We are living longer, which is the good news. However, to make the most of it you need to think about how you are going to fund your retirement.

The changes to the State Pension will help you get started – and they may mean more people will get the full basic State Pension.

To get the full basic State Pension you need to build up a certain number of years of contributions, called ‘qualifying years’. Prior to the changes on 6 April 2010, this was 39 years for women and 44 years for men. Following the changes this has now reduced to 30 years, to make it easier to build up a full basic State Pension.

Whilst this is a step in the right direction, it will not enable you to live in the lap of luxury when you retire – so if you don’t want the prospect of always having to count up the pennies, you’ll need to act now!

Pensionable age is also changing

If you’re a woman born on or after 6 April 1950 you will be affected by the changes to the new State Pension age.

Between 6 April 2010 and 5 April 2020, the State Pension age for women is gradually rising from age 60 to 65, to match the State Pension age for men. Then from 2024 to 2046, the State Pension age for both men and women will gradually rise from 65 to 68.

More change…

Also, following a major pensions review and the publication of the Pensions Bill in 2007, the government has decided to introduce a new, low-cost, pension scheme called ‘Personal Accounts’ from 2012.

This can all start to sound a little confusing, so what should you do?

Time to take stock of the situation

You don’t have to wait for the Government before you act. In fact, the earlier you start, the more choices you have. But first you need to consider where you currently are and what you already have.

How many companies have you worked for and left partly funded plans with? How many plans have you taken out yourself?

What other provision do you have – eg a savings account, investment plan, perhaps a second house or even your own business.

Then you need to take charge, because your pension fund may be one of the largest assets you have.

Our pension review service is designed specifically to help you take charge of your retirement plans. We take a comprehensive look at what provision you have, where that provision is going to take you, consider how this fits with where you want to be and then, if appropriate, suggest the best options to make up any shortfall for you.

Take charge of things now!

For more information, simply contact us and we can outline the possibilities for you, without obligation.

On April 6^th this year, tax on income exceeding £150,000 will rise to 50% and for dividends to 42.5%.

 It applies to all income trustees accumulate and distribute exceeding the trustees standard rate band of, normally, £1,000. This means tax on trust income will rise by 25% in less than two months time.

 It’s not too late to limit the impact

 What are the actions you could take to mitigate the impact of this change. In view of the tax increase and current uncertainty in investment conditions, it’s time to consider:

 1.     Distribute income: By distributing income to beneficiaries, you can help them recover some – and in most cases, all – of the income tax that you pay as a trustee (not applicable to ’settlor interest trusts’ as all trust income is assessed on the settlor regardless of whether and to whom it is distributed. The notional 10% tax credit on dividend income is not reclaimable in any circumstances.

 2.     Invest for capital growth: make use of your annual Capital Gains Tax exemption against capital gains arising on disposal, which would mean focusing your investment strategy on growth rather than income. However, you should also consider risk and suitability for the Trust.

 3.     Invest tax efficiently: Invest in the most tax-efficient investments within the trust. This is of particularly importance if you want to invest for income.

If you are considering taking your pension benefits as an annuity, before taking the annuity offererd by your pension company, call us to see if we can increase the pension on the open market. Remember, if  any health issues or if you smoke, you could increase the pension you receive.

If you wish to draw down from your pension fund and have a guarantee that the value will not fall whilst locking in some growth in the stock market then call Brian on 01472318256 or email brian@crfinancialservices.co.uk to discuss this option.

If you wish to take cash from your pension, there are several ways of doing this dependent upon the type of pension and your situation. Remember, the minimum age for taking pension benefits fromyour private plans increases from age 50 now to age 55 with effect from 5th April 2010, so call us now.

Imagine a pension where you are in control of the investments.

Imagine a pension that can invest in most asset classes including houses and holiday homes.

Imagine a pension where there is no restriction on the amounts which can be taken as an annuity or a lump sum.

Imagine a pension that grows virtually tax free.

Now imagine that this is your pension.

I imagine that you will be in contact soon.

The investment limit has gone up to £10,200 annually, of which a maximum of up to £5,100 can be saved in cash

Please note that these higher limits will apply to people aged 50 and over from 6 October 2009, and then to everyone from 6 April 2010.

Pension Contributions

From April 2011, tax relief on pension contributions will be reduced if your annual income is greater than £150,000, reducing to 20% if your income is more than £180,000 per year

Before the restriction takes effect you cannot make large additional pension contributions to take advantage of pensions tax relief while it is still available, as restrictions have been put in place.

