In a bold move aimed at incentivising individuals, particularly healthcare professionals, to extend their working years, the UK government announced the abolition of the Pension Lifetime Allowance (LTA) in the 2023 Autumn Statement. Set to take effect from April 6th, 2024, this decision seeks to encourage more people, especially doctors, to remain active in their professions for longer durations.

Abolishing the LTA

The abolition of the LTA is expected to benefit individuals with substantial retirement savings, as well as public sector workers with sizable final salary schemes. However, amidst the anticipation of this policy change, concerns have been raised within the industry regarding the pace of implementation and its potential implications for customer advice and outcomes.

Industry experts have called for clarity and guidance on the new rules and regulations, urging the government to provide further details to facilitate a smoother transition. Some industry leaders have even advocated for delaying the implementation of the abolition until 2025 to ensure a more seamless adjustment period.

Despite the abolition of the LTA, complexities persist within the pension system, including caps on tax-free lump sums and lump sum death benefits, adding layers of intricacy to navigating the new regulations.

Review of State Pensions

In addition to the abolition of the LTA, the government's 2023 Review of State Pensions shed light on the challenges posed by increasing life expectancy and the fiscal sustainability of the State Pension. As the retirement age is set to rise to 67 between 2026 and 2028, questions arise regarding the government's commitment to intergenerational fairness.

The triple lock mechanism, which guarantees State Pension increases by the highest of inflation, average earnings growth, or 2.5%, continues to be a focal point of discussion. Despite criticisms regarding its cost and fairness, both the Conservative and Labour parties have shown reluctance to reform the triple lock agreement, emphasizing the importance of safeguarding pensioners' financial security.

It remains crucial for individuals to stay informed and proactive in managing their pension plans amidst evolving regulations and policies.

Shampa Roy-Mukerjee is an Associate Professor (Economics) and Director of Innovation and Impact, at RDSBL, UEL.

If you are already receiving your pension or you are keen to keep on track of your pension plan options then you might be wondering what the triple lock system means.

Triple lock pension

This is the system which maintains the rising pension payments so they stay in line with the rise of inflation and cost of living. The triple lock pension ensures that the state pension pot rises with the average earnings growth, inflation or 2.5%, whichever one is highest.

This systems allows pensioners who are relying on the state pension to be able to afford rising prices without worrying.

The BBC reports that Jeremy Hunt has promised that the triple lock system will remain apart of the conservative manifesto if they win the next election.

This promise is no surprise as pensioners are a large portion of the conservative voting demographic.

The state pension cost £110.5bn in 2022-23 which is just under half of the total government spending's on benefits.

The Office for Budget Responsibility estimates this will grow to £124bn this year.

How does this affect me?

If you are currently receiving state pension or are going to start in the near future you can feel secure knowing you state pension allowance will continue to rise in line with the cost of living prices.

This also mean that the cost of paying for these benefits is going to increase each year as more people reach retirement age than the young working population.

The new triple lock system could mean paying income tax for many pensioners. 

For starters, life expectancy has increased, making the average retirement period longer. Research shows that babies born after 2007, around 50% of those are expected to live to 104 years in the US.

Coupled with a longer retirement is the soaring cost of living, which in recent months has reached stratospheric levels, as inflation and macroeconomic problems have seen prices climb to their highest in more than four decades.

More and more companies have scrapped the idea of a defined pension benefit as well. The shift in workplace loyalty among newer generations has given soon-to-be retirees and current employees less financial support from employers toward their pensions. Today, the average monthly Social Security benefit for a retired worker is about $1,681, and will potentially rise to $1,827 in 2023.

For the millions of soon-to-be-retired Americans, plumping their savings and boosting their pension with some alternative investment opportunities will be one of the best options they have as they look to navigate the uncertain financial road ahead.

Retirees planning to pay off their mortgage, travel to exotic destinations, migrate to a different state, or even do a cross-country road trip will need a bit of cash to do all these things while still being able to live comfortably.

Here’s a look at some alternatives to invest your pension for a more comfortable retirement.

Dividend income funds

Often individuals will purchase stocks or dividend-yielding stocks that provide them with an alternative income stream. For retirees that are looking to minimise their risk against a volatile market, dividend income funds can provide a steady income over the years, especially if companies decide to raise their dividend payouts.

Dividend income funds often consist of a fund manager that manages the fund and the dividend-paying stocks, which makes it a more suitable choice for any person, even if they have no prior trading or investing experience.

In some instances, companies will allocate dividends that may be taxed at a lower rate compared to that ordinary income or interest. In this case, these dividends are classified as “qualified dividends” and should be held in non-retirement accounts or funds.

Real Estate Investment Trusts

In 2020, around 58.1% of working-age baby boomers, between the ages of 56 and 64 were most likely to own at least one type of retirement account. Often, working individuals who are soon to retire will either have an IRA, Roth IRA, or a standard 401(k).

