No Obligation Process
At Pensionlite we believe that everyone should have access to specialist pension advice without concerns about cost. Consequently, all of our clients have the opportunity to receive an independent, no obligation, free pension review and recommendation report.
Many first time visitors to our web site question the fact that this opportunity is genuinely free and we would like to take a few minutes of your time confirming this.
Financial Services advice is based on a client’s circumstances which become known to an adviser through some form of Fact Finding exercise. Equally, a client gets to know about the adviser through things like a business card and a client agreement which details the services provided, any costs and the manner of charges. You can of course also check the Financial Services Register to reassure yourself further. www.fsa.gov.uk
It is quite clear that the choices available to clients for advice and services are either paying for them in the form of a fee or by allowing that firm to receive a commission from a product or service provider should a transaction occur.
Choosing the commission option means no transaction - no commission - no charge. Under normal circumstances you have to make this decision before any IFA can act on your behalf. You do of course have the right to change your mind at a later stage but if your initial choice is to pay by fee then you pay up front. If you choose the commission option there is no charge for the advice and recommendations.
At Pensionlite we will give you the options at the outset. If you would like to pay a fee you can, although we cannot see why you would want to do so at this stage. Once we have completed a Review of your existing pensions and made recommendations you will once again have the same choices. If the advice and recommendations made are that your pension should stay where it is then there is no charge. If the advice and recommendations are to move your funds and you do not take the advice there is no charge. If the advice and recommendations are to move your funds and you accept the advice you will be once again given the choice of payment options. You can pay a fee or allow us to receive a commission from the new provider.
About The Review and the Process
Pensionlite pension reviews are carried out by specially qualified pension advisers. They will obtain all of the available information about your existing pension arrangements, including details of the charges and investment performance. This information along with any special scheme benefits, rules and conditions will be compared to what is currently available within today’s independent pension market place. Taking into account the scheme information and your personal views, concerns, attitudes and aspirations a tailored review and recommendation report will be produced and posted to you.
If the recommendations are to stay with your existing scheme and or make certain changes to what you already have then you will be told how and why. If the recommendations are to move your scheme you will be told why and where the adviser believes you should move it to. This advice will include not only why a particular provider has been selected but also what specific funds you should invest in to match your risk profile, age and planned retirement date. If you have several schemes each one will be reviewed separately and any recommendations will cover each individual policy.
Once you have received your Free, Independent, No Obligation Pension Review and Recommendation report we telephone you to ensure you fully understand it and are aware of what the likely implications are of following or not following the recommendations.
You are under NO OBLIGATION to follow the advice or recommendations.
In future years, with your permission, your pension policies and any new contributions will be reviewed and re-assessed to ensure they continue to perform efficiently and in line with you and your circumstances. Life moves on, things change and your pension must move with you.
This service will be of particular interest if any of the following apply to your scheme or schemes
- A Personal Pension
- A frozen Personal Pension
- A With Profits Personal Pension
- A Personal Pension with a company that may be overpriced
- A Personal Pension where the provider no longer sells new pensions
- A Company Pension with an employer who has ceased trading
- A Company Pension which is being closed or changed
- Been or getting divorced
The review service is generally not available where the total value of all of your pensions is under £15,000 or there is less than 10 years to retirement, as it is unlikely that the benefits of transferring would be worthwhile. If in doubt please ask.
Personal Pensions - The Truth Of Why You Need To Act Now
Pension charging structures have changed dramatically over recent years. Due to the introduction of stakeholder pensions the charges applied to new Stakeholder benchmarked plans are far lower than in the past. Many individuals now find themselves with outdated, overpriced pension contracts. It may be possible to transfer to a cheaper plan with the same provider.
Investment returns on many pension plans have fallen well short of what has been achieved in the open market.
