- where an employer makes contributions on the minimum band of earnings required by the Pensions Act 2008, an 8 per cent contribution for an average earner (approx £25,100) would be approximately £1,600 per annum
- alternatively, an employer might choose to make contributions on a broader band of earnings, for example by basing them on the first pound of pay. In this case an 8 per cent contribution for an average earner (approx £25,100) would be approximately £2,000 per annum
New National Employment Savings Trust
Annuity rules change in April so people over the age of 50 need to act now
The current UK Pension Regulations change in April 2010 and the age that you can take annuity benefits will increase to age 55 from the current age 50. It is therefore very important for all those pension savers under age 55 to act quickly to unlock billions of pounds of tax-free cash from their retirement pots – or wait years before they get another chance.
The amount of tax free cash that can be taken from a pension fund before an annuity has to be purchased is 25% of the fund value. This money can come in very handy to pay off a mortgage, or provide university fees for your children.
It is usually a good idea to speak with a pension annuity specialist to get independent financial advice. They will search the open market to find you the best annuity rates. Your existing pension provider does not necessarily provide the best rates and you can shop around to get better annuity quotes.
If you do not have your own adviser you can call annuity specialist Retirement Solutions on 0800 043 6701
Annuity Rates
Life expectancy has increased considerably over this century therefore once you reach retirement in is important to get the best annuity rates from your pension pot, this is because the income from your annuity will probably have to last you on average over 10 years.
The majority of annuities in the UK are provided by the big Insurance Companies such as Prudential, Aviva, Standard Life, AXA and Legal and General to name a few. They all have different annuity rates for different ages, sex and postcode. Because of this it is very important to shop around a few months before you retire. There was a recent article that was published in America that stated that the British spend more time on Christmas shopping than they do on shopping for the best annuity rates.
Shopping around for your annuity is not that difficult and generally perhaps the best way is to consult the advice of an indpendent financial adviser, he or she will then research the whole of the market including some of the annuity providers you probably have not heard of. If you can it is perhaps also better to find a firm of independent financial advisers that specialise in annuities. There are many such firms an just typing “annuity rates” into Google should bring up a reasonable list of specialist firms.
It is also important to ensure that you check to see if you may qualify for enhanced annuities as these can give a significant increase to your annuity income.
Annuity Supermarket recommends a specialist annuity independent adviser Retirement Solutions and you can reach them on 0800 043 6701
Annuity Quotes
If you are retiring soon and you have recieved your wake up pack from your pension provider telling you what benefits the pension will provide for you, I guess you now need to find some annuity quotes from the open market.
Yes! you can buy your annuity from your current pension provider but you will probably find that if you go to the open market and look for the best annuity rates that you will get a much better rate. It can be a quite daunting experience going to every annuity provider and asking them for annuity quotes. Perhaps the best suggestion is to go and visit an annuity supermarket and ask them to provide annuity quotes.
Annuity Supermarkets will generally be whole of market, however, some only use a panel of annuity providers, this is because they will get enhanced commission rates by selecting a small panel. Make sure you choose an independent whole of market annuity intermediary to provide your annuity quotes.
Also make sure that the intermediary you choose asks questions about your lifestyle and health, this is because in many instances you can qualify for enhanced annuities. Generally enhanced annuities will pay around 20 to 40% more income, this is because you are likely to have life expectancy that is lower than the average.
If you want to get annuity quotes from a specialist independent whole of market annuity intermediary then go to annuitysupermarket.com or call 0800 043 07125.
SIPP allowable investments
Since the legislative changes to pensions at A-day, there are now many more opportunities open to today’s investor. One of the features of the new regime is that very little is banned. The approach taken by the legislation is to impose tax consequences on some transactions and leave the choice of the investment to the investor.
The rules are generally more flexible and accommodating than they used to be, the new regime offers several new opportunities to invest in a wide range of assets and exciting investment opportunities.
If HM Revenue & Customs allow it, so do we.
Annuity Supermarket will strive to get you the best annuity rates from the Open Market.
It is our policy not to impose Company rules on top of Revenue rules. As a result we can proudly claim ‘No other SIPP advisers allows more’.
Examples of some of the investments members have taken out can be found here:
Investments
Commercial Property
Land
Deposit Accounts
Cash
Stock Exchange listed companies (listed on a HMRC or FSA recognised stock exchange)
AIM and OFEX Companies
Unit Trusts and OEICS (listed on a HMRC or FSA recognised stock exchange)
Government Securities
Fixed Interest Securities
Quoted Debentures and loan stocks
Shares in unquoted private companies
Offshore funds
Real Estate Investment Trusts (REITS)
Offshore funds
Hedge Funds
Insurance Company managed funds and unit linked funds
Second Hand Endowment Policies
Companies on an overseas exchange recognised by H M Revenue & Customs
Traded futures and options (relating to stocks and shares on a recognised exchange)
Contracts for Differences (CFD)
Notes
The member is responsible in conjunction with their Financial Adviser for choosing investments that are suitable for their individual circumstances.