While these products can produce significant savings for retirees, investing in real estate, or at least in a real estate investment trust allows them more opportunities to grow their wealth and their retirement portfolio.

Like a dividend mutual income fund, a REIT is a mutual fund that either owns or invests in real estate property. These funds are typically managed by a team of fund managers, and in most instances, investors are allocated an income as the fund matures over time.

REITs are a simpler, yet a safer option for retirees, as it allows them a better chance to invest in property and real estate, without directly exposing themselves to market volatility. Think of it as a way to increase your savings and wealth, regardless of whether you’re planning to use those savings to build your dream home or relocate abroad to Canada or somewhere exotic - REITs often provide better security for pensioners.

Annuities

When planning to invest in annuities, it’s best to consider the two types of annuity products that are available. For starters, fixed annuities are often considered to provide retirees with a guaranteed income for life, which can help them hedge inflation and potentially offer tax-deferred growth.

The second annuity product is fixed index annuities, which have the same benefits related to the before mentioned but have marked-related growth factors. This means that fixed index annuities are considered more of a risk, as they can fluctuate with the market, but depending on the index it may be related to, the reward may often be higher than regular annuities.

There are several benefits to annuities, and retirees should consider each product and their benefits individually before adding it to their retirement portfolio.

Exchange Traded Funds

Often considered a traditional investment option, ETFs are mutual funds that are a mix between stocks and bonds that often track the index benchmark. With ETFs, individuals have the option to buy and sell their mutual fund at any point, as they are priced in real-time, and traded on the stock exchange.

Usually, retirees or early novice investors will opt for ETFs as these are considered safer investment options, and are relatively affordable to buy. Important is the fact that the longer you hold an ETF mutual fund or any related stock pick, the better your chances of increasing its value over time.

This is true for most investments, and when it comes to ETFs, it’s easy to hold onto it well into retirement, only to later sell it off once it has reached a pinnacle. The longer you hold, the more valuable the fund, and the more likely you are to save on fees and additional costs which can be directed towards your retirement fund.

Why is investing important in retirement?

There are several important reasons why one should look at different investment opportunities well before or during retirement. Traditional pension and retirement plans, such as a 401(k) or Keogh Account are no longer enough to financially sustain you during your retirement.

The soaring cost of living, volatile markets, and uncertain labour conditions have made it increasingly hard for many individuals to plan and save for their retirement. Instead of holding onto the idea that life savings or an emergency fund will be enough to keep you going once you hit retirement, it’s best advised to start looking for alternative pension options that can help give you a comfortable retirement.

Final thoughts

As many soon-to-be retirees enter their golden years, some have opted to park their pensions in several investment opportunities that can provide them with a sustainable income. Not only are there more options available for retirees in terms of boosting their retirement portfolio and savings, but often these products can provide better financial security as well.

Planning for the future can be hard, as we’re not sure what to expect or what to plan for. Yet, it’s rather better to have a financial safety net in place now so that by the time you retire, you can live comfortably off your earnings.

Having spent your entire adult life building up your funds, you deserve to enjoy them, however, and wherever, you’d like. But this is a major financial step and one that deserves careful consideration before it is taken.

From Brits who have settled in NZ, to Kiwis who have returned home after working in the UK, many have found that the pros of transferring their UK pensions over to New Zealand outweigh the cons.

To help you make a fully informed decision, and avoid any unexpected hiccups, in this article we’ll work to clarify the process and outline the most important considerations.

What should I consider before transferring my UK pension to NZ?

Before deciding to move your funds from the UK to New Zealand, ask yourself the following questions:

• What benefits might I lose by moving the money to NZ?
• What (if any) fees will I be charged?
• What are the tax implications?
• Will there be a change to the age at which I can access my pension?
• Should I hire a financial adviser to help with the transfer, and who should I choose?

You should also familiarise yourself with Qualifying Recognised Overseas Pension Schemes, otherwise known as QROPS. In short, these are annuity-based funds, based in offshore financial centres, that can help you to transfer your UK pension to New Zealand in a quick, easy and tax-effective manner.

What are the pros and cons of transferring my UK pension to NZ?

Let’s start with the good news: there are a number of benefits that can come with transferring your UK pension to New Zealand, including:

• More control over your funds (and in turn, your life.)
• Some NZ pension schemes offer more investment options than UK private pensions.
• UK-based administrators and former employers can no longer reduce your benefits if they face deficits.
• There’s no cap on the level of income you take (though be aware that amounts withdrawn over your Lifetime Allowance may be taxed.)
• No reduction if you choose to retire early (many UK schemes apply a reduction for every year you retire early.)
• Eliminate ongoing exchange rate fluctuations and international bank transfer charges.
• Consolidate personal and occupational pensions into a single NZ scheme.

