Pensions Consolidation

How long is a piece of string? Before you calculate how much you need on retirement, we would advise sitting down and identifying your goals, which will then inform how much you will need to invest to achieve these. However, once you decide on a regular amount to put into a pension fund, this can be altered and amended as your circumstance and goals change throughout your life.

A defined-contribution pension is a pension plan where you and/or your employer pay in a regular amount to your pension plan. The amount you get on retirement depends on how much is put in and how much this money grows including investment returns and tax relief. This is the most common type of pension plan.

A defined-benefits pension is one where the benefit payable is based on how many years you have been a member and your salary over that period or when you leave or retire.  They are increasingly less common and apply more to individuals working for large companies or in the public sector.

At Mercer & Hole, we would always advise you to take advice before consolidating your pensions, just to make sure that you understand the implications. Please don’t hesitate to get in contact with us if you are in a position where you want to review your pensions so that we can help to identify your needs and a suitable pension with a well-balanced portfolio to help you achieve your goals.

The UK government likes to reward individuals for saving towards retirement and given the tax benefits available through them, pensions offer one of the best ways to do so. Essentially, tax relief is available on your pension contributions at up to the highest rate of income tax you pay.

• Basic-rate taxpayers get 20% pension tax relief
• Higher-rate taxpayers can claim up to 40% pension tax relief
• Additional-rate taxpayers can claim up to 45% pension tax relief

If you are interested in setting up a pension and would like to find out how much you can save in tax relief, please don’t hesitate to contact our Financial Planning team.

Trivial commutation rules concern taking out pensions savings as a lump sum. Taking out cash this way is taking a ‘trivial lump sum’, however, with increased pension flexibility, this is becoming less common.

It is possible to work part-time and still receive pension income.

In theory, anything that belongs to your estate comes under IHT, however, in most cases, pensions can be passed outside of your estate, so won’t be subject to IHT. At Mercer & Hole, we work with our clients to consider the wider picture when planning their pensions to include considerations such as IHT, tax savings in general and other investments to ensure they get the best return on their investments.

If the total value of your pension benefits exceeds the lifetime allowance, there will be an additional tax to pay on the excess at some stage.

Ultimately, if you breach your lifetime allowance, you will end up with a bigger pension, despite the lifetime allowance. We would advise you to seek professional advice before you opt out of your workplace pension.

Defined contribution pensions can be passed on to anyone. It is therefore important to set out your wishes on a suitable form that you can then give to your pension provider.

There can be many unforeseen consequences when moving from one pension to another. The best approach is therefore to seek professional advice before doing so.

Most pension plans can only be held by one individual. You can pass on a pension to a loved one upon your death though.