Lloyd O Sullivan https://www.lloydosullivan.co.uk/blog Our Blog Wed, 25 Sep 2019 11:30:55 +0000 en-US hourly 1 Lasting the distance https://www.lloydosullivan.co.uk/blog/lasting-the-distance/ https://www.lloydosullivan.co.uk/blog/lasting-the-distance/#respond Wed, 25 Sep 2019 10:35:55 +0000 https://www.lloydosullivan.co.uk/blog/?p=1392
The early retirement dream lives on, but at what cost?

Whether you choose or need early retirement, having a plan can give your money the best chance of lasting the distance. Whether lifestyle preferences or circumstances beyond your control are behind your decision to retire early, you’ll need to make a plan to help your retirement savings last, while still enjoying your favourite comforts in life.

But with increasing numbers now working past traditional retirement ages[1], stopping work can seem a long way off, especially for younger people. But the good news is that the early retirement dream lives on, according to new research[2].

Escape the daily grind early

Nearly two thirds (60%) of those stopping work this year are doing so before their expected State Pension age or company pension retirement date. The study also found that the average expected retirement income, inclusive of savings and State Pension, for those retiring early is £18,567, compared to £21,961 for those not retiring early.

It appears that those planning to escape the daily grind early feel the most comfortable when it comes to their financial situation in retirement, with over half (56%) saying they feel financially well prepared, compared with 49% of those working towards their expected retirement date. That’s reflected in the numbers taking professional financial advice – 68% of early retirees are seeking professional advice, compared with 60% of those working until their projected retirement age.

Make the most of free time

The average age of those retiring early is 57, and early retirees will be making the most of their free time – over a third (37%) plan to take up a new hobby or sport, 27% will start voluntary or charity work, and nearly a fifth (17%) are planning a long-term holiday or gap year.

It’s encouraging to see that so many of this year’s retirees are in a comfortable enough financial position to enable them to retire early. People stopping work early are not planning to put their feet up – they want to keep busy and active by taking up hobbies, sports and charity work, and some are even planning a post-work gap year.

Identify the best course of action

These are nice ways to spend your retirement but can be expensive, and with everyone living longer than ever before, it is vital to ensure you can fund your entire retirement. Seeking professional financial advice can help you identify the best course of action to achieve your specific financial retirement goals at any stage in your working life.

The East Midlands is the early retirement capital of the UK, with 72% of its retirees retiring early, closely followed by Wales (69%) and Yorkshire and the Humber (67%).

Time to unlock an early retirement?

If you’re thinking about early retirement, it’s important to understand what this means to you and to have a plan to make it happen. And your planning doesn’t stop once you commence your early retirement – you need to be flexible and be prepared to adjust as you move through your life. To discuss your requirements, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemploy eetypes/articles/fivefactsaboutolderpeopleatwork/2016-10-01

[2] Research Plus conducted an independent online survey for Prudential between 29 November and 11 December 2017 among 9,896 non-retired UK adults aged 45+, including 1,000 planning to retire in 2018.

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Taxing times ahead https://www.lloydosullivan.co.uk/blog/taxing-times-ahead/ https://www.lloydosullivan.co.uk/blog/taxing-times-ahead/#respond Wed, 25 Sep 2019 10:35:02 +0000 https://www.lloydosullivan.co.uk/blog/?p=1390
Don’t be penalised by the tax system when you exercise your freedoms

The ‘pension freedom’ reforms of 2015 were welcomed by consumers, as they vastly widened options available to most savers at retirement.

Pension freedoms allow savers to have the flexibility on how and when to spend their money without being penalised by the tax system, but it is worrying that some individuals plan to withdraw more than the tax-free lump sum limit.

Potential tax bill shock

For those who take their entire pension fund in cash, they not only face paying more in tax than they have to but also put their long-term retirement income security at risk. If you exercise this option, you can’t change your mind – so you need to be certain that it’s right for you.

Around one in ten (10%) planning to retire this year expect to withdraw their entire pension savings as one lump sum, new research[1] reveals, risking a potential tax bill shock and their future retirement income. The findings show in total that one in five (20%) retiring this year will risk avoidable tax bills by taking out more than the tax-free 25% limit on withdrawals.

Flexible payment withdrawals

The research suggests that some of this cash has been spent paying down debt, renovating homes, upgrading cars or helping adult children onto the property ladder. However, not everyone is necessarily spending all the cash – the main reason given by those taking all their fund in one go was to invest in other areas such as property, a saving accounts or an investment fund (71%). And interestingly, research shows around two thirds (66%) of people are planning on retiring early.