There are however some potential drawbacks that come with transferring your UK pension to New Zealand, including:

• Losing your UK pension scheme and any associated benefits.
• Losing any income guarantees that may be built into your pension.
• Losing any associated spouse or dependent pensions.
• Losing annual increases and inflation-linked increases that may be built into your UK pension scheme.

Will my UK pension get taxed in NZ?

Your pension can be taken as either tax-paid income or a potentially tax-paid lump sum. If you leave your pension in the UK, you will be liable to pay NZ taxes on any income you take from it. If you bring your pension to NZ, there will be no NZ taxes to pay if it is transferred as a lump sum, provided:

• You transfer within four years of your move to NZ.
• You are registered as a tax resident.

Pension transfers and lump sum withdrawals from UK pensions are taxable in NZ beyond that four-year period. Depending on your residency and financial position, your tax liability is based on either the ‘schedule method’ or the ‘formula method’. The mathematics of this can quickly become complex, so at this point, it’s best to seek professional financial advice.

In terms of ongoing tax, NZ pension scheme growth and earnings are generally taxed at New Zealand's standard income tax rates which are dependent on your total income. Earnings on UK-based pension schemes and investments may also be liable for NZ’s Fair Dividend Rate tax. UK personal pensions, meanwhile, can grow almost tax-free (up to the Lifetime Allowance limit.)

Ultimately the control and opportunity that you gain from moving your funds over to NZ can make these higher taxes worth it, but you should carefully weigh up the consequences of such a move.

Ultimately the control and opportunity that you gain from moving your funds over to NZ can make these higher taxes worth it, but you should carefully weigh up the consequences of such a move.

Final thoughts

Retirement planning by itself is complicated enough, and that’s before the complexity and red tape of international finance is added to the mix. Nevertheless, bringing your pension over to NZ could represent a wise move that pays real dividends, both in terms of growth and control.

The combination of importance, opportunity and complexity make this a task worthy of professional assistance. It’s wise to speak with a financial adviser who specialises in these matters to ensure you’re not only doing things the right way, but in the way that is most beneficial to you.

In situations that deal with such large sums, a professional financial adviser will inevitably pay for themselves many times over.

For more information, visit https://www.myfutureplan.co.nz/. 

How to secure your pension using cryptocurrency?

The idea of retirement is changing quickly. People are no longer content with working for the same company for decades and then living on a modest pension. Many invest their money, so they can retire early and ensure their retirement funds are much more substantial. If you are up for this, you need to have a good understanding of how to get good returns, and why cryptocurrency as a type of investment is becoming popular. 

Inflation is a silent killer

Bank savings accounts don't work anymore. Interest rates around the world are approaching 0% as banks try to stimulate the economy. That means you earn almost nothing for placing money on deposit. It gets much worse than that. The financial crisis in 2008 and the coronavirus pandemic are only some of the events that make governments print more money than ever. 40% of US dollars in existence were printed in just 18 months in 2020/2021, which inevitably leads to inflation. Prices of goods and services will increase over time, effectively making your money decrease in value. 

The combination of 0% interest rates and huge money printing means that the old retirement playbook no longer works. If you want to grow your wealth with compound interest over time, you need to invest in other assets. One asset that is immune to inflation is cryptocurrency. 

Benefits of cryptocurrencies as an asset

Cryptocurrency has caught the attention of retirees because of its immense returns over the last few years. Investing $1,000 in Bitcoin in October 2016 would have got you a 1.57 BTC, which now amounts to almost $79,000. If you invested the same amount in Ethereum in 2016, it would now be worth about $300,000. These returns on investment are ridiculous. It's why there are so many Bitcoin millionaires in the world. So, what is driving such insane growth in the value of cryptocurrencies? The first reason is the growth of the crypto market. It is expanding quickly, and those that invest early reap the rewards. Crypto still likely has a long way to go in this regard, as the technology has not made it to the mass adoption point yet. 

However, there's something else going on. Bitcoin and many other cryptocurrencies have a tightly controlled supply. There are only 21 million BTC that can ever exist. This is written into the Bitcoin protocol and will never be changed. Because of this limited supply, the coin is immune to inflation from money printing as we discussed earlier. In fact, Bitcoin is deflationary in nature, meaning when you hold it, prices will seem to deflate relatively to your currency. This is a great thing for you as an investor. 

Another benefit of investing in cryptocurrency is that crypto assets are weakly correlated with other traditional assets. Price changes in the stock market or currency markets don’t automatically bring cryptocurrency prices with them. This means cryptocurrency is a great way to diversify your investment portfolio. It works as a defensive asset to hedge against crashes in other areas of the economy. 

Your retirement plan

If you want to add digital assets to your retirement investment portfolio, you’ll need a plan to do it successfully. The first step is to get started. Cryptocurrency is still growing in value quickly, and the earlier you can get in, the better. The market may go up and down after you buy, but remember: this is a long-term investment. Try not to get too caught up in the ups and downs of the market. 

