Pensions

What we do

At Open Financial Advice, we wish for our clients a comfortable and relaxed retirement and we’re on hand to assist our clients do exactly that. As fiduciaries, we are renumerated only for creating a path forward towards retirement that makes financial sense and future gains for you.

How we do it

Retirement looks different for all clients and responding to this individually is vital. We assess your position in detail to establish the current position, how the future position and income generated may look on its current trajectory and advise you on how we can improve upon this. We can advise on consolidating previous employer or personal pensions, self employed pensions for directors and their employees, state pension benefits, 25% tax free lump sum and implications, income tax, IHT considerations, trusts and legacy plans, minimising risk as we reach pension age (lifestyling), and how best to make your retirement goals a reality.

Why work with us

Simply put, low pension management charges. Here we ensure your future pension growth is in absolute focus, not impeded by excessive fund, platform or adviser charges. We are more cost effective than the vast majority of financial advice firms open today – total charges can be typically between 2.4% – 6.0%p.a1 . Here at Open Financial Advice, any investment we initialise, transfer or manage for the long term will not incur costs of more than 2.0%p.a. and usually less depending on your requirements. We’re happy to review and compare any existing pensions for potential improvement in charges and performance entirely free of charge.

State Pension

A state pension is provided by the government, paid in arrears every four weeks and whether a full award or partial award is granted is based upon lifetime Class 1, 2 or 3 National Insurance contributions. If you’re not sure whether you’re on track to receive a full state pension, we can help you with this as well as identifying how much of a top up would be required to grant the full award. The state pension is not paid automatically and must be claimed, we can also assist you with this.
Triple Lock – Currently state pensions increase annually by the highest of the below:

• The average percentage growth in wages in Great Britain
• The percentage growth in the Consumer Price Index 
• 2.5%

Personal Pension Plans

Personal Pensions are designed to help you save money for retirement in a tax efficient way by creating regular contributions to build a pension fund, later able to be drawn down in different ways for retirement income at your preferred retirement age, the earliest being age 55 or 57 depending on when you were born. Pension funds are invested for long term growth with the view to increase the amount received in retirement and with the aim of beating the impact of inflation. It’s common for longer term retirement goals to be invested in more adventurous fund mixes in the earlier years to aim at maximum growth, with more conservative fund mixes to be used closer to retirement. This is referred to as Lifestyling. Taking less risk within funds closer to retirement can be prudent due to this preventing a significant impact on pension income when this is required, to protect against a market downturn or negative worldwide event. The maximum annual pension contributions are currently £60,000, or 100% of your annual salary, whichever is the lower of the two.

Tax relief plays an important role in all pensions, enabling pension providers to claim back income tax and to bolster the growth of your pension pot. For basic rate taxpayers, this is 20% and is automatically obtained by the pension provider. For higher and additional rate taxpayers, the additional tax rate is required to be rebated through tax returns and we can advise you on this.

Personal Pensions: Important Information and Facilities

– Tax relief – For higher earners, or those requiring an increase in pension size toward retirement, this is vital.

– 25% Tax Free Lump Sum – 25% of full pension fund can be taken age 55 at the earliest, depending on your birth year, tax free. This will reduce later retirement income and potentially diminish future gains. We can calculate the impact of this for you. Further drawdowns over 25% are subject to normal income tax.

– Inheritance – Pensions sit outside of normal estates and as such no IHT is charged on pensions. In the event of a death before age 75, your beneficiaries can inherit the full pension fund as either income or as a lump sum free of any income tax. If over 75 upon death, your beneficiaries may incur income tax upon lump sum or income drawdowns.

– Lifetime Allowance – Currently the lifetime pension allowance is £1,073,100. Receipt of an inherited pension does not count towards an individual’s lifetime allowance. Your pension can grown to more than the lifetime allowance amount, though the amount over and above is subject to much higher regimes of tax.

Stakeholder Pensions

Stakeholder Pensions and Self Invested Pensions Plans are types of Personal Pensions that utilise the above benefits and restrictions, though they differ dramatically in function and identifying which is best suited to you is part of our pension advice process.

Stakeholder pensions are invested, typically with an insurance company, with a view to create future growth with your funds over a number of years. The investments may be in shares, bonds and sometimes property, though this is determined by the team handling the investment itself and your chosen risk allocation. Stakeholder Pensions can be taken out alongside workplace pensions, and they have specified minimum standards which are government enforced. These are:

• A capped charging structure which is a maximum of 1.5% per year for the first 10 years and 1% per year thereafter; if an employer is using a stakeholder pension to meet their automatic enrolment duties there will be a charge cap of 0.75%
• The minimum contribution is £20 per month
• You can pay in lump sums whenever you want
• You can stop and start payments as you wish
• You can switch to another scheme at any time without penalty
• You do not need to retire to draw your stakeholder pension benefits. You can take benefits from 

Self Invested Pension Plans (SIPP)

Self Invested Pension Plans (SIPPs) are available for those requiring more autonomy over their pension investments directly with less or no involvement with specific investment management or insurance companies. These should primarily be used by those with some investment experience. SIPPs are generally of higher risk to the overall pension fund due to the level of direct control and they require active management. SIPPs generally carry higher charges than personal or stakeholder pensions due to the level of activity and the direct control facility required. One of the benefits of a SIPP is that this fund can be distributed and invested in areas and assets unavailable to other pension plans, these include:

• Individual stocks and shares
• Government securities
• Unit trusts
• Investment trusts
• Insurance company funds
• Traded endowment policies
• Deposit accounts with banks and building societies
• Some NS&I products
• Commercial property

   

Commercial property is of particular interest for business owners/company directors due to being able to purchase a commercial premises for use, including a mortgage able to be raised, with rent being paid back into the pension fund. We will be able to work with you in identifying whether a SIPP is the best future strategy for you.