Since the launch of pension freedom reforms in April 2015, more than 1.1 million people aged 55-plus have withdrawn around £15.744 billion[2] in flexible payments. Government estimates[3] show around £2.6 billion was paid in tax by people taking advantage of pension freedoms in the 2015/16 and 2016/17 tax years, with another £1.1 billion raised in the 2017/18 tax year.

Show me the money

The most popular use of the cash is for holidays, with 34% planning to spend the money on trips. Around (25%) will spend the money on home improvements, while one in five (20%) will gift the money to their children or grandchildren. Other popular uses include buying cars or paying off mortgages.

Added to your other income

Under rules introduced in April 2015, once you reach the age of 55, you can now take your entire pension pot as cash in one go if you wish. However, if you do this, you could end up with a large tax bill and run out of money in retirement.

Three quarters (75%) of the amount you withdraw counts as taxable income. Depending on how much your pension pot is, when it’s added to your other income, it might increase your tax rate. Your pension scheme or provider will pay the cash through a payslip and take off tax in advance – called ‘PAYE’ (Pay As You Earn).

Higher rate tax band

You could end up paying more if your withdrawal added to any other income in that year takes you into a higher rate tax band. You may pay less tax if you spread out your cash withdrawals over several years and keep below higher rate bands. If you are thinking of totally withdrawing your pension fund, you might want to take into account any other earnings that you will have in the tax year, as the pension fund will be added to your earned income for tax purposes.

Drawing pension funds in stages

Everyone has a personal tax allowance of earnings before they pay tax, which might provide a way to draw pension funds in stages over a number of years. It’s a good idea to only take cash from your pension if you need it. The more you take now, the less you’ll have in future. Once you go over your tax-free cash limit, you’ll pay Income Tax on the rest.

Taking out more than your tax-free cash limit (when you start accessing taxable income) restricts the payments you or an employer can make to any of your pensions to £4,000 a year. This can be a problem if you’re still earning and either have other savings you want to pay into a pension or if you want to make significant payments into any of your pensions. In addition, any means-tested state benefits you receive may be affected if you take cash or income from your pension – check this isn’t going to be a problem before going ahead.

One of the most important decisions you will make for your future

For many or most people, it will be more tax-efficient to consider one or more of the other options to gain access to a pension pot. Deciding what to do with your pension pot is one of the most important decisions you will make for your future. When looking at the best income option for your retirement, it is essential to obtain professional financial advice. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data

[1] Research Plus conducted an independent online survey for Prudential between 29 November and 11 December 2017 among 9,896 non-retired UK adults aged 45+, including 1,000 planning to retire in 2018.

[2] www.gov.uk/government/uploads/system/uploads/attachment_data/file/675350/Pensions_Flexibility_Jan_ 2018.pdf

[3] http://obr.uk/overview-of-the-november-2017-economic-and-fiscal-outlook/

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

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What’s important to you? https://www.lloydosullivan.co.uk/blog/whats-important-to-you/ https://www.lloydosullivan.co.uk/blog/whats-important-to-you/#respond Wed, 25 Sep 2019 10:34:02 +0000 https://www.lloydosullivan.co.uk/blog/?p=1388
Reaching those milestones starts with setting clear financial goals

We all have dreams for the future, and many of those dreams require money and planning to make them become a reality. Reaching those milestones starts with setting clear financial goals. Making decisions with a clear endpoint in mind can make it easier to achieve financial security and allow you to enjoy your life to the full, so we’ve put together this brief rundown to help you get closer to your goals today.

Be prepared for any financial emergency

Typically, emergencies don’t let you know they’re on their way, and in some cases, you can’t afford for them to happen – so it’s always good to be prepared for any financial emergency with savings. The amount of rainy-day savings you need will of course depend on your situation, but financial experts recommend aiming to have around three to six months’ worth of your regular expenses put away.

Savings can act as a safety net until you get back on your feet or until the situation changes. By having an emergency fund, it helps you deal with those surprises without needing to get into debt. Depending on your budget, saving might not be easy, but if you can spend less than you earn, it’s recommended to put some money aside for a rainy day.

Focus on your time horizon

It’s important to know the ‘when’ of your financial goals, because investing for short-term goals differs from investing for long-term goals. Your investment strategy will vary depending on how long you can keep your money invested. As your priorities or life circumstances change, you may also find that you want to delay certain goals by a year or two, while others you may want to try to meet sooner. And some – such as an expensive family holiday – you may decide to forego altogether.

