Personal Pension Advice
Pension savings are among the most important and valuable financial commitments you will enter into during your working life. They can provide income for your retirement, as well as financial protection for dependants, and do so in a tax efficient way.
There are a number of ways in which, as an individual, you can accrue pension savings for your retirement, either individually through a personal pension arrangement or collectively through a workplace pension arrangement
But do you know your rights and how to complain if things go wrong, or you are not given the opportunities to save that, by law, you should be given? Whatever type of pension arrangement you use to save for your retirement, the law exists to protect those rights and ensure that you receive the benefits to which you are entitled.
Pension arrangements can be complicated, but they have one purpose, which is to provide you with an opportunity to save for your retirement. When that doesn’t happen, or doesn’t happen in the way it should, we can help.
To speak to a solicitor for personal pension advice, call JMW today by calling 0345 872 6666, by filling in our online enquiry form. If you’re looking for pension advice for your business, please visit our dedicated page.
How JMW Can Help
Pension schemes provide valuable benefits, but sometimes things go wrong. We can give advice and support to you where:
- Your employer hasn’t provided you with the pension arrangement to which you are entitled
- Your pension scheme hasn’t been administered correctly
- You have a complaint or a dispute with the scheme
- Your pension benefits aren’t correct, or are not what you have been told to expecting
- The trustees of your scheme won’t grant a discretionary benefit to which you believe you are entitled
- A request to transfer-out of the pension arrangement hasn’t been done properly and you have lost out financially
Types of Pension Schemes
If you are employed and normally working in the UK, your employer must provide a pension arrangement for you to join and make contributions.
Different types of employees have different rights to join their employer’s pension arrangement. If you are aged between 22 and state retirement age, and earn more than £10,000 per year, then your employer must enrol you automatically into a pension scheme and contribute an amount equal to at least 3% of your salary, on your behalf.
If you are outside of that age range or don’t earn at least £10,000, you still have legal rights for your employer to make a pension arrangement available to you and, in most cases, to make a contribution to the scheme on your behalf.
Final salary pension schemes
Workplace pension schemes like final salary arrangements offer valuable benefits that are underwritten by your employer and administered by scheme trustees. They provide salary-related benefits that build up over time, for you and your family.
Self-invested personal pensions (SIPP)
Individuals can make pension savings through a personal arrangement outside of their workplace, often through a SIPP.
While not benefitting from employer contributions, SIPPs allow individuals to control the type of investments in their schemes and give flexibility over pension benefit design.
What are My Options if I’ve Been Auto-enrolled into a Workplace Pension?
If you've been auto-enrolled into a workplace pension, there are several options available to you:
- Stay in the Scheme: Your employer has automatically enrolled you into the scheme because it's a legal requirement for them to do so, and it is generally a good way to save for retirement. Your employer will contribute a percentage of your qualifying earnings into your pension pot, and you will also receive tax relief on your contributions. Staying in the scheme means you'll benefit from these contributions towards your retirement savings.
- Opt Out: If you decide that you do not want to be part of the workplace pension scheme, you have the option to opt-out. There's typically a one-month opt-out period from the date you receive your enrolment notice, during which you can opt out and get a refund of any contributions you've already made. If you decide to opt out after this period, you may not be able to receive a refund of your contributions, which will remain in your pension pot until retirement age.
- Opt Back In: If you've opted out but later decide that you want to join the workplace pension scheme, you can opt back in by notifying your employer. They are required to enrol you back into the scheme at least once in a three-year period, but may do so more frequently at their discretion.
- Contribute More: If you'd like to save more for your retirement, you can choose to increase your contributions. This may also result in your employer increasing their contributions, depending on the scheme rules.
- Transfers: If you have old pension pots from previous employers, you could consider consolidating them into your current workplace pension scheme to make it easier to manage your retirement savings. It's important to seek advice before doing this, as some pensions may have valuable benefits that could be lost on transfer.
Before making any decisions, it's important to understand the implications for your personal situation. At JMW Solicitors, our team can provide you with comprehensive legal advice to help you make the right decision about your pension. Please note that for detailed financial advice, you should also consult with a financial advisor.
How Do I Deal with a Dispute About My Pension Benefits?
If you're dealing with a disagreement over your pension benefits, there are several steps you can take.
- Internal Dispute Resolution: The first step usually involves raising the issue with your pension provider or scheme administrator. They should have an Internal Dispute Resolution Procedure (IDRP) that you should follow. This gives them the opportunity to resolve the issue before it escalates further.
