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Private Pensions

Pensions are complicated and ever-changing; do you want to make sure you are on track to achieve your retirement goals?

Insurance providers | Black Lion Wealth

Private Pensions

The state pension stands at £8,767.20 per year, whereby the average household UK spending is £27,484.80 According to the Office of National Statistics (ONS, 2018).

 A private pension scheme or plan is a way for you, or your employer to save money for later in your life. There are two main types of pension schemes:

  1. Defined contribution; a pension savings pot based on how much is paid in
  2. Defined benefit; usually a workplace pension based on your salary and how long you have served that employer

Type of pension

Can I contribute?

Can the employer Contribute?

Is cash invested?

 Defined Contribution




 Defined Benefit




 State Pension




According to the Office of National Statistics (ONS, 2018):

  • Total Membership of occupational pension schemes in the UK was 45.6Million (compared with 41.1Million in 2017) – this is the highest ever level recorded by the Occupation Pension Schemes Survey
  • Active Membership of occupation pension schemes was 17.3Million in 2018
  • Active Membership of private sector defined contribution occupation scheme was 9.9Million (compared with 7.7Million in 2017)

5 tips on Private Pension’s

Tip 1 – When and How much to pay

  • Start Now: don’t delay paying into your pension. Start now – whatever age, or stage in your career.
  • This means that you will get a head start; the sooner you do this, the longer your money will have time to grow
  • The compounding impact of investments can make a big difference over time and this can make a big positive difference in terms of investment returns
  • Pay what you can afford and increase payments: if you can afford to increase your contributions to the maximum permitted through your employer I.E 5% per month, then this will be advantageous in the long term.
  • Make the most out of pay rises: make sure you keep increasing your contributions inline with your earnings. If your earnings increase, then up your contributions inline with this.

Tip 2 – Advantages of a Pension

  • Tax relief: tax relief is one of the most attractive considerations when paying into a pension. The government gives those that save for retirement a bonus through tax relief. Effectively, you get the tax back that you’ve paid on all contributions.

If you pay the money into your pension personally, or through your employer from your pay directly you get 20% back from the government into your pension pot. If you are a higher rate taxpayer, you can claim an additional 20%, while top rate taxpayers can claim an additional 25%. If you are part of a workplace pension, usually, you do not need to reclaim tax as this is done automatically through your pay packet.

Example of how tax relief works:

Raj is a basic rate taxpayer (20% bracket).

He invests £80 of his take home pay in his pension.

He’d have in effect, earned £100 before tax. Therefore, the tax relief is 20% of the £100 = £20.

The 20% tax relief does not mean you get topped up by 20% of what you have contributed. The 20% tax relief is calculated on pre-tax earnings.

Please note, the maximum you can invest is 100% of your salary (not dividends), for that specified tax year up to a maximum of £40,000 (before you start to be penalised).

If you earn less than £3,600 as a salary or don’t earn anything, the maximum you can contribute to your pension within the tax relief limit is £3,600

  • Salary Sacrifice: effectively, this is giving up part of your monthly pay in return for a ‘non-cash benefit’ such as increased pension contributions. Different employers offer different options for salary sacrifice, so if you are employed, please double check with your employer.

The benefits of salary sacrifice; is that you can reduce your Income tax and national insurance contributions by giving up part of your salary and directing this into your pension.

Potentially no Inheritance Tax on Death: Mainly, with defined contribution pension schemes, depending on the age you die, your pension pot can be passed on to your beneficiaries without being included in your estate for inheritance tax purposes. This is providing you die before your 75th birthday, then any pension can be passed on tax-free.

  • 25% Tax free lump sum from age 55: from age 55, you are eligible to take 25% of the final value of your pension as a tax-free upfront lump sum.

Tip 3 – Keep on the right side of the Pension Rules

  • Earnings limit: tax relief applies to annual earnings. So, for example; if you earn £30,000 a year, and decide to put in £10,000 from your savings into a pension, you will only receive tax relief up to £30,000 of your earnings.
  • Lifetime Allowance:  This is a good problem to have, but one that can have serious consequences if overlooked.

The Lifetime allowance is essentially the limit on the amount of ‘tax free benefits’ that you can be provided with from a pension scheme.

From April 2016 the lifetime allowance is £1,000,000, remaining at this level for tax years 2016/2017 & 2017/2018.

The current lifetime allowance is £1,055,000.

  • Annual Allowance:

This is the amount of pension saving that can be built up in any one year before a tax charge is incurred.

  • This includes benefits built up in across all your pension savings
  • The annual allowance is set by HMRC and is currently £40,000
  • This may be tapered down to a lower limit from 6 April 2016 if your taxable income is more than £150,000

Your annual allowance may be lower if you have already accessed any defined benefit pensions Since April 2016, anyone who has total income, pension contribution

Tip 4 – What are the different types of Private Pensions?

Defined contribution, or money purchase pension schemes are a type of pension by which money is paid into them, and this money is invested. Therefore, the value on retirement is dependent on how much is paid into the pension, and how the underlying investments have performed. At retirement, you can withdraw cash from the plan or purchase an annuity. Money purchase are now the most common pensions, whether it is a workplace pension, or a personal pension.