If you're new to cryptocurrency, you'll also need to educate yourself. Investing in crypto is a little different from other assets. There are some technological and legal hurdles to overcome. These may be very easy or difficult, depending on where you live. You can follow many crypto influencers to learn more about cryptocurrency. Or, you can also take some of the many online courses to get familiar with specific cryptocurrencies. 

The most important thing when investing for retirement is to diversify. When you're going for the long term, anything can happen in the markets. Having all your eggs in one basket is a terrible idea when looking for good returns over decades. So, don't put all of your pension in Bitcoin. This means diversifying beyond crypto (have traditional assets like stocks, gold, etc. in your portfolio) and also diversifying within crypto (having multiple cryptocurrencies in your crypto portfolio). 

Risks of long-term investments in cryptocurrencies

Keep in mind that cryptocurrency is a risky asset. Many people have made a ton of money in cryptocurrency, but just as many have lost considerable sums of crypto, too. Cryptocurrency is volatile and can suddenly crash in value. This happened many times in the past. Cryptocurrency is also vulnerable to hacks and theft if you don't look after it properly. Then, there's a simple risk you might 'lose' your cryptocurrency by losing your “keys” (like your crypto password). If this happens, it's gone forever. Many governments haven't yet officially decided on the legal status of cryptocurrency, so the legal risk also exists. If you want to invest in crypto for retirement, you're going to be a pioneer. No generation has done this before. The risks are real, but the rewards can be very large. 

Cryptocurrencies on a retirement account

In some countries like the USA, you can already save cryptocurrency on your self-directed Individual Retirement Account (IRA). They work just like regular IRAs, except a self-directed IRA allows you to hold alternative asset classes like cryptocurrency and real estate.

One of the biggest advantages of having crypto as a retirement investment is the diversification of your portfolio. The more diverse it is, the more protected your account will be in case of any market downturns. With the crypto market growing in popularity each year, there is also a high chance that it will bring you large financial benefits if you invest in it now. Amongst the main disadvantage of having cryptocurrency as your retirement investment is its high price volatility. Take Bitcoin as an example: in December 2017, its price dropped to $14,000. Although the price increased and reached new heights in 2021, many might pick a more stable alternative to crypto.

Conclusion

Investing for retirement is getting trickier with time. Gone are the days when you can just leave your savings in a bank account and earn high interest from the bank. Now, inflation is silently eating away at the savings of those that aren't aware of it. Cryptocurrencies are a new inflation-proof asset class that provides extremely high returns for long-term investors. Just be prepared for a wilder investment ride than other long-term assets. 

Andrew Megson, executive chairman of My Pension Expert, explores the risks of property as a retirement investment.

There is no easy answer to this question. Especially in the current economy, as inflation has continued to climb up to record levels whilst interest rates remain low, there is a clear case to be made for entering the property market. Add into the equation the fact that house prices have rebounded at pace since the first lockdown – allowing buy-to-let properties in the UK to prosper and increase in value by 5.8% year-on-year – property may constitute a sound investment for some. 

 Clearly, this may provide some impressive returns in retirement. However, it is important to note the various risks that inevitably come when individuals replace a traditional pension with a property portfolio, as Haldane’s suggestion may be reckless for some. With this in mind, what should pension planners consider before taking the leap?

Hidden costs can be more than retirees bargain for

 Firstly, it is important to acknowledge that property can be a sound investment for some, offering the prospect for long-term capital growth. That said, it is equally important to note that house prices don’t always reliably head upwards.  

 In times of economic hardship, like a recession, the market typically slows and causes properties to fall in value. The result of this is that individuals are likely to see their property lose capital. Likewise, in this scenario negative equity becomes a possibility; this tends to happen when individuals have paid more money for the property than it is worth. It goes without saying that this sort of volatility is rarely an issue for those who have a more traditional pension pot. Even throughout the COVID-19 crisis, many individuals have still been able to enjoy positive pension growth this year.

 Other important factors that those considering this option should mull over, are the ongoing costs associated with running a property, as these can accumulate, chipping away at retirement funds. Costs can be varied – from landlord’s insurance, maintenance fees for wear and tear, property management, letting fees, or simply even furnishing the property. Letting fees alone are usually somewhere in the region of 15%, and this is before retirees have factored in any void periods where the property is vacant, which is likely to happen from time to time. Together, these costs can amass, leaving prospective retirees financially vulnerable, if they have no plan B. 

Considering tax and liquidity risk 

Tax burdens can pose further issues. It goes without saying that buy-to-let property owners will normally end up footing a higher tax bill than before, due to legal, stamp duty, and survey fees, as well as several taxation changes affecting landlords and those who own a second (or several) property. For example, there is a 3% stamp duty surcharge for second homes, as well as an increased capital gains tax. These costs can be very steep, making the cost of buying and owning an investment property an extremely expensive business. Put simply, this can lead to diminished returns in retirement. 

