Professional Investment Managers Views on Coronavirus

There is no denying that the Global Coronavirus pandemic has significantly impacted the global financial market. The UK share index (FTSE), for instance, declined by 16 percent over the week by March 12, and by 27.5 percent when you consider its performance in February 2020. Within the same time frame, the S&P also declined by 17.7 percent and 26.5 percent. These declines may be alarming to investors, so professional investment managers, including pension financial advisors are sharing their views and welcoming personal one-on-one consultations with their clients who may be concerned about their pension portfolios.

Knowing the views of professional investment managers and your pension financial advisor on the Coronavirus may provide you with some reassurance about the health of your finances. Notably, most financial experts believe that much of the media and the available market commentary on equity markets are associated with short-term movements in the market. Pension funds, however, are long-term investments, and despite the lack of a guarantee, history has proven that market volatility can improve over time and that the markets can recover invariably.

Your pension financial advisor will likely tell you that determined that a diversified portfolio can offer some protection and serve as a cushion against the impact of declining equity markets. That said, investment managers may recommend having a diversified portfolio that is tailored to your risk profile in the longer term. If you think that your risk profile evolved, get in touch with your financial advisor for a discussion. Long-term investors are encouraged to look at the bright side. Even if the virus brings the world economy to a recession, they are expecting economic activity to bounce back later, and additional factors could make it stronger.

Besides the Coronavirus, there are other factors that have impacted the markets around the world. These include US border closure to European flights except for the UK, and the oil price conflict between Russia and Saudi Arabia. The Coronavirus may be the underlying reason, but those factors led to more negative market sentiments these days. Professional investment managers expect the outbreak to affect consumer spending and industrial production.

Your pension financial advisor may offer some tips on how you can act and what you can do in times of uncertainty. Do not hesitate to get in touch with them for assistance.

Source URL: https://www.pensionexchange.co.uk/professional-investment-managers-views-on-coronavirus/

How to Decide on Your Final Salary Transfer?

When you are enrolled in a DB (defined benefit) pension scheme, you may, at one point, be offered an option to transfer your DB pension to another type of pension scheme (commonly a defined contribution). This is called a final salary transfer, which is a huge and irreversible decision that requires a careful weighing up of the different pros and cons that the transfer may bring.

A DB pension scheme, otherwise referred to as final salary pension scheme, is a workplace pension where you are guaranteed an annual income for the rest of your life, the amount of which is based upon your average or final salary. In a final salary pension scheme, it is your employer’s responsibility to pay into a central fund (with the exception of schemes that are directly funded by taxpayers). You will then be assigned a “normal retirement age” from which your pension will be paid. The amount that you are paid depends on various factors, but most likely on your final salary rate. One of the main benefits of a DB scheme is that it guarantees your income for the rest of your natural life. As long as the scheme remains funded, you are guaranteed a pension income regardless of your age and how long you live.

A final salary transfer trades in your DB pension for one fixed-size fund of the same kind that’s found in DC or defined contribution pensions. This means giving up a guaranteed pension for life for something that’s called a cash equivalent transfer value, which can then be invested in another pension pot from which to draw your income from age 55. This makes your pension accessible at an earlier age and at the same time provides you the option to vary your income levels. Unspent pension can likewise be inherited by your defined beneficiaries without any inheritance tax. Deciding whether or not to go through a final salary transfer is all a matter of weighing up the positive and negative implications on your future finances.

Source URL: https://www.pensionexchange.co.uk/how-to-decide-on-your-final-salary-transfer/

Cashing in a Pension – Is It the Right Choice for You?

You become eligible to access your pension funds when you are 55 years old. You also have the option of cashing in your pension to change it to a flexible or guaranteed income any time.

However, it may not be in your best interest to take as much as you please. There are certain parameters you must consider before you make that crucial decision to cash in your pension. Here’s what you need to think about:

• Taxes: A quarter of the pension pot is typically tax-free, and income tax is applicable on the rest. The income tax to be paid will be based on your overall income, where you live, and your personal circumstances. It makes sense to learn about taxes, how they affect your pension, and what you are likely to pay before cashing in your pension.
• Withdrawal risks: You may pay more if the withdrawal that is added to other income in the same year will result in a higher income tax rate. You might pay less by spreading out the cash withdrawals over several years.
• The urgency for money: Why do you want to cash in your pension? If you really need cash, take only what you need. Remember that the more you take today, the less you will have later on. Moreover, if you exceed the tax-free limit, you will have to deal with income tax for the rest of it.
• State benefits: Cashing in your pension could affect your state benefits, so be sure to check.
• The possibility of restricted payments: there is a limit on the amount of gross contributions that an individual can pay each year and benefit fully from tax relief. This can be an issue if you are still earning and you have other pensions to pay into.

If you are still unsure about cashing in your pension, consult with a qualified financial adviser, preferably experienced practitioners who follow the Pension Transfer Gold Standard. That way, you can be sure that you are receiving credible financial advice from someone who is regulated by the Financial Conduct Authority in the UK.

