Paul Leatherbarrow, Liverpool
Planning for retirement is more than just paying into a pension plan, there are other arrangements you may want to consider.
Considerations Benefits
Find out your entitlement to benefits, you may be able to claim to top up your income or get help with specific costs. Budget work out what you would like to live on, this can be done by listing static expenses, like rent, mortgage, gas/electric bills etc than add on leisure activities, cost of holidays, evenings out etc. This gives you a starting point to aim for. Don't forget you will have more time on your hands so you are more likely to spend more. Next, track down all your savings and see how you can make your savings go further.
Tax
When you retire the amount of tax you pay changes make sure you are not paying more than you should be. The tax man (HMRC) very rarely send s you a nice letter for over charging you, the onus is on you although you can reclaim any tax if you have overpaid.
Insurance and Wills
It's not a bad idea to think about insurance to provide for your partner and family in the event of your death or your health fails, some insurance companies offer special rates for people over 50 or 60.
Now is the time to make a will or ensure your existing will is up to date. It is a traumatic time anyway losing a loved one without the hassle of waiting for their estate to escape Probate.
Your affairs and wishes
No one likes talking about death but unfortunately just like taxes it is one of life's certainties. Find out how you handle the affairs of a deceased partner and the affects this will have on your money situation. Prevention is always better than the cure; especially as the state takes away first and makes you claim it back or fight for what is rightfully yours.
Carrying on working
Since 1 April 2006 so long as you have reached the age at which you can start claiming your company pension. You do not need to stop working in order to claim your company pension,
Now you have a number of options all of which should be included in your pension documents
Working after you retire
You can choose to keep on working while taking your State Pension entitlement, or delay your claim and get paid more later on. At last the government has realised that no longer will people, who are fully capable, be told they must retire wasting a valuable and experienced resource.The government also offers schemes and incentives to help you find work.
Tax in Retirement
All income you receive in retirement. Whether from part time work, savings, personal, state or company pensions is all classed as taxable income. If your overall taxable income is more than your tax free allowances (income you can earn without paying tax) you will be taxed at the usual Income Tax Rates.
You must be aware your allowances are more generous once reach retirement age and you may also qualify for other allowances that will reduce your tax bill.
Deferring your State Pension
The Government has certain incentives for individuals who put off taking their state pension till after they reach State Pension age. You have two options: 1. Get a higher weekly State pension for life later on. 2. Take the amount you deferred as a taxable lump sum with interest, then receive the normal State Pension To qualify you have to put off claiming for at least 5 weeks to earn extra State Pension and at least 12 consecutive months to qualify for lump sum payment.
If this is something you are considering you need professional advice so you are fully aware of your options and benefits.
Working after Retirement and effects on benefits
Any money earned after you reach State Pension age may affect income related benefits such as Pension Credit, Housing Benefit and Council Tax Benefit. Make sure you fully understand what effects these will have on your existing Benefits. National Minimum wage You are still entitled to the National minimum wage, currently £5.80 per hour rising to £5.93 from October 2010
Can I stop receiving my State Pension?
If you are already receiving the State Pension you can cancel your claim if you receive enough income to meet your current needs. Your pension stops until choose to claim again. Then you can choose one of the before mentioned options, increased pension or lump sum. Once you restart your State Pension you will not be able to cancel again.
How about retiring early?
Although you can retire at any age you can only claim State Pension from age 60 if you are a women (rising to 65 from April 2010) or from age 65 if you are a man. You have to be aware the earlier you start drawing your private or company pension the lower the income will be. All pension schemes have different rules relating to retiring early, although there is one standard restriction, which is, you cannot retire and draw benefits below the age of 55 in any scheme.
It is advisable that you seek professional advice if you are considering retiring early so you are fully aware of the consequences and the options available.
What should you consider before retiring early?
The recent headlines suggest that we should forget all ideas of retiring before age 60 and be prepared to work longer in order to build up our pension fund. However a large majority of people seem to be wholly ignoring this pressure to work longer. In fact, as many as 55% of men and 33% of women retire before the state pension age. Many people just want more free time or have worked for 30 plus years and have had enough. Studies suggest that around 10% of early retirement is linked to generous occupational schemes.
Whatever the reason, it is important that you consider the implications to your pension before you make the final decision of retiring early. With the increased talk of pension reforms to address the UK pension crisis it seems likely that these reforms will bring about a reduction in incentives towards retiring early and an increase in incentives to work longer. As a result it is becoming increasingly important that retiring early is thoroughly researched. There is a growing concern that many of the people who have already taken early retirement, either due to redundancy, ill-health or through choice may not have enough pension provision for their future. You need to know all your pension options to make sure you'll have enough to live on in retirement. Retiring early is bound to affect both your private pensions and your State Pension, so it is important that you invest time in finding out exactly how they will be affected before you make any decisions.
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