Furthermore, individuals should also consider liquidity risk  – that is, how easy (or difficult) it is for an individual to reclaim their funds when they need them. Often, selling a property can take several months, and sometimes even longer, which means that any people who are relying on the sale proceeds to fund their retirement will need to plan way ahead, and have a contingency plan in mind, on the off chance that the sale falls through, or the markets crash.

Evidently, using a property portfolio to fund a retirement is a very involved process, and can be extremely costly. As such, those seriously considering this as an option must carefully weigh up all these considerations to ensure that committing to property investment is viable and profitable enough to see them through retirement.  

The importance of financial advice

Just like any investment, the property investment process carries risk. For this reason, individuals would do well to seek independent financial advice before making any big commitments – particularly because taking out a significant amount of cash from their pension pot to fund a property can entail serious implications and tax penalties. 

After reviewing all the relevant information, some individuals may decide that doing away with a traditional pension entirely is too risky. In this eventuality, an independent financial adviser (IFA) will be able to suggest a more suitable investment strategy. Certainly, unlike property investment, retirees are likely to experience more tax relief from a pension pot, as these investments are sheltered from the likes of capital gains tax and stamp duty.

Ultimately, owning a property as part of a wider investment portfolio can be a very prudent option, allowing individuals to make some notable returns. That said, prospective retirees should not put all their eggs in one basket and discount traditional pensions altogether. In many ways, factoring in a more traditional pension may offer more security and tax-efficiency in the long-term. 

About the author: Andrew Megson is the Executive Chairman of  My Pension Expert, the UK’s number one Advised Retirement Income Specialist. Founded in 2010, My Pension Expert specialises in providing independent advice to UK consumers about their pension plans – it arranges millions of pounds worth of retirement income options each week.  

Annie Button, professional content writer and branding aficionado, discusses the key factors to consider when deciding  whether you're financially secure enough to retire. 

However, before you hand in your notice for the final time and embark on a life of volunteering, travelling, charity working, fishing or whatever you envisage yourself doing, it's important to weigh up whether now is a good time to retire or not. Choosing to retire is a big decision, after all, and it is one in which many workers are actually a little scared of making. This is largely due to the horror stories that many people will have heard about those who retired too soon, resulting in a combination of financial, income and lifestyle restrictions as a result. What's more, with the coronavirus pandemic adding another layer of uncertainty to the world's economics, the decision-making process has become even more complex for pre-retirees weighing up whether now is the right time or not. So, with this in mind, we thought we’d try and address one of the key questions many people ask when deciding when to retire: how do you know if you’re financially secure enough? Join us as we discuss how you can work this out for yourself.

Think about your bills, bills, bills

To determine your financial stability, your first port of call should be to look at your incomings, outgoings and bills, bills, bills. If you still have mortgage repayments to make, for example, ask yourself how you will be able to fund them during your retirement. Would it make more sense to pay off your mortgage up-front before you retire, freeing up a lot more money for your post-retirement plans? Or will you still be unable to for a few years yet?

 You will also need to consider the other utilities costs as well. While you should see your commuting costs come down during your retirement, spending longer at home could increase your gas, electric and entertainment bills significantly. Therefore, weigh up whether your pension pot will be able to cover these costs.

 Weigh up what you want

 It’s all well and good making the decision to retire but it’s imperative you don’t underestimate what that will actually involve. The amount of money you need will largely depend on how you foresee your retirement going. If, for example, you fancy travelling the world in your newfound downtime, that will cost a lot more than simply spending more time in your home and garden.

 As such, it’s important to follow the three tips listed below:

 1. Know what you have. Put simply, you need to understand what exactly your pension can do for you when you retire, especially when accessing it under the updated Pension Freedoms Rules. Only you will be able to determine whether what you have available is enough to support the retirement lifestyle you want to lead. 

2. Know what you want. Along a similar theme, while you don't need to explicitly decide what you want to do in your retirement in advance, it will certainly help when it comes to addressing doubts over your post-retirement financial security.

3. Know how long to plan for. Almost 80% of people aged over fifty underestimate their life expectancy. As such, it's important to think realistically about how long your retirement is likely to be and how long you'll need to keep your pension running.

Think about your family

 If you have children, answering questions about your financial security when retiring could depend a lot on them and their circumstances. If, for example, you have aspirations to help fund the home purchases of your children or grandchildren, it’s important to include these when deciding whether to retire or not. While taking out an equity release mortgage can help during these moments, if your pension income is unable to cover the repayments you’ll need to make for releasing equity on your home, you may be unable to help in the way you’d like. Therefore, be realistic about what you think you will – or won’t – be able to afford to help your family out with after you’ve retired.

Final thoughts…

Deciding when to retire is one of the biggest decisions you’ll ever make, and is certainly one you don’t want to rush. However, taking the time to make sure you are financially secure to retire should provide you with the reassurance you need to make the best decision for your future.