It’s important to stay flexible and adapt your timetable to your changing needs and priorities. While past performance is no guarantee of future results, historical returns consistently show that a well-diversified investment portfolio can be the most rewarding over the long term.

Be patient

Building wealth for most of us takes time, so you have to be patient. And achieving your financial goals can have its ups and downs. But sometimes, challenges aren’t about failing to reach your goals – they’re about setting better goals in the first place. Set yourself up for success from the start by creating realistic, achievable financial goals that are connected to what’s important to you.

If you know what your financial goals are, you can start working to accomplish them. And working out what those goals are is the very first step. Setting financial goals is essential to financial success. Once you’ve set these goals, you can then write and follow a roadmap to realise them. It helps you stay focused and confident that you’re on the right path.

Little and often

Having set clear goals, getting started by saving little and often and seeing your own progress towards your goals can reinforce your motivation. Regular saving from a young age can make life easier when you need to access money quickly for a large purchase further down the line. Gradually watching those small amounts build up into more significant savings will further encourage you to save more.

One of the major benefits of long-term saving is the ability to make substantial gains through compound interest. ‘Simple’ interest is calculated on the original amount of a deposit. But compound interest is calculated on this amount and also on the accumulated interest of previous periods. Put simply, compound interest is ‘interest on interest’.

Want to talk about your financial future?

Investing for your retirement or the years to come could be the most important financial goal of your life. We’ll help you build a goal-based financial plan that reflects what’s most important to you. Discover how we can help you grow more than wealth by contacting Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE AND DEPEND ON YOUR INDIVIDUAL CIRCUMSTANCES.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Unlocked pension savings https://www.lloydosullivan.co.uk/blog/unlocked-pension-savings/ https://www.lloydosullivan.co.uk/blog/unlocked-pension-savings/#respond Wed, 25 Sep 2019 10:33:07 +0000 https://www.lloydosullivan.co.uk/blog/?p=1386
Critical gap in consumer awareness

Drawdown allows most pension holders to withdraw a tax-free lump sum and reinvest the remainder as an income. But hundreds of thousands of DIY drawdown investors are unaware they can scale back or stop their withdrawals, putting them in danger of draining their retirement savings too rapidly, according to new research[1].

Half (52%) of all over-55s taking an income in drawdown do not know they can reduce the value of their withdrawals, and more than half (56%) are unaware they can stop them – despite income flexibility being a defining feature.

Critical gap in consumer awareness

The findings of people who have unlocked their pension savings since the 2015 pension reforms highlight a ‘critical gap in consumer awareness’, which is estimated to potentially leave half of the 615,000 people in drawdown exposed if there is a stock market correction.  

If share values move downwards, investors risk falling into a trap known as ‘pound-cost-ravaging’. This is where, as stock prices drop, retirees are forced to sell more investments to achieve the same level of income, depleting the capital of their pot more quickly and reducing its future growth.

Flexibility to shift income up or down

Taking an income is entirely up to the individual and withdrawals can be made at any time. However, the length of time you can take an income depends on the value of your drawdown pot, the amount you take as income, investment growth and charges. If your drawdown pot runs out before you die, your income will stop.

Drawdown gives people the flexibility to shift their income up or down as their spending needs change or markets fluctuate, yet a high proportion of people are seemingly in the dark over the control they have. 

Protect portfolio from pound-cost-ravaging

If investment returns come to a sudden halt, pension holders need to be prepared to step on the income brakes. People who are unaware they can slow down or stop their income could seriously damage their savings and deplete their pots too soon. 

Savers can protect their portfolio from pound-cost-ravaging by holding up to two years’ worth of living expenses in cash, which reduces the need to sell investments when prices are falling, giving them a chance to ride out short-term bumps in the stock market. Alternatively, limiting withdrawals to the ‘natural’ income from share dividends or bonds leaves the underlying investment intact, giving it a better chance to regain lost ground when markets recover.

Obtaining professional financial advice is key

The research found significant differences between consumers who have sought professional financial advice and those who haven’t. Just 35% of non-advised consumers understood they could reduce their drawdown income, compared to 77% of people getting ongoing advice. And some 33% of non-advised consumers were aware they could stop their drawdown income, versus 73% of those speaking to a professional financial adviser.  

The reality is that some pension holders are making complex choices in drawdown without fully understanding how it works. To overcome this critical gap in consumer awareness, it’s important that people engage with their savings in drawdown and obtain professional financial advice.

