Sorry about the play on words, but this item was seen in Farmers Weekly. The massive fall in share prices has raised concerns by poultry managers and workers their pension provision, it reported. The two main problems with planning for your retirement; how does the current economic downturn affect pensions and which options are suitable to you?
You have probably had a pension valuation and seen your fund reduce markedly over the past year. For those approaching retirement, it is a really important issue. If you buy a pension annuity, you effectively crystallise your fund value and lock yourself into lower annuity payments for life.
For this reason, unsecured pension (USP), also known as income drawdown or drawdown, has gained popularity recently. If stockmarkets recover, at least your fund has the opportunity to rise with them.
Another option may be to retire in stages, taking phased drawdown. You don’t have to stop working to take your pension, so it may be possible to start taking benefits from part of your pension while reducing the hours worked. This solves the problem of committing your entire pension fund to an annuity while your fund value is down.
Taking a USP or a phased retirement option can be complex and it is important that you seek independent financial advice.
If you are closer to retirement, it can still be worth you making a pension contribution. You will get tax relief when you pay in and tax-free cash when you come to retire.
For those some way off retirement recent stockmarket falls have created a great opportunity. You can now buy more units for your pension fund for the same amount of money. Provided the markets recover, those units will increase in value.
Those investors who went on buying shares in the stockmarket slump of 1987 or the recession of the early 1990′s benefited greatly when the markets returned to normality. So now could be a particularly good time to investigate starting or increasing your payments to a pension.
Unfortunately, Farmers Weekly reports, most people do not seek advice when they get to retirement. As a result, they set up their pension annuity with the same company that held their pension with. Most are blissfully unaware that they could get higher levels of annuity income simply by obtaining advice on the best annuity rates available from an independent financial adviser (IFA).
This same IFA can help set up a self invested personal pension (SIPP) if it is appropriate for you. This could allow the SIPP to own property. If you actually work from the property, then you would pay rent to the pension, increasing its overall value when you come to retirement. Also, capital gains tax (CGT) is not payable on assets held by a pension, so when the property is eventually sold, you could save a considerable tax bill.
