Retirement Seminar v1

Planning the right
retirement for you.

Why might you be concerned?
Maybe you are…
 Worried you cannot afford to retire.
 Worried that your retired years will not be as you dreamed them.
 Unsure which route to take and need help.
 Concerned about all the legislation. It is all just so confusing.
 Unsure how to put you other assets to best use.
 Worried about your family if you died; would they be OK.
 Worried about a change in your future circumstances; could you adjust.
 Trying to make sure as much of you wealth as possible is passed to your family.

So, what you would like to do is…..
• Know how much is enough to retire when and how you want.
• Understand the ways you can use a pension to make an informed choice.
• Know your family is provided for if the worst were to happen to you.
• Ensure that you are using all your assets in the best way.
• Be able to respond if your circumstances change.
And…..
• Know that you have access to expert advice, where your interests are being looked
after and that you ultimately have control over your retirement.

What should you do?
 Start planning now.
 Set out your plans for retirement. What are your goals and priorities?
 You need to get advice and be sure not to overlook anything.
 Put in place a retirement plan that suits you and your family.
Why Swindells?
 We are the experts.
 We work with you in a relationship of trust.
 We provide you with on-going support and guidance, helping you stick to the plan.
 We provide wholly impartial advice covering all your options.

Funding your pension savings.
 Pension contributions are limited on tax relief.
 Personal contributions - lesser of £40,000 a year or 100% of your earnings.
 Employer contributions - not linked to earnings.
 Employer contributions - but the £40,000 a year limit does apply.
 Wholly and exclusively test.
 You can carry forward unused contribution allowance from 3 previous years.
 Potential to pay £160,000 in one year.
 Be careful once benefits are taken, £40,000 allowance reduces. And you still need a salary!

Why contribute? What is the
advantage?
 Higher rate tax payer
 £32,000 net (before tax relief) pension contribution
 “Grossed up” to £40,000 in your pension
 A further £8,000 comes off you income tax bill too!
And when you take pension income.
 Basic rate tax payer
 £40,000 of pension pot taken
 £10,000 tax free (as 25% tax free lump sum)
 £30,000 at 20% basic rate tax; £6,000 tax paid
 An effective income tax bill at 15%

Taking benefits. Where we are now…
Method Lump Sum Income Death benefits Inheritance tax treatment
Annuities
25% of the whole
pension value
Balance of the pot spent with an
insurance company in exchange for
a guaranteed income for life
What you buy from the
insurer at a cost e.g.
guarantee period & spouses
benefits
Pension removed from the
estate as it has been
“spent”
Drawdown
25% of the whole
pension value
Pot remains invested. You draw an
income directly from it within
minimum and maximum limits
Pension pot passes to
spouse to draw as a taxable
lump sum or income
Not part of the estate for
IHT; but pension rules mean
lump sum taxed at 55%
Phased Drawdown
25% of the pension
value that is put into
payment
Pot remains invested, but it is not
all put into payment in one go.
Very tax efficient income as each
“phase” of income has 25% paid tax
free
Pension pot passes to
spouse to draw as a taxable
lump sum or income
If under age 75 lump sum
from the part of the pension
not in payment can be paid
free of tax. Otherwise same
as drawdown

What is changing? Income withdrawal.
 Buying an annuity remains.
 Drawing an income directly from my pot remains.
 Phasing in benefits remains.
So not a lot then….?
 Restrictions on annuity providers to be lifted.
 Limits on income available from Drawdown to be removed; now to be called “flexi
access”.
 Phasing income limits removed too.
 And we have a new option - “Uncrystallised Funds Pension Lump Sum (UFPLS)”.

A look at annuities.
 Annuities could suit you.
 But do they offer good value?
 Enhanced annuities can greatly
improve these low rates.
 Will product innovations alter
the perception of annuities.
 Time will tell.

Drawing down; how does it work?
 For drawdown and phasing, think “sausages”!
 But you do not have to take the income.
 It can be turned on and off as you need to.
 For UFPLS you must take the income bit.

