Financial Services Questions and Answers
Q. My life assurance policy only lasts for the term of the mortgage.
Is there a better way of having life assurance without constantly taking out new plans?
A. There are several ways but probably the neatest is what is called
'Rolling Term Assurance'. This continues for your whole life so you do not have to keep
applying.
Q. I am shortly going to retire from my business and will be drawing
down income from my pension. Is this the best way of doing it?
A. Sorry to be hedging my bets here, but this does depend upon what type
of scheme you are drawing down from. Draw down is probably the best route but you need to
also consider phased retirement. Also, what state of health are you in?
For SSAS draw down, I would suggest contacting me. A more tax efficient way where there is
also no need to take an annuity at age 75 might be appropriate.
Q. I have built up a large cash reserve in my business and would like
to take some of it out. How can I do it with minimum taxation?
A. You should be a bit wary if you sell your shares. The Inland Revenue
take a view that if there are more than 20% of your company's assets that are not trading
assets, then you may have to pay 23% capital gains tax and not 10%. Quite a sting!
However, it is possible to extract a substantial amount of cash with the minimum of tax
payable!
Q. My pension is due to be taken shortly and my pension company has sent me
details of what my tax free cash and pension will be. I am disappointed with the pension
and wonder if there are any alternatives? I had thought about leaving it for now if there
was any benefit to doing this.
A. There are several issues to consider. First, assuming that you are talking
about a money purchase type of pension scheme and not a final salary scheme, you have what
is known as the 'Open Market Option' available. This means you appoint an Independent
Financial Adviser (IFA) to check out the annuities offered in the open market place. this
can quite often result in an increased amount of regular pension, though not any increase
in tax free cash.
If you are a smoker or are in ill health, then you may be entitled to a higher pension
from one of the companies that offer enhanced annuities for this type of person, subject
to your details. Your IFA should check all your details before shopping around for you.
Other factors to consider are whether you need a spouses pension and whether you want a
level pension or one that increases every year.
By delaying the start of your pension, you would increase the amount of annuity received
because you would be drawing your pension for a shorter length of time! Pension annuities
are based on interest rates and mortality rates, so delaying may not increase the pension
in the short term if interest rates and annuity rates fall.
If you are lucky enough to have a substantial fund value built up, it may be possible to
keep the fund invested and draw your pension from the fund, which would remain invested.
This way, you are in control of the amount of pension taken (within limits) and the
investments within the fund. More complicated but potentially more beneficial!
All in all, there is a lot to be considered, so Independent Financial Advice is essential.
State Pension Questions
Q. What is the state pension and am I eligible to receive it?
A. State Pension is for people who have reached State Pension age. It is based on National
Insurance (NI) contributions and is made up of different elements. More information on
National Insurance Contributions is available on the Inland Revenue website.
Basic State Pension is based on how many NI contributions you have paid or been credited
with. If you do not have enough, you may be able to pay some extra contributions. Your
pension depends on how long you have worked for and the number of "qualifying
years" you have.
If you have been paid or credited with sufficient National Insurance contributions and
have reached pension age, you will be eligible to apply for the state pension.
Q. What is the state pension age?
A. From 6 April 2020, the State Pension age for women will be 65, the same as for
men. Women's State Pension age will start to change gradually from 2010.
This will not affect women born on or before 5 April 1950, who can still claim their State
Pension at 60. Women born on or after 6 April 1955 will have a State Pension age of 65.
Q. How do I claim?
A. You will usually be sent a claim form for State Pension 4 months before you reach State
Pension age. If you have not received your claim form 3 months before you reach State
Pension age, get in touch with The Pension Service.
If you are more than 10 days away from state pension age, you can obtain a pension
forecast either online or by sending a form BR19 to the Pension Service at Newcastle upon
Tyne. It is important that The Pension Service can be sure of your identity when you make
a claim. They may need to ask you about your background and look at any official documents
you have to support the information you give.
Q. Can my British state pension be paid in Australia?
A. The UK state pension may be paid in Australia. The pension will be fixed (frozen)
at the rate in force at the date of entitlement, or the date the person left the UK if
they were already a pensioner at that time.
The UK pension may result in a reduction of the Australian age pension.
Q. What is Pension Credit?
A. Pension Credit is an entitlement for people aged 60 or over living in Great Britain.
This could mean extra money for you every week. If you apply, you may be able to get up to
12 months back-payments if you could have been entitled earlier.
The person who applies for Pension Credit must be at least 60; it does not matter if their
partner is under 60.
Q. What is the basic state pension?
A. The basic state pension is paid to women at 60 and men at 65, who fulfil National
Insurance (NI) contribution requirements.
From 6 April 2020, the state pension age for both men and women will be 65.
The government will introduce the change gradually from age 60 to 65 for women over a
10-year period from 2010 to 2020
How much is it worth?
The full weekly rates are (year to April 2007):
Basic and additional State Pension
- basic State Pension £87.30
- The pension for married couples £139.60 a week.
Pension credit
Age 60 and above Guarantee Credit element:
- single £119.05
- couple £181.70
Age 65 and above – Savings Credit element:
- single £19.05 a week
- couple £23.58 a week
Q. What is the address, telephone and fax number of The Pension Service?
A. You can call if you would like to e-mail the Pension Service please click on the
Pension Service link under Pensions related links and contact information below.
Useful contacts
Pensions Advisory Service (Opas):
A non-profit organisation which seeks to help any member of the public who has a problem,
complaint or dispute with their occupational or private pension arrangement.
http://www.opas.org.uk/
Telephone: 0845 6012923
Pensionguide.gov.uk:
The government's pensions website, which offers information to individuals about their
pension options, and rules.
http://www.pensionguide.gov.uk/
The Pensions Scheme Registry:
Helps people trace pension schemes they have lost touch with - for example following a
change of job, or when a former employer changes name. It is run by the Occupational
Pensions Regulatory Authority (Opra)
http://www.opra.gov.uk/
Telephone: 01273 627600
Department for Work and Pensions:
The government department responsible for benefits and services for older people. Its
website has information on availability and rules. Enquiries about pensions are dealt with
by the Pension Service (see below).
http://www.dwp.gov.uk/
The Pension Service:
This new government office for state pension entitlements will eventually offer 26 local
advice centres for pensioners. The service will work out your retirement pension and offer
advice on other pensioner related services.
The Pension Service International Pension Centre on +44 - 191 218 7777 or fax +44 - 191
218 7293. Opening hours are 8.00 am to 8.00 pm. Or you can write to The International
Pension Centre, Tyneview Park, Newcastle Upon Tyne, NE98 1BA, United Kingdom.
http://www.thepensionservice.gov.uk/
Inland Revenue:
Oversees taxation of pensioner incomes. Its leaflet IR121 provides information on income
tax and pensioners. Its international services division deals with queries from people who
have spent part of their working life abroad.
http://www.inlandrevenue.gov.uk/
Telephone: 0845 6060265
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Independent Financial Advice