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Whilst it's nice to retire, it’s even better, if you have a large enough
income, to enjoy it! However, with real costs of living increasing faster than
most pensions, now more than ever, it is important to ensure that you get the
best income from your pension or the savings you have built up during your
working life.
That’s why legalisation now insists that all personal pension providers
give you an Open Market Option - the right to shop around for the best
annuity, before taking the benefits simply from your existing pension.
So before accepting the pension on offer from the company
with which you have saved, seek advice and quotes from other companies,
as you may be able to:
- Improve the income provided
- Benefit even more should you or your spouse suffer from poor health
- Consolidate different small pension funds, to receive just one
larger income, making budgeting easier.
When it comes to shopping around for the best deal, it’s worth considering arranging for an expert in this field to do it on your behalf. Laterlife has teamed up with
Skipton Financial Services (SFS),
who are a 'Whole of Market' financial advisor, who have already helped thousands of people make more from their annuity fund. They will research the whole marketplace in order to locate the best deal for your personal circumstances. Call them on 0800 145 6661 to see what they can do for you.
You can provide an income just for yourself, in which case the income
would stop on your death. If you have someone else whom you would like to
provide for - and if you are happy to accept a smaller pension for yourself - you
can ensure that either your pension would continue for the balance of 5 or
10 years or provide for a spouse’s pension. In the latter case,
they would then continue to
receive an income for the rest of their life, however long that proves to
be.
What about Tax?
Pension Annuities (sometime referred to as Compulsory Purchased
Annuities-(CPA’s) are taxed at source through the PAYE system. Income tax
is deducted at the basic rate. Non-tax payers can claim this back while
higher-rate and additional taxpayers have to pay more through self-assessment.
Voluntary Purchased Life Annuities (VPLA’s) purchased from your own
money, consist of two elements. The first is the return of the purchase money, which is tax
free. The other is interest paid by the provider for holding this money for
you. This second part is taxed as unearned income at currently 20% for
basic rate taxpayers with higher rate taxpayers paying 40% and additional rate taxpayers
50%. As the interest element decreases and the non- taxed capital
element increases the older you take the annuity, this can be a very tax
efficient income source.
Please note: Levels, bases and reliefs from taxation are subject to
change.
Annuity / Open Market Options – Risk warnings
Purchased Life Annuities can be a very good way of securing a tax
–efficient, guaranteed income, but may not be right for everyone.
So it is important to get Financial Advice. |
