Why Solid Pension Advice Could Save You From Retirement Poverty

Despite health concerns such as obesity, the UK nation is aging better than ever thanks to huge advances in medical science. In turn, our average life expectancy has now reached 80 years old, 8 years higher than what we were expected to live in the 70s. This is set to increase further in the next 20 years. Whilst this is great news in many respects, there are financial pressures arising from the growing number of elderly needing care.

The elderly are now living longer and consequently requiring care for longer than before. As a result many people are forced face the difficult decision of either receiving care at home moving into a care home to help with tasks such as washing, cooking and eating. Coupled with the increase in inflation, pension pots that the older generation have saved into are no longer adequate to cover the annual cost of living in a care home which is now nearly £20,000.

The government lends a small hand to aid those needing care. At present, elderly care needs is means-tested by the Local Authority in which you live and individuals are judged on two criteria; means and need. Anyone with savings over £23,250 must pay for their own support. This threshold figure includes the value of a property. Even if you clear this first hurdle of the means-test, the local authority is then only obliged to provide care if the individual meets certain needs. At the moment this is broken down into low, moderate, substantial and critical. The thresholds councils set will be decided upon their finances.

Only those who require substantial or higher care-needs will be provided with care packages from most councils. This leaves the elderly with low or moderate care needs either having to rely on family and friends to look after them, paying for care themselves or risk doing without any care.

Faced with the option of no care at all is a situation which should be avoided at all costs. Aging is an emotional process leading to heart wrenching decisions which can affect the whole family. The present situation means that many elderly who cannot afford to pay for long-term care are selling their property in order to cover costs. This is a catch-22 situation as state benefits such as heating allowance and pension credit are taken away when you do not live at home. Moving into a smaller home is another option but may prove unsatisfactory. If the elderly person concerned has to move to a more affordable area, or a different local authority which offers a more lenient needs-tested care package, it may mean moving away from those nearest and dearest. The re-mortgaging of homes or relatives of the elderly selling homes to compensate are also tough decisions which are being considered. Such drastic steps should not be made without talking to a pension adviser for easier options.

Seeking professional pension advice can help avoid these life altering decisions. Long-term care annuities now exist and could provide up to 40-50% more income than your existing annuity. Immediate Needs Annuities (INA) have been around for several years to provide an immediate income to cover the partial or total cost of care fees. An INA works by exchanging an initial lump some; its resulting income is then given straight to the care home provider, tax free. The annual income will depending on the size of the lump sum and the purchaser’s impairment or gender. The benefit of an INA is their income is substantially higher than a standard annuity.

Tailored INAs available on the market now also take the life expectancy of the purchaser into consideration. If he or she lives longer than expected, an INA annuity will continue to work to cover care-costs. Many specialised INA annuities on the market also offer money-back guarantees if the purchaser unexpectedly dies. If this happens within the first 6 months of the annuity being purchased then part of the initial up-front some will be returned. Different INAs will offer varying percentages of the lump-sum returned, from 25%-100%, obviously effecting the initial down payment.

Growing old gracefully is something which we should all be entitled to. There are many options available to the individual and their families involved should the need arise for long-term care. Specialist pension advisers will access your personal and financial circumstances to decide on the best long term care annuity scheme; before you have to make any drastic decisions.

Where to Get Pension Transfer Advice

A brief scan of the financial pages of the national press might give you some idea of the number of employers these days why are eager to switch their employees from final salary pension schemes into other, personal pension, plans. Many employers are so keen to encourage such a switch that they are offering a lump sum cash inducement for those who elect to transfer their pension rights in this way. Despite such an apparently attractive inducement, however, where can the employee get pension transfer advice that he or she can feel secure in knowing the transfer is in their own best interest?

The reason for many employers wanting to shift employees away from final salary schemes is that such schemes tend to be relatively expensive. For the employee, however, the attraction may well be the certainty offered by a final salary scheme, since it will be known all along just how the pension is calculated and what it is likely to amount to. A personal pension plan, however, will depend on the performance of the pension fund’s investments and the equally unknown variations in annuity rates. So, the personal pension plan could do better, or it could do worse than, the occupational final salary scheme. How can the employee begin to compare the two, therefore, to know whether to accept the employer’s incentive to quit the safety and certainty of a final salary scheme?

The answer is that it is an extremely difficult decision to make and not one which should be made without dependable pension transfer advice. The complicated nature of pension transfers is no idle judgment, but one that comes from the financial services industry regulator, the Financial Services Authority (FSA). Speaking about the responsibility of pension fund trustees towards any of its members who are thinking about a pension transfer, the Authority states: “Although it is not compulsory, the trustees should encourage members to take advice as pension transfers are complicated and it is difficult to make suitable decisions without advice, even when all the relevant information is provided”.

So, the FSA itself would encourage anyone thinking of transferring from one pension scheme to another – and that includes a transfer out of a final salary scheme – should first consult an independent financial adviser. It is the independent financial adviser, for example, who can begin to make sense of the next most important piece of information you will need in order to weigh up the pros and cons of any transfer. That is a transfer value analysis and an estimate of the benefits that your present scheme would pay. Fairly obviously, this is something that would be needed before any comparison between the existing and new scheme could be attempted. Furthermore, the transfer value analysis is something that only the trustees of your present scheme could provide.

Summary

For whatever reason you are considering taking pension transfer advice, the best-placed source is an independent financial adviser because:

o Independent financial advice is recommended by the Financial Services Authority;

o You will need someone who can help you understand and interpret the transfer value analysis provided by the trustees of your current pension scheme;

o You will benefit from professional advice in weighing up the benefits and drawbacks of your present scheme compared to any alternative.

Financial Planning Services – Decorate Your Present and Protect Your Future

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