Protecting drawdown savings in a market downturn

Diversify your investments – a well-diversified portfolio is a good defence against market falls. By investing across a variety of different asset classes, sectors and regions, you can spread the risk much wider than when all your investments are concentrated in a single area.

Build a cash buffer – building up a cash buffer can protect against stock market corrections. If the worst happens and the stock market falls from its high, then having a reserve of cash gives you an income to fall back on. Holding one to two year’s cash means you won’t be forced to sell when prices are falling, thereby locking in losses. Instead of cashing in funds, you can dip into cash reserves, giving your pot a chance to regain lost ground.

If it comes to the worst, turn off the taps – in drawdown, you can turn off the income taps whenever you like. Selling funds after markets have fallen means there is no chance to make up losses, shrinking your pension fund and reducing its future growth. If you can afford to, scale back your withdrawals or place them on hold until markets have recovered. Alternatively, limit the level of withdrawal to the ‘natural’ income from share dividends or bonds. This leaves the underlying investment intact, giving it a better chance to recover when markets rise.  

You don’t have to fully retire to start claiming your pension savings. In fact, increasingly more people are choosing to take their pension savings gradually while they scale down their work hours. So from the age of 55, there is an option to access your pension savings and ease into retirement gently, but don’t forget you need to make sure that you have enough to last for the whole of your retirement.

Building a future that matters

We help our clients achieve their financial goals through tailored and flexible investment solutions. If you would like to discuss which retirement income method may be best for you based on your personal needs and goals, or to review your current retirement plans, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,028 adults, who have accessed their DC pension since 1 April 2015, of which 1,191 are drawing a regular income in drawdown. Fieldwork was undertaken between 18 and 29 April 2019. The survey was carried out online for Zurich.


FCA Retirement Income Data Bulletin September 2018 shows 435,769 people took out drawdown between April 2016 and March 2018. If numbers grew at the same pace as October 2017 to March 2018 (90,504), Zurich estimates the population in drawdown would have increased by 181,008 between April 2018 and March 2019, resulting in 616,700 people in drawdown. https://www.fca.org.uk/publication/data/data-bulletin-issue-14.pdf


A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

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Lost pensions https://www.lloydosullivan.co.uk/blog/lost-pensions/ https://www.lloydosullivan.co.uk/blog/lost-pensions/#respond Wed, 25 Sep 2019 10:32:11 +0000 https://www.lloydosullivan.co.uk/blog/?p=1384
Make sure your pension savings don’t get left behind

The employment landscape has evolved significantly over the last few decades, and changing jobs multiple times before retirement is now very much the norm. Even if you have not had that many jobs, you may still have a number of different pensions to keep track of.

Nearly two thirds of UK savers have more than one pension, and changing work patterns mean that the number of people with multiple pensions will increase. People typically lose track of their pensions when changing jobs or moving home. The average person will have around 11 different jobs over their lifetime[1]. The Government predicts that there could be as many as 50 million dormant and lost pensions by 2050.

Multiple pensions

As a result, many people have multiple pensions set up, as they have been automatically enrolled into a new pension scheme each time they have started a new job. The scale of the UK’s lost pensions was highlighted in the latest research carried out on behalf of the Association of British Insurers (ABI)[2].

In the largest study yet on the subject, the Pensions Policy Institute (PPI) surveyed firms representing about 50% of the private defined contribution pensions market. From this, PPI found 800,000 lost pensions worth an estimated £9.7 billion. It estimates that, if scaled up to the whole market, there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot.

Different employers

If you have accumulated a number of pension pots over the years from different employers, consolidating them could be appropriate. By bringing together all your different pension pots, it can help give you a clearer picture of your financial position, enabling you to make more informed decisions about your retirement savings.

Bringing together multiple pension pots could be a sensible move if you have a number of pension pots and want more control over your money, or you have a number of pension pots and want less hassle managing them. You may also be unhappy with the performance of a current provider, the choice of investments offered by them or the high fees.

Valuable benefits

However, a pension consolidation is not always appropriate. It may not be sensible to consolidate your pensions if you are a member of a defined benefit pension scheme. If you transfer out of this type of pension, you may be giving up guaranteed benefits and potentially taking on greater risk.

Also, if you have a pension that comes with valuable benefits (for example, a pension that allows you to buy a higher income in the future via a ‘Guaranteed Annuity Rate’) or your pension provider charges high fees to transfer to another provider, pension consolidation may not be the right option.