If you are hitting your fifties now, and you don’t have a pension pot or any savings, you’ll be pleased to hear it’s not too late to do something about it.

In fact, it is never too late to start saving for old age. Obviously, the sooner you get started the better, so why not make that now?

In this article, I’ll be looking at some of the pension and saving options for late starters. Whether you’ve just hit the big five-oh milestone, or you are creeping towards retirement, there are still ways to build a savings pot and make your money work better for you,whether that’s through a pension, learn from an investment blog or otherwise.

First up let’s take a brief look at the State Pension.

What pension will you get from the State?

The State Pension is a regular payment from the Government you can claim when you reach State Pension age. The amount you get is based on how much you have paid in National Insurance contributions.

The State Pension age has undergone radical change in recent years. Women used to be able to get the State Pension at age 60, and men at 65. From November 2018, both men and women have to be 65, but this is gradually increasing, depending on when you were born. The State Pension age will reach 67 for both men and women by 2028. It could change again in the future.

The full amount of the current State Pension is currently £168.60 per week. Check how much State Pension you could get here.

A pension is actually a tax-efficient way of saving money

Independent Financial Adviser (IFA) and pensions specialist Adam Reeves, says “No matter how old you are it is never too late to think about financially planning for your retirement and paying into a pension scheme. It is actually a tax-efficient way of saving money.”

If you are a UK taxpayer, you will can get tax relief on pension contributions of up to 100 per cent of your earnings or £40,000 annual allowance (whichever is lower).

Pension tax relief is paid at the highest rate of income tax you pay, so for basic-rate taxpayers it is 20 per cent, for higher-rate taxpayers it is 40 per cent and for additional-rate taxpayers it is 45 per cent.

What does this mean? If you are a basic-rate taxpayer if you contribute £100 from your salary into your pension it will only cost you £80 – the government pays £20 (the tax you would have paid on the £100 of your salary). Higher-rate taxpayers benefit more.

See more about tax relief on pension contributions here. As you can see, the tax relief available on pensions is particularly attractive to higher earners and additional rate taxpayers.

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What is a private pension?

Sometimes called a personal pension, and commonly referred to as a ‘Self Invested Personal Pension’ (SIPP), a private pension is a type of investment scheme. You make monthly or one-off payments into a pension plan. Your pension scheme provider adds tax relief to that. The money you put in to the pension plan is invested in a range of assets, such as bonds, shares, property and cash.

How much you get from your pension plan will depend on how much you save, how it is invested and the type of pension plan you have.

It is important to seek independent advice when considering any pension scheme or other form of investment as there are risks. The return on your investment can go down as well as up.

Workplace pension schemes

If you are working in the UK, are aged 22 or over, are under the State Pension age and earning more than £10,000 a year, then you are likely already signed up to a workplace pension scheme (unless you have opted out).

Many workers are now covered by pensions auto-enrolment. This is a government scheme to help people save for later life.

Since 1^st February 2018, all eligible workers in the UK must be enrolled in a workplace pension scheme. The amount you and your employer contribute has been increasing since the scheme was introduced. From 6^th April 2019 your employer pays 3 per cent of your qualifying earnings and you pay 4 per cent of your qualifying earnings.

If you have previously opted out, you can rejoin, but your employer only has to action one request from each member every twelve months. See more about rejoining your auto-enrolment workplace pension scheme here.

What are the alternatives?

As well as considering a private pension, there are lots of other money-saving tips for over-50s. Now is the perfect time to give yourself a money makeover. Any savings you can make in your expenditure now can be saved for your retirement.

ISAs are another tax-efficient way of saving money. The term ISA stands for Individual Savings Account. It essentially allows you to save money tax-free. See if an ISA could be right for you here.

Profile Pensions has investigated how employer contributions to pensions vary based on industry and gender and which sectors offer the best pension planning with high contributions from employers.

The Best and Worst Industries for Employer Contributions

The financial and insurance industry has been revealed as the most advantageous option for obtaining support. Although, as a sector renowned for its remunerative staff benefits, it’s no surprise that employer contributions are at an average of 9.5%. The education industry also fares very well in terms of pension options, with teachers receiving a rewarding 9.3% average contribution. This is followed by the electricity, gas, steam, and air-conditioning supply industry, however, this is significantly lower than the prior two with average contributions of only 7.1%.

At the other end of the scale, agriculture, forestry and fishing jobs offered the minimum legal contribution of just 2%, making it them worst occupations for creating a satisfactory pension pot. As an industry which is also climate dependant, this further defers individuals seeking a financially secure retirement after an unpredictable career. The accommodation and food services sector received a similarly low employer contribution of just 2.1%. While the arts and entertainment industry had the third lowest employer contribution, where it reaches only 2.5% on average. Although as a notoriously competitive industry, it’s anticipated that employers can get away with such a low contribution and a major factor to consider when navigating the risky world of entertainment.

