Archive for the ‘Retirement Options’ Category

Pension sharing on divorce Scotland

Thursday, September 15th, 2011

Pension Sharing on Divorce Scotland

To achieve your fair share of pension rights and a clean break you will need expert legal and financial advice, especially where divorce is taking place between older couples and a considerable pension fund built up over the life of the marriage.

The allocation of pension rights on divorce is a particularly sensitive issue mainly because women are likely to have much smaller pension pots than men.  This is usually for two main reasons – women on average earn less than men and they are more likely to have spent time out of the workplace raising children.  In the event of a divorce, it is as important to consider the fair split of pension provision as it is the division of any other assets.  If one spouse has no pension savings because they have stayed off work to support either house or family, while the other has worked and built a substantial fund, this should be taken into account when determining the settlement.

Pension Sharing

When pensions are to be shared, you may not actually split the pension fund itself but instead, offset your rights to it against the value of something else – perhaps some investments, business assets or even the marital home.  Where young children are involved, for example, the marital home may be a precious asset which will reduce upheaval in the short term.  However, the benefits of this need to be weighted against those more formally related to retirement.

If a longer term solution for pension assets is required, there are a number of available options. The first might be to earmark a portion of your ex-spouse’s pension fund, and defer receipt of that benefit until they retire.  However, such earmarking leaves one partner dependent on the other, reducing the chances of a clean break.  They may also have to wait years before benefiting – and, if your ex-spouse dies before retirement, it is possible you could end up with no formal pension provision at all.

To protect against such eventualities, it is now possible to split a pension at the time of divorce.  A dependent ex-spouse gains access to a specific portion of the main breadwinner’s pension fund which then allows them to move their share away and make a much “cleaner” break. Both parties can then move on and take full control over their own share. In addition, if the main pension holder dies or remarries, all pension rights for the ex-partner remain protected.

The allocation of pensions on divorce requires expert legal and financial advice to achieve a fair split for both parties.  If you could benefit from talking to our financial advisers on this matter please call 0141 764 0040 in complete confidence.  Contact Us.

At what age do you want to retire?

Thursday, September 15th, 2011

Sooner rather than later?  But later may mean you have more money.

Age of retirement in the UK

The minimum retirement age is now 55 and the statutory age is 65 and this is increasing to 66, for men and women, by 2020.

Retiring later can increase your retirement income

As a general rule, it is better to hold off retirement for as long as possible. Deferring state, employment and/or personal pension benefits generally provides a larger income than retiring early because the older you get, the better annuity rates tend to be. Equally, if you choose to downsize your career but can still earn some income after your chosen retirement date, you may be able to ‘phase’ your retirement, using only a portion of your pension fund to begin with and leaving the remainder invested until later.

However, the most important choice you will make will be over the actual annuity, or unsecured pension product (Income Draw Down), as this will determine your ultimate retirement income. There is also the option of taking 25% as a tax-free lump sum, which could perhaps pay for a long holiday or be re-invested elsewhere to generate additional income. An annuity will provide you with an income stream for life, but this does mean you give up all right to the capital – and your descendants may not inherit anything of your investment if you die soon after retirement. You therefore need to weigh up the merits of guarantees in your annuity choice (thereby securing some of that fund value at least for the short term) against the rate being offered to you, particularly if you smoke or have certain health conditions which could lead to an increase in the amount you receive.

Alternatively, you can use an unsecured pension arrangement, which allows you to keep your fund fully invested and to draw an income directly from that. This income could be less or more than you might receive with an annuity, depending on your circumstances and requirements, but it does mean you preserve some of the value of your pension fund. This approach does, however, come with risks. Rather than consolidating your value as an annuity would, your retirement investment remains in the hands of the market so, whilst the value could go up, it could just as easily go down. Given the time it took to build that value, positioning your portfolio to minimise the risk of losing it is therefore essential.

Finally, you could do a little bit of both – take an annuity for part of your pension fund and leave the remainder invested. Such a combination could offer a decent half way house, but be sure to examine all the options before you make your move.

We’re happy to provide more information about planning for your retirement and you options will really depend on your own set of circumstances and wishes.  For professional advice tailored specifically to you why not call our financial advisers on 0141 764 0040.

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