Making the right choices

Because there are both advantages and disadvantages associated with consolidating pension pots, it can be a complex decision to work out whether it’s the best move to make, particularly if defined benefit plans are involved – you’ll want to be sure you’re making the right choices. That’s where professional financial advice comes in – and we can help you on your way. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

Source data:

[1] The Lost Pensions Survey includes data from 12 large insurers, covering around half of the defined contribution pensions market.

[2] The Association of British Insurers is the voice of the UK’s world-leading insurance and long-term savings industry.

TRANSFERRING OUT OF A FINAL SALARY SCHEME IS UNLIKELY TO BE IN THE BEST INTERESTS OF MOST PEOPLE.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

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Pension scammers: spot the warning signs https://www.lloydosullivan.co.uk/blog/pension-scammers-spot-the-warning-signs/ https://www.lloydosullivan.co.uk/blog/pension-scammers-spot-the-warning-signs/#respond Wed, 25 Sep 2019 10:30:49 +0000 https://www.lloydosullivan.co.uk/blog/?p=1382
Don’t lose your life savings or be persuaded to invest in high-risk schemes

Don’t let scammers enjoy your hard-earned pension proceeds. Anyone can be the victim of a pension scam, no matter how savvy they think they are. It’s important that everyone can spot the warning signs.

Latest figures show that nearly one in ten over-55s fear they have been targeted by suspected scammers since the launch of pension freedoms, new research[1] shows. Cold-calling has been used by fraudsters trying to steal life savings or persuade people to invest in high-risk schemes.

Some 10.9 million unsolicited pension calls and messages are made a year, according to Citizens Advice. The new research suggests people could fall for at least one of six common tactics used by pension scammers.

Claims of guaranteed high returns

These include pension cold calls, free pension reviews, claims of guaranteed high returns and exotic investments. They also include time-limited offers and early access to cash before the age of 55 that can tempt savers into risking their retirement income.

But exotic or unusual investments are high-risk and unlikely to be suitable for pension savings. But worryingly, nearly a quarter (23%) of the 45-65-year-olds questioned say they would be likely to pursue these exotic opportunities if offered them.

Gaining early access to pension monies

Helping savers to access their pensions early also proved to be a persuasive scam tactic. One in six (or 17%) of 45-54-year-old pension savers say they would be interested in an offer from a company that claimed it could help them gain early access to their pension monies. Of all those surveyed, 23% say they would talk with a cold caller who wanted to discuss their pension plans, despite the Government’s ban on pension cold-calls this January.

The FCA and the Pensions Regulator have warned that 42% of pension savers, equivalent to five million people, could be at risk of pension scams. The study found 9% of over-55s say they have been approached about their pension funds by people they now believe to be scammers since the rules came into effect from April 2015. Offers to unlock or transfer funds are tactics commonly used to defraud people of their retirement savings.

Being defrauded of savings is a major concern

One in three (33%) of over-55s say the risk of being defrauded of their savings is a major concern following pension freedoms. However, nearly half (49%) of those approached say they did not report their concerns because they did not know how to report or were unaware of who they could report the scammers to.

Most recent pension fraud data[2] from ActionFraud, the national fraud and cybercrime reporting service, shows 991 cases have been reported since the launch of pension freedoms involving losses of more than £22.687 million.

Approached by suspected scammers

The research found fewer than one in five (18%) of those approached by suspected scammers had reported their fears to authorities. Nearly half (47%) said the approaches involved offers to unlock pension funds or access money early, and 44% said they involved transferring pensions.

About 28% of those targeted by suspected fraudsters were offered alternative investments such as wine, and 20% say they were offered overseas investments, while 13% say scammers had suggested investing in crypto-currencies. Around 6% believe they have been victims of frauds.

Lucrative opportunity for fraudsters

Pension freedoms, though enormously popular with consumers, have created a potentially lucrative opportunity for fraudsters, and people need to be vigilant to safeguard their hard-earned retirement savings. If it sounds too good to be true, then it usually is, and people should be sceptical of investments that are offering unusually high rates of return or which invest in unorthodox products which may be difficult to understand.

If in any doubt, seek advice from a regulated professional financial adviser. Retirement savers can report suspected frauds on the ActionFraud helpline 0300 123 1047 or online at www.actionfraud.police.uk/report_fraud, and more advice is available at www.thepensionsregulator.gov.uk/pension-scams or by calling the Pensions Advisory Service on 0300 123 1047.

