Pensions

Pensions often play a key part in long term financial planning and many individuals accrue substantial pension funds during their lifetime. It is therefore a little surprising that what may represent someone's single most valuable asset is not reviewed as frequently as their other investments.

Pension arrangements themselves are not as simple as most would like, and this can prove problematic when planning a clear retirement strategy. Private investors, particularly those with larger funds, often have an array of options available to them, both whilst accumulating assets and then once they have started to draw their pension benefits.

Pension legislation changes regularly and it is therefore essential to keep on top of these developments and make appropriate changes when required.

Depending on the size of your pension fund there may be various options open to you at retirement which allow a lot of flexibility in how you take your benefits.

Legislative changes on 6th April 2006 introduced a single so-called "simplified" set of tax rules to apply to all pensions. Many argue that these changes have, in fact, caused further confusion and uncertainty, but it is clear that both opportunities and threats have been created.

For example, for those with pension funds exceeding the lifetime allowance there is potentially tax payable at up to 55% on any excess amount.

More positively, the annual amount of pension savings upon which an individual can claim income tax relief has increased significantly. This may be of particular benefit for high earners, and those that receive larger bonuses who want to significantly increase their pension savings over a short period.

If you read the financial press, leaving your occupational pension with a previous employer may or may not be in your best interest, depending on the status of the scheme. In our opinion it is good financial planning to review this area on a regular basis to ensure that your pension in retirement meets your expectations.

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• Pensions
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