February 2011

Those readers that study Demographics, or indeed listen to Media Current Affairs, will know that the UK is heading for a large increase in New Retirees over the next few years. This, of course, has been brought about by what is often referred to as the ‘Post War Baby Boom’. In the first 4 working days of 2011 I have seen four such customers in Perranporth alone!
If you are one of the ‘Lucky Many’ that are getting close to retirement, what are your options?

Clearly most readers will be entitled to some form of State Retirement provision. This will have the ‘Basic Element’ and possibly an additional amount known as SERPS (State Earnings Related Pension) and/or SSP (State Second Pension), both of which are additional entitlements loosely linked to previous earnings. Those that have been Self-Employed for their whole working lives only ever qualify for the Basic State Pension. Additionally, those that have worked for large organisation are likely to have some ‘Final Salary’ entitlement from previous schemes. Certainly individuals that have worked in any area of Government, Local or National, should have some benefits accrued. These are called Final Salary because the pension payable is based on the salary of the individual during their last few years of work. Final Salary pensions are guaranteed and are normally considered to be excellent schemes.

Those that have not joined a Final Salary scheme are likely to have some sort of private provision, this could be just one Personal Pension, or any combination of a myriad of pension schemes that have been available over the past 40 years. There are too many variations to even start here, but the important thing to remember is that all private schemes have to offer a facility known as ‘Open Market Option’ (OMO). Essentially, this allows the Customer to take their accrued pension fund and buy a pension from whet they consider to be the best in the market from ANY provider. Put simply this means that a fund could do one of the following:

Buy a Standard ANNUITY from the best priced in the whole market.
Buy an ENHANCED ANNUITY which is a higher income based on the customer’s health and lifestyle.
Go into INCOME DRAWDOWN which allows the customer to take an income from their fund, whilst it remains invested.
Take a Pension Commencement Lump Sum which is TAX FREE from any of the above.

Finally, it is very important to consider that what you ‘Buy’ with your accrued fund is often for life, that is, once the plan commences you cannot change it.

The Financial Services Regulator, the FSA, offers some basic brochures on the their website moneymadeclear.org.uk which are available for FREE download, alternatively, we have printed copies available FREE OF CHARGE at our Perranporth Office in Tywarnhayle Square.

PLEASE REMEMBER THAT FINANCIAL ADVICE IS INDIVIDUAL, AND YOU SHOULD SEEK ADVICE FOR YOUR OWN CIRCUMSTANCES.