- Seek Legal Advice: If your dispute is not resolved through the IDRP, or it's a complex matter involving potential legal issues, it may be time to seek legal advice. Our experienced pension law team can help you understand your rights, assess the merits of your case, and advise on the best course of action.
- Pensions Advisory Service: If you're unhappy with the outcome from your provider's IDRP, you can consult with The Money and Pension Service, a free government service that provides information, guidance and informal dispute resolution services.
- The Pensions Ombudsman: If your dispute remains unresolved, you can bring your case to the Pensions Ombudsman. The Ombudsman has legal power to make decisions that are binding on pension providers. Legal advice is recommended before pursuing this route due to the potential complexity and implications of these cases.
- Legal Proceedings: In some circumstances, it may be appropriate to start legal proceedings, for example, if you believe you have suffered a financial loss due to negligent advice or maladministration. This is a serious step and you should definitely consult with a legal professional before proceeding.
At JMW Solicitors, we have a dedicated team of pension law specialists ready to guide and support you through the process. We can help you understand your situation, explore your options and work towards achieving a satisfactory resolution to your dispute. Pension law can be complex, but with our expert team at your side, you won't have to navigate it alone.
FAQs About Personal Pensions
What is the best age to start a pension?
While the ideal age to start a pension can depend on personal circumstances, it is generally beneficial to start as early as possible.
Starting a pension early in your career, even if the contributions are small, can significantly increase the value of your pension pot by the time you retire. This is due to the compound growth of your investments over time. The longer your money is invested, the greater the potential for growth.
Another important aspect to consider is the employer contributions that come with being enrolled in a workplace pension scheme. These essentially act as 'free money' towards your retirement. By starting your pension contributions early, you can maximise these benefits.
The government also provides tax relief on pension contributions, which means a portion of the money that would have gone to the government as tax goes into your pension pot instead. Starting early allows you to make the most of this tax advantage.
However, we understand that everyone's circumstances are different. There may be other financial commitments that take precedence, like paying off debts or saving for a house deposit. It's about finding the right balance for your personal circumstances.
Remember, it's never too late to start contributing to a pension and planning for retirement. Whether you're just starting your career, you're at the midpoint, or you're nearing retirement, there are always steps you can take to improve your financial position for the future.
At JMW Solicitors, while we can provide legal advice related to pensions, we recommend seeking detailed financial advice from a regulated financial advisor who can consider your individual circumstances and provide personalised guidance.
How much should I be contributing to my pension?
As a general rule of thumb, a common suggestion is that you should aim to save a percentage of your pre-tax salary equivalent to half your age at the time of starting your pension. For instance, if you start a pension at age 30, aim to save 15% of your pre-tax income for the rest of your working life.
In the UK, if you are enrolled in a workplace pension scheme, your employer will contribute a portion of your salary to your pension pot, and the government will provide tax relief. As of the 2021/2022 tax year, the minimum total contribution is set at 8% of your qualifying earnings, with at least 3% coming from your employer. This percentage includes both your contributions and those from your employer. However, many financial advisors would suggest that this is a minimum benchmark and, if possible, you should aim to contribute more to secure a comfortable retirement.
While our team at JMW Solicitors can provide legal advice relating to pensions, for a comprehensive assessment of your personal situation and detailed financial advice, you should consult a financial advisor.
Can I have more than one pension?
When it comes to having multiple pensions, it is indeed possible and quite common. In fact, over the course of your career, you may accrue several pensions, particularly if you change jobs frequently. Each time you start a new job and join a new employer's pension scheme, you begin a new pension pot.
It's also possible to have a private or personal pension in addition to a workplace pension. This could be a scheme you've set up yourself with a pension provider or a stakeholder pension.
When you reach retirement age, you will have a few options for how to use the money across these different pension schemes. You can choose to access each pension separately or combine them into one. However, it's important to be aware that each pension pot you have could have different terms and conditions, including fees, charges and benefits. Therefore, if you're thinking about combining your pension pots, you should seek professional advice.
Remember, managing multiple pensions can be complex and time-consuming, particularly as you near retirement. It's vital to keep track of all your pensions, their value, and where they are invested.
At JMW Solicitors, we can provide legal advice about your pension, but for comprehensive financial advice, we recommend consulting a financial advisor. They can help you understand the best options for your personal circumstances, ensuring you're able to make the most of your retirement savings.
What are the tax implications of my pension contributions?
