You really should make the most of your pension arrangements and your annuity, and you’ll thank yourself later for doing so. Here are some tips on boosting your pension, following the Budget which contained a whole host of announcements affecting retirement income.
Make sure that you do get all the pensions to which you are entitled. Many people do have old pensions that they may well have forgotten about or they might have simply lost touch with. An independent financial adviser (IFA) should be able to help you find out where your pension is now, or you can use the government’s helpful Pension Tracing Service (0845 600 2537), or online at www.thepensionservice.gov.uk
You do have various retirement options, and you need to know what they are. Retirement planning is extremely complex and if you buy a pension annuity this is usually a final decision that cannot be changed. But you can now draw an income from your pension fund in several different ways. An IFA can talk you through all of the retirement options and help you decide which is the most appropriate for you.
Whether you are buying a pension annuity or thinking of another way of providing your retirement income, you will have a lot more buying power if you bring all of your pension arrangements together. You are entitled to transfer your pension fund and shop around for your the best annuity rates using the open market option (OMO).
Some personal pension plans will have guaranteed annuities written into them, guaranteeing a minimum amount or annuity rate at retirement age, and you may have a sound entitlement of which you are unaware. These guarantees can actually be lost if you do not take the option on a specific date with some providers, so it is important that you are aware of your entitlements.
You might want to boost the value of your pension fund in the run up to retirement. You can contribute up to 100% of your earnings into a pension plan and get tax relief on the full amount. This is particularly useful if you are paying higher rate tax and you want to top up your pension. In the recent Budget, this higher rate tax relief will be curbed from April, 2011, for those whose annual income is over £150,000. Thoew with higher earnings really should explore the myriad of retirement options available.
When you do retire make sure you reduce your income tax liability as much as you can on your annuity income. For example, if you are 65 or over with taxable income below the figure of £22,900, you may be entitled to claim improved personal tax allowances to reduce the amount of income tax you pay. Married couples may well be able to improve their overall position by “equalising” ownership of joint income bearing assets to bring each of them within the income limit for those increased tax allowances.
Just a few pointers that might help you with your pension arrangements leading to that important annuity purchase. Just make sure you do eventually shop around for annuity quotes using your open market option.
