Pensions and you - a brief overview
PUBLISHED: 17:04 25 April 2016 | UPDATED: 17:20 25 April 2016
The various options for pension provision and accessing pension savings is now vast - we spoke to Penningtons to find out more
Pension providers, trustees and employers often take it for granted that people have a clear understanding of their pension arrangements. But we have found that, although many well run schemes try to simplify what is a very complicated area affecting your future, much of their communication is not of an acceptable standard. Individuals must be given enough information to make informed decisions and the Pensions Regulator has made this a high priority.
The various options for pension provision and accessing pension savings is now vast, particularly since the introduction of defined contribution freedoms in April 2015. Contrary to some of the publicity, not everyone will be able to access their money for a loft extension, new sports car or the holiday of a lifetime. It depends on the type of arrangement you are in and the rules and provisions that apply to it. As ever, it is all in the small print. Making the process easier is still a work in progress.
Sources of advice
If you are giving serious thought to accessing your defined contribution pension savings, take a look at the Government’s free and impartial government service, Pension Wise, at www.pensionwise.gov.uk. You can also seek face to face advice at your local Citizens Advice Bureau or call the Pensions Advisory Service helpline on 0300 123 1047.
Remember that, if you are a member of a defined benefit scheme, you cannot take advantage of the freedoms unless the scheme will allow a transfer to a defined contribution scheme. Strict requirements will apply.
Alongside freedoms, all employers by law must now provide a workplace pension scheme and automatically enrol certain employees (depending on their age and earnings). Other employees can ask to join and may benefit from an employer contribution. A scheme only needs to be introduced when an employer reaches its prescribed staging date, which is set by employee numbers. This means that, if you work for a small employer, you may still be in the queue.
Although workplace pensions are generally seen as a good thing and the statistics show that most employees choose to stay in schemes upon their automatic enrolment, they are not suitable for everyone. High earners who have elected for tax protection of their pension savings are just one example. If you are in that position, you need to take appropriate advice. Some people are also excluded from the requirements, including anyone who is genuinely self-employed.
Over the last few months, statistics have shown that the self-employed are possibly the greatest risk to the state because very few contribute towards a pension and those that do have reduced their contributions significantly over the last 10 years.
Although the Government did not play around with pension tax in the recent Budget, there is a possible Brexit on the horizon and there is some concern - particularly around investment. Commentators speculate that, as the referendum approaches, there will be sharp spikes in volatilities across many asset classes typically held in pension funds. It has been suggested that gilt yields, interest rates, equity values, corporate bonds and foreign exchange would all be affected. So this could also affect you, particularly if you are expecting to draw benefits this year.
For legal advice on all types of pension schemes, arrangements and obligations, please contact Maria Riccio or Verity Cruse in the Guildford office of Penningtons Manches on 01483 791 800 or visit our website at penningtons.co.uk