Friendly Money Newsletter
Managing your pension can be stressful!
A very warm welcome to our latest PensionMan newsletter. Matters of a financial nature certainly haven’t got any easier with so much responsibility placed upon individuals to sort out their financial affairs.
To that end I was recently invited to participate in a panel sponsored by financial advisers Quilter, where we discussed all the risks people saving for retirement are being forced to assume. In the good old days people had final salary pensions or at least bought annuities. These days savers face investment risk, inflation risk and longevity risk (the risk of outliving your retirement savings).
Two further stresses?are less apparent though. Since 2011 mandatory retirement ages have been outlawed. In practice this means that people have to make a conscious decision to unplug themselves from their regular pay-checks and live entirely on their savings. So rather than knowing for decades that you will be retiring on your 65th birthday, it is up to you to decide when you have enough money.
And having decided to retire, many people find that their company pension savings have to be transferred to a new scheme to facilitate drawing down on those savings. These are both problems that previous generations didn’t have to contend with. The first picture below is a link to a one minute extract from the Quilter “Retirement Ready” podcast that I was invited to appear on, while the full thing is the YouTube link below.??
There’s another pension-related tax issue that is worth considering, especially if you are a higher rate taxpayer. Freezing income tax allowances continues to drag millions of previously basic rate taxpayers (20%) into the higher rate (40%) bracket. What few of these people realise is that if they contribute towards a Self-Invested Personal Pension (SIPP), or their company pension contributions are made?after the tax has been deducted, they are very likely to be missing out on half the tax relief that they are entitled to. This is because while 20% relief is paid automatically, the additional 20% must be claimed through your self-assessment?tax return. So if you contribute ￡60 to your SIPP, you get ￡20 of tax relief automatically, but you have to claim the additional ￡20 to bring the total contribution to ￡100.
I wrote an article about this for Bloomberg/Washington Post. This link should allow you a couple of free reads.
And finally, I make no apology for repeating that April 5th is the last day for topping up missed National Insurance contributions all the way back to 2006. As of April 6th, the system reverts to only being able to top up six years of missed contributions. However, at the time of writing,?there are reports that, due to the huge?demand to make payments,?the deadline has been extended until July 31st.
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If you would like some coaching help with any of these topics?(or any other financial issue for that matter!) please?reach out for a session.
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Take care out there,
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Stuart & Vicky
Disclaimer: Stuart Trow is a financial educator, not a regulated financial adviser, so cannot provide specific financial or investment advice.?The opinions expressed do not constitute investment advice and regulated independent advice should be sought where appropriate.