If you have never earned more than £150,000 annually and anyone who continues with their regular pattern of contributions then you are not likely to be affected by this, but could be.

As is probably now well-understood, those earning more than £150,000 a year are now, broadly, subject to a “Special Annual Allowance Charge” to Income Tax on pension contributions above £20,000 a year (a recent Treasury Bulletin states this will be raised to £30,000) where the contributions exceed a previously established pattern. Where this happens, the individual faces a 20% Income Tax charge under self-assessment. Actually, if the pension contributions are paid by a company, the tax rate is much higher than this, but there is a solution, as described below.

Our specialists say that the charge is higher than 20% because it is the individual who pays the tax and not the company or the pension scheme.

Therefore, the individual needs to retain sufficient post-tax income to enable him/her to pay the charge. In 2009/10, if an individual who is caught is entitled to £100 of corporate profits, the company can only pay £72.34 into a pension scheme – the balance of £27.66 is required to produce £14.47 after tax and National Insurance Contributions to deal with the charge of 20% on £72.34. In 2010/11, when the Income Tax rate will be 50%, the pension contribution reduces to £68.47 with £31.53 needed to produce £13.70 after tax.

The individual only receives the £27.66 or £31.53 temporarily – it eventually ends up with Revenue & Customs one way or another. Therefore, our specialists regard these amounts as tax charges. Compared to the amounts of the pension contributions, the rates are 38% in 2009/10 and 46% in 2010/11.

For people who are caught by these new rules, can we suggest that they look at pensions and other savings plans which are not regarded as “approved”.

This does not mean that they are in any way illegal, only that they do not fall within the special tax regime for approved pensions. Prior to “A Day”, FURBS (funded unapproved retirement pension schemes) were quite popular.

Contributions to them were subject to Income Tax and (possibly) National Insurance Contributions on the individuals for whom they were made, so they were taxed in much the same way as salaries. The main reasons they were popular were that:

* the FURBS funds could be invested to grow subject to Income Tax at

only the basic rate;

* the whole fund could be withdrawn at a suitable time entirely free

of tax; and

* the fund could be invested free of the restrictions imposed on

approved schemes.

Since A Day, FURBS have become unpopular because the sponsoring company no longer obtains Corporation Tax relief for contributions it makes until amounts are paid out as income, at which point in time, the individual is subject to Income Tax thereon. Also, it became somewhat easier and more tax-efficient to make contributions to approved schemes.

In our specialists’ view, that has all now changed. Even if Corporation Tax relief is not available, a “small” company will be able to make a contribution to a structure that does not adhere to approved pension scheme rules of £79 out of original profits of £100 and a large company £72. This gives greater retentions in the pension scheme for a high earner than in an approved pension scheme. The difficulty of Income Tax liabilities when amounts are paid to the individual can be overcome.

Actually, this route is often not even the best that can be achieved:

Because the structure our specialists’ use does not need to adhere to approved pension scheme rules, it can make loans to the employee for whom it is established and there are sometimes other ways in which he/she can benefit from funds in the structure before retirement.

In some circumstances, it is possible to use a structure which generates a Corporation Tax deduction for the sponsoring company, which increases the fund from £72 or £79 (or somewhere in between) to £100.

The structure can be established offshore which can provide further tax benefits for the ongoing growth of the funds invested.

Individual advice must be sought in all such cases.

With UK interest rates at levels that have not been seen in half a century, where are they heading? Further cuts are anticipated and there are some economists speculating that UK interest rates could fall as low as zero. So where does this place you regarding your unearned income?

If you rely on your interest for income, you will have to start using capital, which then sets you off on a spiral of reduced interest and further reduced capital. If you have a large bank balance this may not be a problem as you can plan to erode your capital over the long term. Alternatively, other methods of generating income will have to be considered, such as income bonds or equity release if you own property.

Whilst may people are opposed to stockmarket investment, investment bonds linked to it can provide 5% return of capital annually tax free, with the possibility of stock market growth in the long term. Whilst this type of investment can fall as well as rise in value, with stockmarkets low at present, it could be a good time to consider this type of investment.

Equity release may also prove to be more popular over the next few years. If you are asset rich with the value of your home, but on a low spendable income, this may make a lot of sense.

Do consult an Independent Financial Adviser for any financial advice.

Contact Brian for further information.

Ask for details: brian@crfinancialservices.co.uk