With Profits personal pensions have generally performed even worse than the poor performing unit linked ones with little or no bonuses being added in recent years. Many of these funds have already ‘spent’ all or most of their reserves subsidising bonus rates declared to investors over the last few years when falling equity markets have resulted in negative returns to the fund itself. With Profit Pension Plans need reviewing immediately.
Companies that may not have changed the charging structure of old style personal pensions are:
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- Abbey Life
- Allied Dunbar
- AMP, Britannic
- Canada Life
- CIS
- Eagle Star
- GE Life
- General Portfolio
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- Halifax Life
- HSBC
- Laurentian
- Liverpool Victoria
- MGM
- Nationwide
- National Mutual
- Pearl Assurance
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- Royal Liver
- Royal London
- Scottish Life
- Skandia
- Swiss Life
- Winterthur
- Zurich
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With Profits Pensions - The Truth Of Why You Need To Act Now
With Profit funds, which were once a popular and seemingly secure way of investing into Pensions, have been in decline for some time as insurers continue to cut maturity payouts.
Whilst these funds continue to raise concerns with our Regulator, the Financial Services Authority, and investors alike the first rule is not to act in haste. One needs to check if there are any guarantees, maturity bonuses and periods when funds can be accessed or transferred without penalty. A review of these funds is a must.
Company Pension Schemes
Final Salary Guarantees
It is important to understand that Company Final Salary Pension Scheme benefits are not "guaranteed". It is effectively a promise from the sponsoring employer to contribute enough money into the pension scheme now and in the future to provide the pension calculated at retirement. One of the more recent Final Salary disasters involved the ASW Pension Scheme. One member of the scheme interviewed on television explained how he had contributed to the scheme for nearly 30 years only to find that besides being made redundant the pension he had realistically expected at retirement was nothing like what he was going to receive. This case unfortunately highlights how an employer could underfund your pension without breaking the law. It is important to note that this is relatively unusual; most companies would choose to wind up their pension scheme before it reached this stage.
The good news now is that members of Final Salary pension schemes do have added protection as a result of the establishment of The Pension Protection Fund .
In brief, the Pension Protection Fund’s main function is to provide compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover the Pension Protection Fund level of compensation.
The Pension Protection Fund is a statutory fund run by the Board of the Pension Protection Fund, a statutory corporation established under the provisions of the Pensions Act 2004.
To help fund the Pension Protection Fund, compulsory annual levies are charged on all eligible schemes.
Investing the assets of the Pension Protection Fund effectively is a further key function of the organisation.
The Pension Protection Fund is also responsible for the Fraud Compensation Fund - a fund that will provide compensation to occupational pension schemes that suffer a loss that can be attributable to dishonesty .
For further information about The Pension Protection Fund visit:- www.pensionprotectionfund.org.uk
Final Salary Pension Scheme Wind Up
One of the current trends is for companies to close their final salary pension schemes and change to money purchase schemes. There are a number of reasons why some companies have decided to change. For example:
- In 1997 the government introduced 10% tax on dividends earned by pension schemes. These dividends are an important element of the schemes' long-term health and this taxation has caused huge disruption.
- A new accounting practice, FRS17, which has not yet been introduced but is likely to be introduced in due course, has caused concern amongst company accountants as it requires employers to be more transparent about the pension schemes liabilities.
- During the last few decades, the age people are expected to live has drastically increased. Pensions schemes will therefore have to pay pensions for a longer period of time.
- Companies no longer want the liability of operating a final salary pension scheme. Ongoing costs include running the schemes administration, paying employer contributions and absorbing the pension funds "ups and downs" on the stock market.
- If a company changes its scheme to a money purchase arrangement the majority of the issues highlighted above are removed. This ultimately saves the employer a lot of money.
Preserved or Frozen Pensions
Once an employee has left their employer they cease to be an active member of the company pension scheme. Typically, if you have been in a company scheme for more than two years you will be left with a "preserved" or "frozen" pension that will be looked after by the company pensions department until retirement age. Although the term "Frozen" is commonly used it is somewhat misleading as the pension will normally increase or revalue, as its correctly known, between the date you left and your retirement (this is known as the deferred or preserved period).
