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A client wants to start saving for retirement
Pension intentions
Saving for retirement is the area of financial planning where most people need financial advice.
According to www. unbiased.co.uk, around 40 per cent of all people trying to find a local IFA are asking for personal retirement financial planning advice.
Did you know that the main purpose of financial planning is to create financial independence?
This is the position where, having stopped work, you own the properties in which you want to live and your guaranteed income after tax is greater than your budgeted expenditure.
If you have enough cash available to you and medium term investment through, say, an Isa, now is the time to think seriously about long term investment earmarked for your retirement.
First, ask your employer if they have a pension scheme that you can join.
As you may know, you do not have to save regularly in a pension and currently about 12 million working people do not. When you start saving into a personal pension, your money is tied up until you take your benefits at age 50 or later. The minimum age goes up to age 55 from April 6 this year unless you have an occupation which has a lower statutory minimum retirement age, such as footballers who can retire at age 35 if they joined the Professional Footballers’ pension scheme before April 6, 2006.
The Government expects Nest to have between four million and eight million members by 2050. This will make the Nest pension fund one of the biggest in the world, with tens of billions of pounds in assets
From 2012, the Government starts to introduce auto-enrolment for workplace pensions, under which all employees will be obliged to join their employer’s pension scheme unless they actively opt out.
The national employment savings trust or Nest will be the default fund for those employers that do not create alternative arrangements that are at least as good.
Unless you choose to opt out, all employees will have to contribute 4 per cent of their gross earnings to Nest, with employers contributing 3 per cent and the taxman 1 per cent.
The new Nest pension system will be phased in but full auto-enrolment will not be fully up and running until 2017. Annual contributions into the new scheme will be capped at £3,600 and will be increased in line with earnings. The self-employed will not be subject to auto-enrolment but will be able to opt into Nest.
The Government expects Nest to have between four million and eight million members by 2050. This will make the Nest pension fund one of the biggest in the world, with tens of billions of pounds in assets.
Nest will be a trust-based defined-contribution occupational pension scheme. It will be regulated in much the same way as existing trust-based defined contribution schemes.
Should you wait to start your pension plan? I suggest you speak to your employer to ask what their intentions are for staff pensions.
The way you go forward depends on the answer but do not delay. Enrolment into Nest will not be fully up and running until 2017 and every year of delay means you will probably receive a lower eventual pension.
Kim North (kim@techandtech) is director of Technology & Technical