Know the warning signs

It doesn’t matter the size of your pension pot – scammers are after your savings. Get to know the warning signs, and before making any decision about your pension, be ScamSmart and check you are dealing with an FCA authorised firm. For further assistance, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] Consumer Intelligence conducted an independent online survey for Prudential between 23 and 25 February 2018 among 1,000 UK adults aged 55+ including those who are working and retired

[2] www.actionfraud.police.uk/fraud-az-pension-liberation-scam

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

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Retirement resilience https://www.lloydosullivan.co.uk/blog/retirement-resilience/ https://www.lloydosullivan.co.uk/blog/retirement-resilience/#respond Tue, 27 Aug 2019 13:32:51 +0000 https://www.lloydosullivan.co.uk/blog/?p=1366
Taking the reins and having more control over your pension pot

Saving for retirement is one of our greatest financial priorities, especially as life expectancy is growing and retirements are likely to last longer.

It may be the case that you’d prefer to take the reins and have more control over your pension pot. For appropriate investors, one option to consider is a Self-Invested Personal Pension (SIPP).

Please note that a SIPP is a type of Personal Pension, and the rules as to how much you can contribute to a SIPP are the same as a Personal Pension. Also, when it comes to taking the pension, the same rules apply to both a SIPP and a Personal Pension.

Saving discipline

A SIPP is a tax-efficient wrapper for your pension investments and gives you control of your pension, whereas most members of a company pension scheme have very little control and almost no idea where their pension money is invested. SIPPs enforce saving discipline until retirement since you cannot withdraw your money early.

Also, with many of the UK’s largest companies closing their final salary schemes to all members, many members now have to look at taking their pensions into their own hands. You can make both regular and one-off payments into your SIPP, and even putting a small amount away early will make a difference to how much you will eventually have to fund your retirement.

Extra flexibility

Once you reach 55, you can access your whole pension pot. You decide how and when to use the fund built up in your SIPP to provide you with an income. You can take up to 25% of your fund as a tax-free lump sum and use the balance to provide you with a pension through income withdrawal from your SIPP, or through the purchase of an annuity. You can also take a series of lump sums from your SIPP – it’s flexible.

SIPPs can be opened by almost anyone under the age of 75 living in the UK. You can open a SIPP for yourself or for someone else, such as a child or grandchild. Even if you’ve already retired, you can still open a SIPP and take advantage of the extra flexibility that it gives you over your pension savings in retirement – but you may be limited by how much you can pay into it.

Investment control

SIPPs offer a wider investment choice than most traditional pensions based on investments approved by HM Revenue & Customs (HMRC). They give you the chance to pick exactly where you want your money to go and enable you to choose and change your investments when you want, giving you control of your pension and how it is organised.

Most SIPPs allow you to select from a range of assets, including:

• Unit trusts
• Investment trusts
• Government securities
• Insurance company funds
• Traded endowment policies
• Some National Savings & Investment products
• Deposit accounts with banks and building societies
• Commercial property (such as offices, shops or factory premises)
• Individual stocks and shares quoted on a recognised UK or overseas stock exchange

Tax treatment

You receive tax relief upfront from the Government when you make contributions, which can feel like the Government is giving you money to save for your retirement. Currently, an investor can receive up to 45% tax relief when they make a personal contribution to a personal pension such as a SIPP, with 20% paid by HMRC to the pension and any higher and additional-rate tax relief reclaimable via your tax return. The tax treatment of pensions depends on your individual circumstances and is subject to change in future.

Please note: you must pay sufficient tax at the higher and additional rates to claim the full higher-rate tax relief via your tax return.

Time to take control of your retirement plans for the future?

A SIPP is not right for everyone, but the freedom it offers you compared to a traditional pension could far outweigh the extra time taken to run your own pension. To find out more about setting up a SIPP, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk and we’ll arrange a meeting to discuss your requirements – we look forward to hearing from you.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

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Financial support https://www.lloydosullivan.co.uk/blog/financial-support/ https://www.lloydosullivan.co.uk/blog/financial-support/#respond Tue, 27 Aug 2019 13:31:52 +0000 https://www.lloydosullivan.co.uk/blog/?p=1364
Looking after your lifestyle during a time of uncertainty

Nobody wants to worry about how they’ll pay the bills if they become sick or injured and can’t work. But illness or injury can strike at any time and can lead to serious financial trouble. The latest government figures[1] report the dramatic increase in the likelihood of long-term sickness absence when we age, leading to an employment absence of four weeks of more.