Money Purchase Pensions
Money purchase pensions will continue to grow in line with the underlying investments.
Final Salary Pensions
If you left a final salary company pension scheme after 31st December 1990 the law dictates that the scheme must increase the pension during this preserved period by the Retail Price Index (R.P.I.) capped at 5%. Some schemes, usually only the Public Sector (NHS, County Council etc), will be more generous than they are required to be by law and allow the member's pension to increase at the same rate as R.P.I. with no cap. This is clearly very generous, especially in times of high inflation.
Contracted Out Schemes
Many company pension schemes are "Contracted-Out of SERPS, S2P". Essentially, this means that the pension scheme has decided to take responsibility for part of your State Second Pension, S2P previously SERPS. As of 6th April 2006 all Contracted Out Pensions are classed as Personal Pensions in terms of benefits and availability. This means you can take 25% of the fund as tax free cash. The earliest retirement age is 55.
Pensions and Divorce
Divorce can create financial difficulties. The pensions of both parties in a divorce may be considered when the court decides what money goes where. If one spouse never worked, while the other built up a large pension fund, this will have to be taken into account. The calculations can be complex.
Company pension schemes are usually valued at their 'transfer value' - the amount of money which would be transferred if the holder moved it to another company scheme. Private personal pensions are taken at their fund value. But valuing a pension fund is one thing - working out how to distribute it is quite another.
There are three ways of handling the division of pension rights in a divorce, although since new rules were introduced in 2000, the third option - 'pension splitting' - has become the preferred option for many people.
Here's how they all work:
Offset:
Since you can't really split a pension down the middle, the court can decide to allow one partner to keep their pension and award the other partner a greater share of the family home, for example, to 'offset' the value of the pension.
Earmarking:
The court can also earmark one partner's pension. This means that when the pension finally pays out, in 20 years or so, part of the pension is reserved for the other partner. The problem with this system is that having divorced your husband or wife, you then have to sit around for years waiting for them to retire before you get any money. If they choose to retire late, you have to wait longer. And if they die before retirement you can be left with nothing.
Pension Splitting:
In December 2000 the law on pension splitting was changed. On divorce, a spouse can now be entitled to half of the main breadwinner's pension (whether it's the husband or wife). This applies to the tax-free lump sum as well.
This means that one spouse can lay immediate claim to a percentage of their partner's pension pot and move the money to another fund. They will no longer have to wait around for their partner to retire. This means that there can be a cleaner break in the divorce and it allows each partner more direct control over their finances. Pension schemes will have to make a cash transfer available so that the other spouse can start a new fund.
Remarrying:
The Government brought in the pension splitting law to prevent a spouse from losing out even if they remarry. Also, they are protected in the instance that their spouse dies, taking their pension rights with them, before they draw their share of the pension, or if a spouse decided to delay taking their pension, as they would have to wait too.
SIPPS
What is a SIPP? A SIPP (Self Invested Personal Pension) is a type of pension that gives you greater choice and control over where you can invest your money. Most other pensions only allow you to select from a limited list of funds, normally run by the pension company's own fund managers.
A SIPP is different. It allows you to choose from a wide range of funds and other investments - even individual stocks and shares. You can also hold cash within your SIPP. In essence, the SIPP enables you to select the investment.
For many, the suggestion that they are in control of their pension is an exciting proposition. For others, having made the decision to set up a SIPP, the reality is significantly different. You do become your own adviser and you do make the decisions. Would you be happy becoming the investment adviser? Would you have the time and dedication to actively manage the money?
If you are happy to take on the responsibility of a SIPP our advisers will be delighted to assist you in establishing and managing the scheme. If you like the idea of a SIPP but feel you will need some professional assistance then once again our advisers will be delighted to help.
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