Why phase my income?
 After all other income £30,000 net per annum required.
 Basic rate tax payer.
 No need for a large one off lump sum.
 Pension fund value £500,000.

Why phase my income?
Full Drawdown
Lump Sum £ 125,000.00
(not spent? 40% IHT?)
Gross Taxable Income £ 37,500.00
Net Income £ 30,000.00
Tax £ 7,500.00
Fund Drawn p/a £ 37,500.00
Phased Drawdown
PCLS £ 8,825.00
Gross Taxable Income £ 26,475.00
Net Income £ 21,180.00
Tax £ 5,295.00
Fund Drawn p/a £ 35,300.00

Death Benefits - what is changing? The
current rules…
Age of deceased
Benefits in payment or
not? How death benefits are paid
Who benefits can be
paid to Tax treatment
Under age 75
Not in payment
As lump sum Any beneficiary No tax
As pension A dependent
Marginal rate of
tax
In payment
As lump sum Any beneficiary 55% tax
As penison A dependent
Marginal rate of
tax
Over age 75 All of the pension
As lump sum Any beneficiary 55% tax
As penison A dependent
Marginal rate of
tax

Death Benefits - what is changing? The
new rules…
Age of deceased
Benefits in payment or
not? How death benefits are paid
Who benefits can be
paid to Tax treatment
Under age 75
Not in payment
As lump sum
Any beneficiary
No tax
As pension
In payment
As lump sum
Any beneficiary
As pension
Over age 75 All of the pension
As lump sum
Any beneficiary
Marginal rate of
tax
(from 2016)
As pension

Using other assets to preserve the
estate
 Preservation of the estate for your heirs benefit is a priority.
 ISAs tax efficient from a growth point of view; but so are pensions.
 ISAs are potentially taxable on death at a rate of 40%.
 Pensions death benefits free from all tax prior to age 75.
 Post age 75 pension death benefits tax could also be as low as nil.
 Spend non-pension assets first to reduce the value of the IHT taxable estate.
 Move assets from ISA to pension to remove value from your taxable estate.

How does it effect what my loved ones
get?
 Joint estate of £1,650,000.
 Made up of…
 Gross income required of £25,000 per
annum.
 Retire at age 60.
 Joint Life annuity rate 5%.
 What happens 10 years on?
Asset Value
House £ 850,000.00
Cash and investments £ 300,000.00
Pensions £ 500,000.00
Total £1,650,000

How does it effect what my loved ones
get?
Annuity route
House £750,000
ISA and Investments £300,000
Pension
(£500,000)
-
Estate Value £1,050,000
IHT Threshold £650,000
After Tax Estate £890,000
Drawdown route
£750,000
£300,000
£250,000
£1,300,000
£650,000
£1,140,000
Spend other assets
£750,000
£50,000
£500,000
£1,300,000
£650,000
£1,240,000

What you should be aware of?
 Pension legislation is complex and often changes, on-going advice is essential.
 If you are still funding pension accounts be careful of contribution limits and total
pension savings limits.
 There are several methods of de-cumulating your pension savings.
 Pension death benefits are not always tax fee and interact with the rest of your
estate.
 Accessing pensions via the drawdown methods involve investment risk.
 Your circumstances are different to anyone else, be sure your explore all the
available options.

Summary
 Start planning now.
 Set your retirement objectives with the help of a professional advisor.
 Consider your finances as a whole, not just pensions in isolation.
 Consider death benefits too, not just income generation.
 Make sure your plans remain flexible in case things change.
 Ultimately you can keep control and create the retirement you deserve.

As individual circumstances vary considerably from person to person, the views expressed in this presentation are meant only as a general guide, and any specific advice
should be sought from your own professional adviser or by contacting either Swindells Chartered Accountants or Swindells Financial Planning. No responsibility for loss
resulting to any person acting as a result of any material in this presentation can be accepted by the presenter or Swindells LLP or Swindells Financial Planning Limited.

Retirement Seminar v1

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Retirement Seminar v1