This highlights a worrying increase in the probability of experiencing long-term sickness absence as we age. 3% of workers under the age of 45 experienced a long-term absence from work as a result of sickness in 2018. This doubled to 6% among the 45-and-over population. In 2018, 773,000 workers aged 45 and over had to take time off due to poor health, of which 59,000 subsequently left work completely.

Helping support you financially

There are more than 10 million people in work in the UK aged 50 and above. This is more than ever before, and it is the fastest-growing employee population in the country. It is estimated that by 2025, the over-50s will represent one-in-three workers.

If appropriate to your particular situation, Income Protection Insurance can help support you financially if you have time off work and suffer a loss of earnings because of injury or illness. This type of insurance covers most illnesses that leave you unable to work. For example, it may cover you if you’re unable to work due to a stress-related illness, mental health or a physical health condition.

Unable to work due to illness or injury

Income Protection Insurance only covers you if you’re unable to work due to illness or injury – it does not pay out if you are made redundant. There are different types of Income Protection Insurance, but most are either Individual Income Protection Insurance (often called ‘IP’) and Employer Provided Income Protection Insurance (known as ‘Group Income Protection’ or ‘GIP’).

Individual Income Protection is taken out if you want to independently protect your income in the event of being unable to work due to illness or injury. Employer Provided Income Protection Insurance is a policy taken out by your employer to protect your income if you are unable to work due to illness or injury.

Keeping on top of monthly expenses

If you or your employer buy an income protection policy, you will be paid a monthly income if you find yourself unable to work. You or your employer will pay a monthly premium to your insurer for your chosen policy, which will pay out after a pre-agreed waiting period.

Most policies have a pre-agreed waiting period. This is also known as the ‘deferred’ period. The waiting period is the time between being unable to work and the time at which you will begin receiving payments. Most people rely on their salary to keep on top of monthly expenses. Without this salary, you can be left in a difficult situation when having to cover rent, mortgage repayments or bills.

Being off work for a prolonged period

Our lives these days are racked with financial worries, so having the safety net of a policy that pays out a regular income in the event that you’re unable to work due to illness or injury could be just what you need to provide that valuable peace of mind.

Having Income Protection Insurance will mean that you can continue to pay your bills, rent or mortgage if you are unable to work. This protection will ensure you receive a monthly income for as long as you need to recover, so even if you have to be off work for a prolonged period, you can protect your finances and lifestyle.

Don’t let your world turn upside down

Can you put a value on peace of mind? Being unable to work can quickly turn your world upside down. The lifestyle you’ve worked so hard to achieve could be at risk. We can advise you how to protect your income, your family and your business – speak to Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk, and we’ll explain your options.

Source data:

[1] https://www.gov.uk/government/statistics/health-in-the-workplace-patterns-of-sickness-absence-employer-support-and-employment-retention

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What you need to know https://www.lloydosullivan.co.uk/blog/what-you-need-to-know/ https://www.lloydosullivan.co.uk/blog/what-you-need-to-know/#respond Tue, 27 Aug 2019 13:30:53 +0000 https://www.lloydosullivan.co.uk/blog/?p=1362
Winners and losers under the new State Pension

The number of people qualifying for the full new State Pension following its introduction in April 2016 reveal almost two in five pensioners (365,290 people, or 38% of claimants) receive less than £150 a week, while a further 62% receive more than £150 a week – of these, 282,447 are receiving a new State Pension[1].

The new State Pension is a regular payment from the Government that most people can claim in later life. You can claim the new State Pension at State Pension age if you have at least ten years’ National Insurance contributions and are a man born on or after 6 April 1951, or a woman born on or after 6 April 1953. The earliest you can receive the basic State Pension is when you reach State Pension age.

Benefits built up over the old and new systems

The full amount you can get under the new State Pension is £168.60 per week (in 2019/20), but this depends on your National Insurance (NI) record. If you have 35 years or more of NI contributions, you will get the full amount; between 10 and 34 years of contributions, you will receive a proportion of the pension; and less than ten years of NI contributions, you aren’t eligible for the new State Pension.

The data also shows 282,447 pensioners (29% of claimants) are receiving a new State Pension from April 2016 with a ‘protected payment’, which essentially means they receive more than the new full State Pension, as benefits built up over the old and new systems are worth more than the new flat rate.

Foundation of most people’s retirement plans

People can receive less than the full flat rate State Pension when their NI record is incomplete or have paid less than the 35 qualifying years required under the new rules (usually through periods of contracting out).