Pension contributions are afforded tax relief in the UK, which means a portion of the money that you would normally pay in income tax goes into your pension instead. The rate at which you get tax relief depends on the highest rate of income tax you pay:
- Basic rate taxpayers get 20% pension tax relief
- Higher rate taxpayers get 40% pension tax relief
- Additional rate taxpayers get 45% pension tax relief
This means if you're a basic rate taxpayer, for every £80 you contribute to your pension, the government will add £20 in tax relief, effectively making your total contribution £100. Higher and additional rate taxpayers can claim back the extra relief through their tax return.
Upon retirement, you can typically take up to 25% of your pension pot as a tax-free lump sum. The remaining amount is subject to income tax at your marginal rate when drawn.
Given the complexity of pension tax rules, and because everyone's circumstances are unique, we recommend consulting a financial advisor for tailored advice.
Can I access my pension early and what are the implications of doing so?
When it comes to accessing your pension early, there are some important considerations to keep in mind.
Under current UK rules, you can usually start taking money from your pension pot from the age of 55. However, you should only consider doing so if it's absolutely necessary, as this will reduce your retirement income.
It's also crucial to be aware of the tax implications. Normally, you can take up to 25% of your pension pot as a tax-free lump sum. The remaining 75% is treated as taxable income and, depending on how much you withdraw and any other income you have, could push you into a higher tax bracket, resulting in a significant tax bill.
You should also be extremely cautious about pension scams offering early access to your pension (before age 55) without mentioning the hefty tax implications. Such 'pension liberation' schemes are often fraudulent and could result in the loss of all your pension savings, along with a substantial tax bill.
Given these factors, it's strongly advised that anyone considering accessing their pension early seeks professional financial advice. While we can provide the legal advice around the pension schemes, for a comprehensive financial assessment, a regulated financial advisor should be consulted. They can help you understand the short and long-term implications of accessing your pension early and provide advice based on your personal circumstances.
What happens to my pension if I change jobs?
The fate of your pension when you change jobs is a common concern for many employees. Typically, what happens to your pension when you change jobs depends on the type of pension you have:
- Defined Contribution Pension: If you have a defined contribution pension, your pension belongs to you. When you leave your job, the pension doesn't stop; it continues to be invested, and its value can go up or down. You won't receive any further contributions from your old employer, but you can continue making your own contributions if you wish. Alternatively, you might be able to transfer it to a new pension scheme, either with your new employer or a private scheme. Before deciding to transfer, you should carefully consider any fees, charges or benefits associated with both schemes.
- Defined Benefit Pension: If you are a member of a defined benefit pension scheme, you'll usually have a few options when you leave your job. You can leave your benefits in the scheme until you retire or transfer your benefits to a new pension scheme. If you have less than two years' service in the scheme, you may have the option to take a refund of your contributions, but this is usually not recommended as you would lose your employer's contributions and any investment growth.
- Auto-enrolment Pension: If you've been auto-enrolled into your employer's pension scheme, when you change jobs, your old pension will remain where it is, and you'll be auto-enrolled into a new scheme with your new employer, starting a new pension pot.
In any situation, when you leave a job, it's important to keep your pension details safe, including the provider's name, your policy number, and the date you stopped contributing.
At JMW Solicitors, we can provide legal advice related to your pension, but for a detailed analysis of your personal circumstances and comprehensive financial advice, you should consult a financial advisor. They can help you navigate the complexities and help you make the right decision based on your personal circumstances.
Can I transfer my pension to another provider?
The straightforward answer is, yes, it is generally possible to transfer your pension to another provider. However, the decision to do so should be taken after carefully considering the implications.
When it comes to defined contribution pensions, you have the freedom to move your pension pot to another scheme if you wish. This can be beneficial if you find a provider who offers lower fees, better investment performance, or a service more tailored to your needs. It can also be a useful way to consolidate your pensions if you have multiple pots with different providers.
For defined benefit pensions, also known as 'final salary' pensions, transferring is a bit more complex. These types of pensions offer a guaranteed income for life, and by transferring out, you might give up these secure benefits. Therefore, it's mandatory to take financial advice if your defined benefit pension is valued at over £30,000.
Regardless of the type of pension, there are several important factors to consider before transferring:
- Fees and Charges: Some pension schemes may charge an exit fee for transferring out, while others might charge setup fees for transferring in. It's essential to be aware of these costs and factor them into your decision.
- Benefits and Features: Some pensions come with valuable benefits that could be lost if you transfer, such as guaranteed annuity rates or life insurance.
- Investment Options and Performance: Different schemes offer different investment options, and past performance can vary. While past performance is not a reliable indicator of future results, it's worth comparing the investment options of different schemes.
