equity returns carry on plummeting. 

Source:  Seattle Times -  15 March, 2008

The government offers a dedicated pensions service for existing and future pensioners and provides state financial support to over 11 million pensioners. This pension service is delivered at a national and local level and in partnership with other organisations. It also helps people to plan and provide for retirement.

Source: Department for Work and Pensions (DWP)

Understanding the pension problem is simple. Basically, there isn’t enough in the government pension stash to pay everyone (primarily due to increase in life expectancy rates). What doesn’t help is the general lack of financial education by those that have worked their entire lives and are expecting to be looked after in retirement.

By investing in a pension you are entitled to a tax break. The amount of tax relief you receive depends on the rate of income tax you pay. By contributing a portion of your income to your pension before tax, you are in effect reducing your taxable income.

Your pension entitlement is directly linked to your National Insurance (NI) contributions. To be entitled to the full state pension you need to have contributed to NI:  

Male: 44 years                          Female: 39 years

The full weekly rates provided by the state pension are:

Single pensioner £87.30            Pensioner couple £139.60 

Source: Department for Work and Pensions (DWP)

The Conservatives claim that more that 1 million more people will be facing retirement without a pension than when Labour came into power. It is estimated that the number of workers to be affected rose from 10.5 million in 1997 to 11.5 million in 2006. The Conservatives analysed figures from the Office of National Statistics’ Annual Survey of Hours and Earnings which shows that in 1997 there were 10,442,000 workers with no pension provision from employers and by 2006, that figure had risen to a staggering 11,534,000.

Many new personal and stakeholder pension plans these days are designed to move your investments automatically from stocks and shares into more stable investments such as cash and bonds, in the years leading up to your retirement date.
Malcolm McLean - Pensions Advisory Service.

When the government launched the Stakeholder Pension in 2001, it was intended to help people provide for their own retirement. Stakeholder pensions were designed to aid those earning £10,000 - £20,000, if you were in a company pension scheme you could only opt for a stakeholder pension if you earned less than £30,000 and were not a company director.

The government is the biggest contributor to our pensions. But thanks to people living longer the proportion of funds available is diminishing. The Pensions Commission suggests the number of people over 65 will rise by 78% between now and the year 2050.

The government says over 4.5million people are not saving enough for their retirement.

“Unless we act now … we will bequeath a nightmare both for future pensioners, plunged into poverty, and for future taxpayers, grappling with the consequences” Peter Hain

“Over the next 50 years the number of people over pension age will increase by more than a half - meaning there will be only two people working for every one person in retirement, compared with four people working today.”

Peter Hain told MPs during a Pensions Bill Debate, 7 January 2008

Due to be launched in 2012, the governments Personal Accounts pension scheme will place a limit of £3,600 on annual contributions. Within the new system, workers will automatically be enrolled and will contribute 4% of their salary, with an additional 4% matched by employers 3% and tax relief 1% to a personal pension scheme.

It has been suggested that a way of solving the UK’s pension crisis is to force people to save a proportion of their income for later life. Provided employers contribute as well, people seem to be in favour this option. The less attractive alternative could see the government increase the starting age for the state pension from 65 to 67 or even 70 years of age.

In 1980 the Conservative party abolished the direct link between state pensions and earnings. As a result, the value of the basic state pension compared to average earnings is falling and the Labour party has ruled out restoring it. The question now is whether those people who rely on the state pension are condemned to live in poverty?

Over the next thirty to forty years the proportion of the population over the 65 years of age will increase from 16% to 25%.  As more people depend on their pensions there will be a greater demand on government resources and taxpayers money – to fund the ever aging population.

On average about half a pensioner’s income is currently provided from their state pension and other government benefits. The government is aiming to see a larger proportion of retirement income from, savings, investments and private pensions. However, young people are saving far too little to make this a reality to date.

New pension age parameters have been set for the entitlement of state pensions.

 Source: Department for Work and Pensions

Released in May 2006, the Pensions White Paper ‘Security in Retirement: towards a new pensions system’ looked at improving the current pension situation by:

1. Encouraging and enabling private pension saving
2. Strengthening existing pension provisions
3. Providing a foundation for private saving
4. Extending work life in an ageing society
5. Consultation arrangements for pensions

Welcome to the Pension Comparison News section. Here you can read the latest pension news and get up-to-date hints for your pension comparison.