The State Pension is the foundation of most people’s retirement plans and yet this data shows more than half of those eligible to claim the State Pension under the new flat rate system receive less than the full amount. Given the various changes that have been introduced over the years, it’s not surprising people find the whole system difficult to understand.

State Pension tips

· Go online or contact DWP for an up-to-date State Pension forecast. DWP will use your NI record under old and new State Pension rules to calculate your State Pension

· Your ‘starting amount’ can be less than, more than or equal to the new full State Pension

· Consider paying voluntary NI contributions if there are gaps in your records (you can only usually go back six years)

· There is no benefit in paying voluntary NI contributions if you’ve built up 30 years under the old system before April 2016

· Ensure you’ve claimed credits for periods where you’ve not worked, for example, when unemployed or looking after children. This should happen automatically, but mistakes can and do happen, especially if you are self-employed

· You can claim for NI credits if you are caring for parents or grandchildren

· If you’ve been contracted out for any period before April 2016, you will have paid lower NI and therefore receive a smaller State Pension. Your private pension will have an element of ‘Contracted Out Pension Equivalent’, or COPE, which will allow for this

· Consider deferring your State Pension (although this is less financially generous than previously)

Spend the longest time on preparing for retirement

The State Pension can be a minefield. And remember, it is only really there to provide a basic standard of living when you retire. Of all the life events to plan for, you should spend the longest time on preparing for retirement.

If you’re in your 50s or early 60s, you may increasingly be thinking more about retirement and how to plan for it. One of the most common dilemmas for people of this age is how to best fund their lifestyle once they’ve stopped work and maintain their pre-retirement standard of living.

Meeting your changing needs

It’s never too late to start planning for your future, so it’s good to know you’ll have our support. We’ll help you put a plan in place for the future you want – and as time rolls by, you’ll keep receiving professional advice and solutions to meet your changing needs. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] Freedom of Information request, Canada Life – 6 June 2019

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Cashing out https://www.lloydosullivan.co.uk/blog/cashing-out/ https://www.lloydosullivan.co.uk/blog/cashing-out/#respond Tue, 27 Aug 2019 13:30:01 +0000 https://www.lloydosullivan.co.uk/blog/?p=1360
Pension changes brought a whole new range of options to consider

Unadvised retirees who are now able to dip into their pension are having to return to work to cope with juggling their finances, according to a new report[1].

Pension freedoms have given individuals control over how to spend their retirement savings, but a number of unintended consequences have emerged. Since rules governing how pensions can be taken were dramatically relaxed in 2015, more than a million over-55s have gone on a freedom-fuelled spending spree.

New options to consider

The pension changes brought a whole new range of options to consider. Individuals now have to think about whether they want an annuity, drawdown, cash or a combination of options; when to access their pension; if it is better to use savings first before drawing their pension; and so on.

However, it seems many don’t really understand the consequences of these options. As a result, more than £23 billion has been ‘cashed out’ from the nation’s pension pots via more than 5 million individual payments. The findings show the increase in retirees returning to the workforce since the introduction of pension freedoms four years ago is due to the number of options available and the lack of professional financial advice.

Facing financial pressure

A quarter of retirees who have returned to work since April 2015 say they were faced with financial pressure. Figures from HM Revenue and Customs show around one million over 55s withdrew a 25% tax-free lump sum from their pension in the last year, up 23% points from the 12 months prior.

There is a lot to think about when you’re planning for retirement, and your circumstances will change over time, which is why it is important to obtain professional financial advice. There’s no doubt the pension freedoms have been hugely popular, but for some retirees they have come at a high price. People now face more complicated decisions in retirement, and it’s clear not everyone is getting it right.

Scale of the problem

The figures also show other reasons for returning to work that include reigniting a sense of purpose and boosting social relationships. A report from the Pensions Policy Institute shows women particularly are continuing to struggle with pensions savings. The average pension for a woman is currently £100,000 lower than for men.

Women’s pension savings have historically been impacted by a combination of the gender pay gap, part-time working and the increased burden of childcare costs, but this figure lays bare the scale of the problem.

Time to convert your pension pot into retirement income?

When you’re coming up to retirement, you have lots of decisions to make, not least how to convert your pension pot into retirement income. With more freedom comes more choice, and it’s important to obtain professional financial advice to help you decide what to do with your pension pot. To review your options, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

Source data:

[1] All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,028 adults, who have accessed their DC pension since 1 April 2015. Fieldwork was undertaken between 18 and 29 April 2019. The survey was carried out online for Zurich.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

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