If any transaction is to be carried out between the Registered Pension Scheme and the policyholder or any person connected with the policyholder, the transaction must take place at market value.
The minimum retirement age is increasing to 55
On 6 April 2010 the minimum age at which pension scheme members will be able to access their pension benefits will jump from 50 to 55.
Enhanced Annuities – Do You Qualify?
Mr Rogers has reached normal retirement age and is a member of his employer’s group pension scheme.
We were asked to provide quotations for an annuity bought under the Open Market Option. We quickly identified that Mr Rogers had medical conditions that might enable him to qualify for Enhanced Annuities (he had diabetes and bronchitis).
We initially obtained a standard rate illustration but after establishing further facts concerning his medical background, we were able to secure an uplift to his pension of 22% above the standard rates, by negotiating with several specialist annuity rate providers.
Based on standard rates, Mr Rogers pension fund (£30,800) would purchase an annual income of £2,323. Based on enhanced rates for impaired health, Mr Rogers fund eventually secured an income of £2,830, which equates to an additional £507 per annum.
Examples of some of the conditions that may qualify
- cancer
- heart conditions
- diabetes
- asthma
- obesity
- high blood pressure
- organ transplants
- stroke
- liver disease
- alzheimer’s
- chronic lung disease
- kidney disease
- multiple sclerosis
- Parkinson’s Disease
- or a disease of the central nervous system.
For advice on annuities call 0800 043 0725
Group SIPP – Investing in Commercial Property
A Group Sipp can be used to hold a wide range of investments from shares, gilts, unit trusts, investment trusts, insurance company funds and commercial property (but not private property). A SIPP can be used for income drawdown.
This is particularly useful for owners of small businesses, who can buy premises through their pension funds. There are attractive tax advantages in using the fund to buy commercial property. The rental income is received tax-free by the fund and when the property is sold, which must be before the pension is drawn. There is no capital gains tax.
Someone with their own business might decide to use the property assets – such as offices, factories, agricultural land and warehouses – as part of a retirement nest egg. In this case, they would pay rent directly into their own pension fund rather than to a third party – usually an insurance company.
For specialist advice on SIPPs, pension drawdown or annuity rates call 0800 043 0725
How can I invest in property via a SIPP?
One of the attractions of SIPPs is that they can be used to invest and develop commercial property, such as offices, industrial units or shops. Your pension fund does not even have to be large enough to buy a property outright as you can borrow up to 50 per cent of the fund’s net value.
In other words, if it is worth £150,000, you could borrow another £75,000 to buy a property for around £225,000. The rent from the property can be used to cover the mortgage repayments. If there is no mortgage, the rent will remain in your SIPP fund and can be used for other investments.
However, it is important to bear in mind that the costs of buying and managing a property in a SIPP can be fairly hefty. SIPP providers typically quote fees of between £500 and £750 for property purchase and there will also be legal and valuation fees to pay. In addition, ongoing annual management charges will be payable.
It is not possible to invest directly in residential property via a SIPP, although a commercial property with a residential element such as a caretaker’s flat may be permitted.
An alternative for those who want to invest in residential property may be to do so via property syndicate or collective fund. These schemes are allowed within SIPPs providing they have at least 10 investors and own at least three different properties worth a minimum of £1m in total.
Not all SIPP providers will currently accept these schemes and before investing, you should look carefully at how they work. Find out the level of borrowing as this will increase the risk and the amount you may have to pay for the maintenance of the properties as well as the costs to be covered when there are ‘void’ periods between lettings. Most importantly of all, you should find out your options for selling your investment.
Other property-related schemes which may be available within a SIPP are buy-to-let hotel room investments in the UK. It has been suggested that similar schemes abroad including ski chalets may also be suitable but some leading SIPP providers still feel this is a grey area. As the trustee, your SIPP provider has the final say on what can go into your pension.
By far the greatest demand for property investment within a SIPP is from small business people who want to buy their own business premises. Changes to the pension rules in April 2006 mean such purchases are now possible even if the property is already owned by the investor or someone connected to them.
Buying your own business premises within a SIPP can have several tax advantages. The rent paid into your SIPP is free of tax because it is a tax deductible expense. There will be no capital gains tax to pay on the property when it is sold within the pension fund and if you die before age 75 and before you start drawing your pension, your beneficiaries can receive the proceeds of the sale of the property free of inheritance tax.
To find an Independent Financial Adviser that can advise on SIPPs call 0800 043 0725
A refreshingly new approach to Independent Financial Advice
An Independent Financial Adviser is the only financial adviser who can provide advice that is specific and personal to your circumstances from products and services available from the whole market. An IFA will work for you and not the product provider.
Retirement Solutions is an independent financial adviser that specialises in giving advice in the annuities and equity release market.
Retirement Solutions Limited is a whole of market financial adviser. However, we choose to provide advice only in the areas where we have the necessary experience and expertise; annuities and equity release
If you would like us to arrange for an IFA to contact you then please click the form link below. We will then select the IFA who is best suited to advise you.