IMPORTANT INFORMATION YOU MUST BE AWARE OF: 

 All investments should normally be held for the long-term as their value can fall as well as rise, therefore you could get back less than you invested. Unless stated otherwise all yields are variable and neither capital nor income is guaranteed. This is published solely to help clients to make their own investment decisions and does not constitute a personal recommendation. If you are unsure of an investment’s suitability you should contact us for individual advice.

The pension and tax rules are subject to change by the government. Tax reliefs referred to are those currently applying. Their value depends on your individual circumstances. Before transferring a pension you should find out if exit or initial charges will be levied and then carefully consider whether you believe it will be beneficial for you to proceed and that the new benefits will be at least as good (ensure you will not be sacrificing special bonuses, guaranteed annuity rates or investment returns).

The annual allowance:

Member contributions

Member contributions are unlimited but there is a limit on the amount of contributions that a member can pay each year and benefit fully from tax relief. This is restricted to:

• the higher of £3,600 or
• 100% of salary.

The tax relief is based on contributions paid in the tax year

The Government initially confirmed details of the annual allowance amounts that will apply for the tax years 2006/07 to 2010/11. It has now been confirmed that from 2011/12, the annual allowance will be £50,000. The table below confirms the annual allowance for each tax year to date:

The total of all pension contributions made by, or on behalf of, the member to all their pension plans is tested against the annual allowance

The lifetime allowance:

The current lifetime allowance is £1.8 million but this will reduce to £1.5 million on 6 April 2012. However, the £1.8 million limit can be retained on application to HMRC, though no further contributions can be made.  This will be called 'fixed protection'.

If you significantly increase pension contributions in the tax year of taking tax free cash from a pension scheme or in the two tax years before or after, HMRC may deem this as pre-planned recycling of tax free cash and levy a tax charge of up to 70%. If you are on a low income and may rely on State benefits in retirement, a pension scheme may not be appropriate.

 When considering taking pension benefits the inheritance tax implications should be taken into account. The earliest age at which you can take pension benefits is 55 years.

 Annuity option

Although some annuity providers provide cancellation rights, these are only available for a limited time period and once the annuity is set up you cannot normally cancel it or switch to another provider. Annuity rates may change from time to time and are only guaranteed for a limited time period. Annuities are covered by the Financial Services Compensation Scheme. This can act as a safety net should an annuity company become unable to meets its annuity obligations.

Pension Income drawdown

• High income withdrawals may not be sustainable during the period you are in pension drawdown.

• Taking withdrawals may erode the capital value of the pension fund, especially if investment returns are poor and a high level of income is being taken. This could result in lower future income whether an annuity is eventually purchased or not.

• The investment returns may be less than those shown in any illustrations you may receive.

• Annuity rates may be at a lower level if or when the annuity purchase takes place.

All options

Past performance is not a guide to future performance.  All investments should be held for the long term as their value can fall as well as rise, therefore you may get back less than you have invested.

This information is based upon our understanding as at 6th April 2011 of pensions legislation and tax. This is subject to change. The options described in this guide are those generally available however please note pension scheme rules can be more restrictive than the legislation.

This guide aims to give you information to help you make your own financial decisions. The information does not constitute financial or other professional advice. If you have the slightest doubt about your own ability to make a decision on your retirement options then you should take advice from an independent pension specialist. Your pension could be the biggest asset you have, and your decision will affect your standard of living for the rest of your life.

Gerard Associates offer a specialist director-led service to help you make the right decisions regarding your retirement planning.