RETIREMENT PLANNING

After many years of hard work and saving, it is crucial to take an appropriate approach with an aim of maximising your potential retirement income.

Looking to the future

Following the Pension Reforms announced in the 2014 budget, there are more options than ever for managing your workplace or personal pension. However, it can be tricky to navigate through the new landscape.

Our Private Banking and Advice Managers can help you put together a retirement plan that is in-line with your financial situation and your personal attitudes.

Advised services

Advised services are provided by Bank of Scotland plc or Lloyds Bank plc dependent upon the nature of the advice. Our recommendations will be based on our understanding of your personal circumstances and plans at the time that we provide you with advice. For Advised services, we will advise and make a recommendation for you after we have assessed your needs. We only offer selected products from a limited number of companies.

You can find out more about adviser fee charging and professional standards by visiting the FCA.

Non-advised services

Non-advised services are provided by Bank of Scotland plc in relation to banking, savings and lending products. For non-advised services, you will not receive advice or a recommendation from us and you will need to make your own choice about how to proceed.

Become a client

Talk to us about how our expert service can help you with your aspirations and goals.

For access to advice from a Private Banking and Advice Manager, you’ll need at least £250,000 in savings, investments and/or personal pensions and/or a sole annual income of at least £250,000.

Before we provide you with any services or products, we will explain and agree with you what advice can be given, the products and services this advice covers and any charges that will apply.

Plan

Planning for your retirement starts with selecting the correct pension

Choose

We are here to help guide you through the decisions you will have to make come your retirement 

consider

We can help create a clear picture of the things you need to consider on retirement

Pension changes 2015

In 2014, Chancellor George Osborne announced some of the biggest changes to the pension system in the UK in over a hundred years. Traditionally, pension options have been relatively restrictive, aimed at safe-guarding the incomes of pensioners rather than giving them flexibility over how they manage their savings.

One of the reasons is that with interest rates at record lows, returns on annuities have in the main been fairly low, resulting in pressure on the Government to make changes.

The Pensions changes from April 2015 offer more freedom than ever before with a number of different options for retirees with defined contribution pension arrangements. Some of the major changes are outlined below. If you need advice or guidance on how the changes will impact your retirement savings we recommend you book an appointment to speak to one of our Private Banking and Advice Managers (PBAM).

Under the Budget 2014 pension changes, once you’re over the age of 55, you will be able to withdraw the entirety of your defined contribution pension as a lump sum if your Scheme permits it. Of this total, 25% will be tax-free, with the remainder taxed at your highest marginal rate.

Phased withdrawal means crystallising a portion of the pension, 25% of which is tax free and the remainder is taxed at the marginal rate of income tax and the remainder of the pension is left untouched to a future date.

Phased Flex-Access Drawdown means you crystallise a portion of the pension, but only withdraw the tax free element, leaving the taxable portion in the pension and therefore not liable to income tax until drawn at a future date. The remainder of the pension stays untouched.

Full flexible drawdown means you crystallise the whole pension fund and withdraw the 25% tax free element leaving the remainder to be accessed at a later date with any later withdrawals liable to income tax at the marginal rate for the tax year in question.

In September 2014 the Treasury announced the new “pension death taxes” applicable from the 6th April 2015.

Where the pension holder dies before the age of 75 any unused defined contribution or flexi-access drawdown pension values that are within the Life Time Allowance can pass tax free to a dependant or nominated beneficiary.

If the pension holder dies after the age of 75 then unused defined contribution or flexi-access drawdown pension can be passed on to a dependant or nominated beneficiary with a taxable rate of 45% on lump sums. This is down from the previous rate of 55%. If taken as income, tax is paid at the marginal rate.

Using your savings

You can use your annual tax efficient ISAs (Individual Savings Accounts) allowance, structured products, shares and bonds as a flexible way to build up your savings alongside a Pension. The pension reforms now provide a number of different ways that you can manage your pensions, making financial planning more complex. For example, you may stagger your withdrawals to gain tax benefits. Alternatively, you may combine using drawdown of some of your cash and use the remainder to buy an annuity.

As a result of the changes to Pension Regulations, a defined contribution pension scheme is now a more tax-efficient method of passing on wealth to family members or loved ones. This may impact how you plan for retirement. You may choose to draw income from other sources and leave your pension fund intact, knowing it can be passed on tax efficiently. The new reforms have made financial planning for retirement far more complex. Our Private Banking and Advice Managers are available to help you to:

  • Understand the implications of the reforms on your savings
  • Review your strategy to make sure it is the most beneficial for you in the new environment
  • Help you make adjustments if necessary.

Tax benefits are offered by the Government on pension savings in order to encourage you to save for your retirement. Below are a summary of the main tax benefits available:

When making a payment into your pension you are eligible for tax relief. Either your employer will take pension contributions out of your wages before deducting income tax, or, your pension provider can claim tax relief on your behalf at the current basic rate of 20% (remember tax rates can change). This amount is then added to your pension.

You can also claim tax relief when someone else makes a personal contribution in to your pension. If you pay tax at the higher rate of 40%, or at the additional rate of 45%, you can claim extra tax relief on your pension payments via your own tax return. The tax relief rate of 20% is topped up to meet your highest marginal rate. This effectively means that a £100 contribution could cost you as little as £60 if you are a higher rate payer or even £55 if you are an additional rate payer.

The annual allowance for tax relievable pension contributions for the 2014/15 and 2015/16 tax years is £40,000. However, an individual can carry forward any unused annual allowance from the three previous years. Therefore in theory in the 2015/16 tax year, on the basis that the individual was a member of a registered pension scheme but had made no pension contributions in the tax years 2012/13 through to 2015/16, so long as you had taxable net relevant earnings of the same level, you could make a single tax relievable contribution of up to £180,000.

If you are not earning enough to pay Income Tax, you can still get tax relief on pension contributions up to a maximum of £3,600 gross a year. This means the maximum you can pay in is £2,880 net and the government will top up your contribution to make it £3,600. There is no tax relief for contributions above this amount.

Once you have started investing in your pension, the growth will be tax efficient. This will potentially help grow your pension pot at a faster rate compared to alternate investments. However, your pension can go up and down depending on the assets it is invested in.

Under the new pension rules, once you’re over 55 (moving to age 57 in 2028) you will be able to access all of your funds at once in your defined contribution pension if the Scheme permits it. The first 25% of any withdrawal is tax free, with any remaining drawdown income taxed at your marginal rate.

Past performance is not a guide to future performance. Investors may not receive back the full amount originally invested and the value of investments and the income from them may fall as well as rise. Tax treatment depends on individual circumstances and may be subject to change in the future.