Not All Pensions are Created Equal: The Gender Gap

Gender stereotypes still exist across industries with men receiving an overall higher contribution rate than women, at 4.6% compared with 4.4%. Education, as a female dominated industry, was the only industry where women outperform men in terms of employer contribution, where they receive 1.4% more annually. These high pensions also mean that teachers are likely to fare better in retirement than those in typically high-earning careers like real estate or finance. In technical areas, men acquired higher contributions and in the electricity, gas, steam, and air-conditioning supply industry, men had an employer contribution of 7.4% compared with 4.2% for women.

When looking at the gender differences, it’s clear an effort to increase the employer contribution in the male permeated professions should be made in order to incentify women to pursue these types of careers. Generally we know women are more likely to have lower incomes and more interrupted careers as a result of their caring responsibilities. Ensuring the pension contributions doesn't penalise them is as much of an organisational culture issue as it is a government policy issue.

Interested in Better Contributions? Here are the Jobs and Salaries Available in These Generous Sectors

We have crunched the numbers on the jobs available and average salaries for the most generous industries. The education industry has 102,805 jobs available in the UK, making teaching the most in high demand profession. When combined with the competitive employer contribution, it’s one of the best options for graduates seeking stability when finding a job and creating a secure retirement package. On the other hand, the administrative and supportive services sector has the lowest average salary bracket, equating to only £544 in contributions each year; an unattractive choice in terms of wages both during and post career.

The mining and quarrying industry offers the most enticing average compensation for it’s workforce with an annual salary of £39,51, although has only 2404 available positions in the UK each year. Similarly, the agricultural, forestry and fishing sector has an average income of £29.451. However it has the fewest number of jobs available and lowest employer contribution compared to any other industry, making it a very risky option in the long term.

Identifying this comprehension gap, urging Millennials understand the gravity of today’s decisions on tomorrow's financial future, pensions experts, Profile Pensions, have researched average millennials spend and compared it to the government provided State Pension, revealing a concerning £1000 per month difference between the two monthly incomes.

Spending an average of £1770 a month, including living expenses, social activities and simple pleasures, the reasonable spend amount is still 142% more than what would receive if they only have the £731 State Pension to rely on.

With rent alone coming to 118% of the State Pension, even if millennials are to cut out all luxuries from their spend, such as Netflix, take away and nights out, the total spend of £1318 further raises the alarm bells that the State Pension is unsustainable.

Though, with the help of the Workplace Pensions Scheme and early intervention, little sacrifices can mean a world of difference for your future self.

The pension provider offers tips to both help slightly cut costs and take advantage of the scheme to maximise your benefit.

Take advantage of your company’s workplace pension scheme

Due to auto enrolment, you’ll be saving a minimum of 8% of your salary per month towards retirement. Comprised of a 5% deduction from your pay and a 3% employer contribution, the 3% employer contribution is money you will not otherwise receive that is added to your pension pot for your future self. The 5% you contribute provides added tax relief.

Be proactive and make sure your scheme is best for you

As with many things, the default option may not be what’s best for you. Looking at your pension plan now could make a considerable impact . Most workplace pensions

Cook for yourself, rather than take away

It’s a 101 saving tip but choosing to cook for yourself can be one of the easiest ways to cut costs. The average amount spent on groceries and takeaways together equals over £300 a month, by trading Deliveroo for Tesco, you could be putting aside as much as £110 a month towards your pension.

Enjoy nights out but be savvy about them

The average monthly amount spent on nights out is equal to 32% of the full state pension. While enjoying yourself while your young is important and this is an expense you’re likely to pay less in retirement, spending less while you’re out, considering cheaper options or just staying in a little more can cut costs in half and save you £100 a month to go towards your private pension pot.

The full study, including a full breakdown of expense, is available at Profile Pensions.

Life expectancy may have stuttered over the past two years, sitting at an average of 85 for people over 65, but as populations continue to grow and live for longer than ever, it has never been more important to make correct and informed choices about how our assets will last the course.

Here, Tony Duckworth, MD and Chartered Financial Planner at Cowens Financial Architects, discusses how we can safeguard our precious pension pots through sound financial planning.

It’s no secret that state pensions aren’t enough to cover most people’s plans for their leisurely retirement years. The push on the need for private savings from the government and the introduction of the compulsory work-place pension in light of these ever-increasing age stats have further heightened the pressure on working people to get their finances in order. The good news is, it’s never too late to start putting the wheels in motion to build a portfolio of assets designed to meet your future financial needs, while also ensuring loved ones are protected should the worst happen.

The introduction of Pension Freedom in April 2015 means that anyone over the age of 55 can now withdraw their hard-earned private pot as a lump sum, paying no tax on the first 25%. This move, although liberating for many soon-to-be retirees, has opened a labyrinth of options and potentially wrong decisions.