The table below summarises some types of money purchase schemes:

Self-Invested Personal Pension (SIPP)

A self-invested personal pension scheme is another form of ‘defined contribution’ personal pension. The value is based on the amount you pay in and how your investments perform.

The main difference with a self-invested personal pension and a stakeholder pension is the ability to have more flexibility on your choice of investments within your pension.

A self-invested personal pension is more tailored towards individuals that are happy to make their own investments decisions or choose someone to do this on their behalf.

Stakeholder Pension

A stakeholder pension scheme is a form of ‘defined contribution’ personal pension. The value is based on the amount you pay in and how your investments perform.

With a stakeholder pension you will find these general characteristics:

  • Flexible contributions
  • Default investment strategies
  • Capped charges

Group Personal Pension

This is generally a type of pension with a third-party provider, such as an insurance provider. Your employer chooses the provider, but usually, you have the ultimate choice of the underlying investments (dependent on the options).

Workplace pension

This is one of the most common pensions for individuals at work. Effectively, you and your employer make regular monthly contributions, and this ‘pot’ is invested up until your selected retirement age. If you move employers, you cab usually take this pension pot with you and join your new employers’ scheme (please check with the provider beforehand).

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    Important Information

    The value of Investments is not guaranteed and can fall as well as rise and you may not retain the amount you originally invested.

    If you drawdown too much Income or your investments underperform, you run the risk of running out of funds.

    The Financial Conduct Authority do not regulate inheritance tax planning and trusts.

    The value of pensions and the income they produce can fall as well as rise, you may get back less than you invested.

    Transferring out of a final salary pension is unlikely to be in the best interests of most people.

    Both Black Lion Insurance & Black Lion Wealth are Trading Styles of PRG Protect Ltd

    Why speak to us – Our client charter?

    We love what we do, and more importantly, we are qualified to do it – we aim to provide a fully comprehensive service to all our clients.

    • We are confident that we will deliver a high-quality service that will be amongst the best in the financial services industry
    • We continually strive to improve our personal development
    • We follow the principles of treating customers fairly set out by the Financial Conduct Authority
    • We treat our clients as we would like to be treated.

    Our 4-step approach to financial planning:

    We Understand YOU

    • By gathering information from you, we always find out about any plans you already have in place
    • We explore your attitude to risk and return, your goals and objectives, and build a picture of what you want to achieve
    • At this stage you find out what to expect from us
    • We do not charge you a fee at this stage

    We Plan for YOU

    • We’ll go away and research various scenarios and how to make the most out of your existing arrangements
    • We’ll then recommend how you can build on your existing plans, so you have the right chance of achieving your goals

    We Implement for YOU

    • We do all the heavy lifting on your behalf – like what we do for all our other clients. This saves you time and effort.

    We Refine YOUR plans

    • Nothing stands still. We will sense check the progress of your plans regularly, we suggest this is done once a year
    • We will update you on legislation, taxation or you will update us on changes to your circumstances

    Pensions Advice

    How Black Lion Wealth Can Help

    We offer specialist advice on:

    Self-Invested Personal Pensions (SIPPs)

    A self-invested personal pension (or SIPP) is a type of defined pension scheme.  In other words, it’s a private personal pension plan that enables you to plan for your later years, when you are no longer working.

    Ideal for contractors, director and the self-employed, a SIPP empowers you to be in control of your pension’s investment strategy.  There are some useful tax and legacy planning opportunities, too. Moreover, your spouse and your family could benefit.

    Of course, the value of your retirement benefits will be determined by the amount of contributions you make and the period over which you make them.

    The team here at Black Lion Wealth will be happy to offer you our advice to help you choose the right options.

    Pension drawdown advice

    Part of the pension freedoms legislation of 2015, access to your own pension funds now offers powerful flexibility and personal autonomy.

    However, pension advice from Black Lion Wealth could offer you all the financial security and peace of mind that you need.

    Apologies, but you have to know what you’re doing here.  We understand every part of this regime.  This means that we know how to protect your hard-earned money from too heavy a tax burden.  Also, how to pass on its benefits to your family after your death.

    If you drawdown too much Income or your investments underperform, you run the risk of running out of funds.

    Don’t leave it to chance.


    An investment in an annuity (buying a product that pays an income each year until you die) was – before 2015 – and still is, a viable aspect of retirement planning.

    However, there’s a long list of considerations to think about here.  In other words, things to know and understand, such as fixed, variable, deferred income – lots of complicated terms.

    Make sure that you get the advice you need from us before you decide.

    Pension switch and consolidation advice

    In our lifetime, most of us will have more than one job, each with a pension scheme as part a remunerations package.  You may wish to ask us about how to gather together all your “pension pots” into one place.

    Not only can we offer you the benefit of our experience and expertise, we can also put the consolidation process into action.

    Pensions – where we are now

    The range of pension options on the market has never been broader.

    On the one hand, this is good news for the canny investor.  On the other, how do you know that you’ve made the right choice? How much should you save?  What are the different types of pension products out there?

    We hope that we’ve convinced you to consider pensions advice.

    We’re all living longer.  The retirement age is rising.  Life isn’t going to get any cheaper any time soon.  Building up your own private nest will make your retirement easier to plan.  Do the right thing today. Give Black Lion Wealth a call.  We’re here to help.

    The guidance and/or information contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK

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