Before making a decision, it's highly recommended to seek professional financial advice. While JMW Solicitors can provide legal advice related to your pension, for a comprehensive financial assessment, you should consult with a regulated financial advisor. They can help you understand the implications of a pension transfer and guide you in making the best decision based on your individual circumstances.
What are the implications of a pension sharing order in a divorce?
The implications of a pension sharing order during a divorce are multifaceted and involve both financial and legal considerations.
A pension sharing order is one method used to divide a couple's pension assets on divorce. Essentially, the order designates a percentage of one party's pension rights to the other party, resulting in a clean break between them in terms of pension provision.
Here are some of the key implications of a pension sharing order:
- Immediate Separation of Pension Assets: Once a pension sharing order is made, the specified portion of the pension is either transferred into a pension in the other party's name (known as an external transfer) or stays within the same scheme but is now in the other party's name (an internal transfer). This gives each party control over their pension provision.
- Impact on Retirement Planning: The pension sharing order can significantly alter each party's retirement planning. The party giving up a share of their pension will have a smaller pension pot, and the party receiving a share will have a larger pension pot than they did previously. This might require both parties to revisit their retirement plans.
- Tax Considerations: Pension sharing orders are exempt from tax penalties that would typically be applied to early withdrawal or transfer of pension funds.
- Valuation Disputes: There can be disagreements over the valuation of the pension assets. It's essential to get an accurate and fair valuation, which might require the services of a pension actuary.
- Potential Fees: There can be administrative costs involved in processing the pension sharing order, which are usually paid by the party receiving the pension share.
It's crucial to seek legal and financial advice before agreeing to a pension sharing order. This ensures you understand the immediate and future implications of the order.
Can my pension be passed on to dependants when I die?
How you handle your pension is an important aspect of estate planning, and it's crucial to understand how pension schemes handle this matter.
In general, yes, most pension schemes do allow for benefits to be passed on to dependants when you die. However, the precise arrangements can depend on the type of pension scheme and its specific rules, as well as your age at the time of death.
Here's a basic outline of how different types of pensions might handle this:
- Defined Contribution Pensions: If you die before the age of 75, the remaining pension pot can typically be passed on tax-free to any nominated beneficiary - not only dependants. They can take it as a lump sum or draw an income from it. If you die after the age of 75, your pension pot can still be passed on, but the beneficiary will usually have to pay income tax on it.
- Defined Benefit Pensions: These pensions usually offer what's known as a 'survivor's pension' for your spouse, civil partner, or sometimes dependant children. The amount they receive and the duration of the payments can vary widely between schemes. It's worth noting that this type of pension doesn't usually offer a lump sum that can be passed on.
To ensure that your pension pot gets distributed according to your wishes, it's crucial to name beneficiaries on your pension scheme - often referred to as 'nominating' beneficiaries. Also, reviewing and updating your beneficiaries after major life events, such as marriage, divorce, or the birth of a child, is recommended.
What’s the difference between a defined benefit and a defined contribution pension scheme?
It's important to understand the different types of pension schemes available and how they work, as each can have distinct implications for your retirement. Two main types are defined benefit and defined contribution pension schemes.
Defined Benefit (DB) Pension Schemes
These are also known as 'final salary' or 'career average' schemes. Here's what you need to know:
- Income: The income you receive upon retirement is based on a formula that typically takes into account your salary (either at the end of your employment or an average over your career), your years of service, and a predefined accrual rate.
- Risk: The employer bears the investment risk in a DB scheme. Regardless of how the scheme's investments perform, you are promised a specific income on retirement.
- Pension Pot: There is no individual pension pot that you can access. Instead, you receive a regular income throughout retirement.
Defined Contribution (DC) Pension Schemes
Sometimes referred to as 'money purchase' schemes, these work differently:
- Contributions: Both you and your employer make contributions into your pension pot, which is then invested.
- Investment Risks: In a DC scheme, the individual bears the investment risk. The value of your pension pot at retirement will depend on the amount contributed and how well the investments have performed.
- Retirement Options: Upon retirement, you have several options, including purchasing an annuity (a regular income for life), drawdown (leaving your pot invested and taking money out as needed), taking the whole pot as cash (subject to tax), or a combination of these.
Remember, each type of pension scheme has different implications for your retirement income, the risk you bear, and the options available to you when you retire. Therefore, it's essential to seek legal and financial advice when planning for your retirement. At JMW Solicitors, we can provide comprehensive legal advice, and we work with financial advisers who can help you understand the financial aspects of your pension scheme.