Know What Final Salary Transfer Means

A final salary pension is a kind of defined benefit pension that pays out a secure income for life at retirement. Increases also apply on the amounts received throughout retirement. Some people consider moving their defined benefit pension to a defined contribution pension arrangement as these can be accessed more flexibly so this might seem like an attractive option.

A final salary transfer involves giving up the right to this pension, along with all its guarantees.

If you decide to transfer out of your defined benefit pension scheme, the trustees who run the scheme convert the benefits into a cash sum. This is called a ‘transfer value’ (also known as a ‘cash-equivalent transfer value’ or ‘CETV’).

When you opt for a final salary transfer, you are effectively giving up guaranteed income during retirement, along with all other benefits offered under the scheme. Agreeing to the pension transfer also means taking on additional risks such as investment performance. This is why it pays to seek the advice of a pension transfer expert so you can better weigh up the implications of your decision.

Any potential advantages of transferring from a defined benefit pension scheme to a defined contribution one can often be outweighed by the costs, risks and loss of benefits involved. That said a pension transfer specialist will discuss the advantages and disadvantages, taking into account your personal circumstances and objectives, looking at all your options and making a recommendation whether to transfer or not.

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Some Useful Tips to Consider Before Cashing in Your Pension

Transferring your final salary pension is an option that many companies offer to their employees to save money on future pay-outs. Employees or former employees who participate or have participated in their pension plan are given the opportunity to withdraw their money as a lump sum as they leave the organisation or perhaps long after they have left. In exchange, people who choose to cash in their final salary pension forgo their right to a guaranteed income for life. While cashing in your pension may seem an attractive option as you’ll be getting your pension savings as a lump sum, there are certain things that you should consider before jumping in and giving up your retirement income.

One of the main things you should think about when considering cashing in your pension is your retirement needs. Annuity guarantees your monthly income throughout retirement. However, a lump sum which is based on your earnings at the company gives you immediate and complete control of your money so you can invest it the way you see fit. Consider the pros and cons of both when thinking about cashing in your pension, because while a lump sum might give you great prospects for investment a guaranteed income during retirement is useful so you can cover your retirement expenses (e.g. cost of living, utilities, medical needs, etc.). Compare your guaranteed monthly income with your projected monthly expenses so you can decide whether or not it makes more sense to withdraw your pension now or later.

A Brief Guide to Employee Pension Scheme

How do you want to spend your life after retirement? Contributing to the right pension scheme, can help you achieve the standard of living you have always wanted in retirement. It is advisable to start contributing to a suitable pension scheme as soon as possible.  The later you leave it the higher your contribution will need to be to achieve your retirement income objectives., In the UK, there are many different pension schemes available, and knowing what they are can help you pick the best option. Here is a quick guide to the types of the schemes available:

• Stakeholder/personal pensions –a type of defined contribution pension. You choose the provider and make arrangements for your contributions to be paid. Some employers offer them, but you can start one yourself. and regularly make contributions, which you can withdraw at retirement.

• Workplace pensions – All employers must now offer a workplace pension scheme and automatically enrol eligible workers in it. You and your employer can make contributions to it and you can withdraw it at retirement.

• SIPP – The Self-Invested Personal Pension is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. Similar to a standard personal pension but tends to give you more flexibility with the investments you can choose. You make contributions and withdraw it later at retirement.

• Drawdown pensions – A flexible scheme lets you withdraw the benefits from a Registered Pension Scheme and the savings will be invested and available for withdrawal at retirement. Your income will vary, as it will depend on the type of investment or how the fund performs.
  
  
• Final salary pensions – Retirement income is based on how many years you’ve worked for your employer and the salary you’ve earned. It promises to provide a guaranteed income for your entire life after retirement. They usually continue to pay a pension to your spouse, civil partner or dependants when you die.

Everything You Need to Know About Defined Benefit Pension Transfer

A defined benefit pension transfer forfeits your scheme benefits in exchange for a cash value to be invested in a different pension scheme. In many cases, you are likely worse off transferring out of a defined benefit scheme, even when your employer is offering an enticing incentive for you to leave. Before making any final decision regarding a pension transfer, it is crucial that you speak with a knowledgeable and experienced financial adviser so you can get guidance on the next steps to take on your defined benefit pension.

When you do decide in favour of a defined benefit pension transfer, the Board of Trustees running the scheme is going to convert all the benefits that you have built up into an equivalent cash sum. This cash sum is also referred to as your pension’s transfer value or cash-equivalent transfer value, which you should then invest in a stakeholder or personal pension, a self-invested personal pension, or a pension scheme with a separate employer. However, not all employer pension schemes allow personal pension transfers, so make sure that you are familiar with these kinds of complexities before making your decision.

One of the main appeals of a defined benefit pension transfer is the different kinds of transfer incentives that employers offer when transferring out of a defined benefit scheme. This could be in the form of a cash payment that’s separate from the transfer value or an enhancement to the determined or calculated transfer value of your scheme benefits, also referred to as enhanced transfer value. However, transfer incentives may not always be as good as they appear to be, for instance, you may have to pay income and national insurance tax on the cash payment or get less pension when accepting the incentive as an extended or enhanced transfer value.