Recent research from the FCA (Financial Conduct Authority) has found that around 100,000 over 55s withdraw money from their pensions every year without seeking financial advice[1], something the organisation is campaigning hard to change. It’s difficult to imagine that this many people have got to this point without any sound advice.

Recent research from the FCA (Financial Conduct Authority) has found that around 100,000 over 55s withdraw money from their pensions every year without seeking financial advice.

Having a comprehensive financial plan with a clear strategy to deliver to your retirement needs is key to understanding the best way to maximise your pension freedom. A Ferrari may seem a fantastic idea within the first week of your new-found retired lifestyle, but in many cases, your pension pot will have to last for almost as many years as it took to save it and a purchase like this may put too much strain on your pot to meet your needs for the remainder of your lifetime.

Care must also be taken when looking at annuities, although well-advertised as a sensible alternative to withdrawing lump sums of your pension, exchanging your pension pot for a monthly income is irreversible, holds little flexibility and gives little scope to pass on benefits to future generations. With no chance of growth, an annuity won’t earn you any interest and restricts your ability to invest for the future. In fact, since pension freedom was introduced, sales of annuities have tumbled by 80% according to the ABI[2] (Association of British Insurers).

The easiest way to protect your funds and cut through the confusion is to seek expert financial advice – it’s the best way to understand when you can retire with confidence, while also ensuring your assets are structured suitably and invested in a risk-managed strategy designed to maximise potential returns. An adviser will spend time discussing what is important to you in life, your goals and aspirations for the future, and learn about the important things you want to plan for. Creating a clear vision for your retirement is the most solid route to understanding what is possible with the money you’ve saved.

Seeking expert help both throughout our working lives and as we hit retirement age is a sure way to take the dreaded stress and worry off our shoulders when we hit our 60s.

There is hope when it comes to the increasing retirement age – a financial adviser may be able to plug the gap between when you want to retire and when your state pension kicks in, structuring your assets and income to minimise tax payments and help your money go further. In the best case, retirement may be closer than you imagined!

When planning for our futures, ‘what ifs’ still need to be taken seriously and a rainy-day fund is essential. With the NHS in the UK in turmoil and people living way into their 80s and 90s – the cost of private health care, medication, and elderly long-term care must be accounted for within a financial plan.

In 2017/18, Paying For Care found that the average cost of a residential care home in the UK was £32,344 a year, rising to over £44,512 a year when nursing care was included[3]. Just one hour of daily care can total up to £6,700 per year in some parts of the country. State funding rules are constantly changing – currently, if your assets come to a total of £23,250 or more by the time you or your partner need this type of care, you will be expected to cover all care costs yourself, which could leave you short if the right measures aren’t in place. A financial expert can help with things such as equity release, payment schemes, and insurance policies to guarantee your cash flow and take some of the burden if care was needed.

Although financial planning and retirement planning are essentially two separate entities, they must go hand in hand in order to provide the lifestyle you want. Getting down into the granular detail of your finances as you approach retirement is the best way to assess what actions are needed to maximise your assets to last. Seeking expert help both throughout our working lives and as we hit retirement age is a sure way to take the dreaded stress and worry off our shoulders when we hit our 60s.

As we strive to save, invest and grow our assets over the course of our working lives, the transition to withdrawing and living off those funds may seem a terrifying concept. But through solid advice and good decision making, you can guarantee financial freedom throughout your golden years.

About Cowens Financial Architects

Cowens Financial Architects is a trading name of R A Cowen and Partners Financial Services Ltd, part of Cowens Group. The team delivers a range of financial planning services, focused on helping people to make the right financial decisions, including financial planning, investment advice, retirement planning, and inheritance tax planning.

 In addition to the financial planning provided by Cowens Financial Architects, the business also provides corporate financial planning through its brand, Cowens Employee Benefits Ltd.

R A Cowen & Partners Financial Services Ltd. Registered office: Inbro House, Commercial Gate, Mansfield NG18 1EU. Authorised and regulated by the Financial Conduct Authority.

[1] https://www.moneysavingexpert.com/news/2019/01/new-rules-to-make-pensions-clearer/

[2] https://www.iress.com/uk/resources/insight-research/retirement-report-retirement-income-and-annuity-perspectives/

[3] https://www.payingforcare.org/how-much-does-care-cost/

But have you ever thought about where these came from, or how each savings initiative has changed over the years? In the following infographic, personal pension specialist True Potential Investor has taken a step through time with this question in mind.

Did you know that the first known building society formed for groups of individuals who were looking to help each other to buy property? Or that the Bank of England was founded towards the end of the 17^th century to fund the war effort against France? How about that the Amsterdam Stock Exchange was believed to be the world’s first stock market?

Discover even more fascinating facts by browsing through the full infographic below…