HLFS Autumn Newsletter

Planning the Longest Holiday of Your Life

We issued a short newsletter in March giving ten reasons to pay into your pension which set out some good reasons for making a pension contribution when accumulating funds for retirement. Here, we look at the top ten questions you should be asking yourself when you are about to retire.

  1. How long will you need your income to last when you retire?
    • A male age 65 can expect to live to age 86, and has a 1 in 10 chance of reaching 99
    • A female age 65 can expect to live to age 89, with a 1 in 10 chance of reaching 100
  2. When will your State Pension start?
    • The state pension age is due to increase to age 66 in 2020, and to 67 in 2028
    • The single tier state pension amounts to £159.55 per week (2017/18)
  3. What does your retirement look like?
    • Outgoings such as mortgages may stop, and there’s no more travelling to work expenses. However, more might be spent on socialising, holidays and gym memberships in the early years.
    • As you reach the middle years, you might slow down and notice that you need to spend a bit more on health costs, for example, eyesight and hearing.
    • And in later years, the cost of care and nursing homes may be important.
  4. What types of pension arrangements do you have and can they offer you all the options available to you?
  5. Have you saved for retirement through a series of personal pensions; were you a member of an employer sponsored pension scheme; were you contracted out of the State Earnings Related Pension Scheme (SERPs)?
  6. Do you take a large one-off lump sum from your pension arrangements or a regular income?
  7. Should you take a little now and more later, or vice-versa?
    • You may need to keep your pension fund invested to generate the right levels of long term income as your needs change.
  8. How do you invest?
    • Your investment goals may be evolving, with the emphasis moving from growth to income, along with your attitude to risk.
  9. Do you need fixed or flexible income?
    • Your ability to absorb losses will probably change as you may have no income to offset any investment losses, but you may expect some cash windfalls.
  10. What tax rate will you pay?
    • Your tax rate might change when you stop work and full-time earnings come to a halt. How do you manage your income in retirement to best suit your tax circumstances?

This could be the biggest investment decision you have to make in your lifetime, and the legislative changes in 2015 give you even more choice than you’ve had before. It’s important to make the right decisions.

If you want to discuss the options available to you at retirement, or review your ongoing plan, please contact us.

Business Focus – Auto Enrolment – increases to minimum contributions

Auto enrolment was introduced in 2012 and each and every employer was provided with a Staging Date from the Pensions Regulator. The last of these employers are now staging. Any new employers will have to add the auto enrolment duties to their list of what they need to do when deciding to take on employees, as their duties start almost immediately.

With regards to building your budget forecast, the auto enrolment contributions increase in April 2018.

If an employer elected to set up a pension scheme for their workers using the minimum contribution basis, the employer contribution will increase to 2% in April, with workers increasing to 3% (giving a total minimum contribution required of 5% to be saved in the member’s pension pot).

Have you included this in your budget for 2018?

Are you planning to inform your workforce of the changes, and how are you doing this? The number of workers who were expected to opt out of a pension arrangement was around 15% but it’s actually closer to 9-10%. The increased contributions might see an increase to this opt out number, but remember that this is a member decision and you shouldn’t make plans based on larger numbers opting out, and you can’t influence a member to do so.

Henderson Loggie Financial Services provides professional advice on retirement planning, and providing consultancy work to employers regarding their auto enrolment duties. If this is an area of advice that you require, please contact us.

HLFS Contact Details:

Jim Wilson – jim.wilson@hlfs.co.uk

Johnathan McDowall – jonathan.mcdowall@hlfs.co.uk

Ricky Clark – ricky.clark@hlfs.co.uk

David Legge – david.legge@hlfs.co.uk