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There are many types of pension available - follow these links to find out more. John Davies Financial Consultancy's team is here to help you.

Pension Freedoms as of 6th April 2015 


As of the 6th April 2015 pension legislation has changed:
If you are over 55 you now have the option to fully assess your pension benefits. You are now able to withdraw some or all of your pension fund subext to income tax at your marginal rate. However care needs to be taken here as any lump sum you withdraw the first 25% will be tax free and the remainder taxed at your marginal rate which could result in higher or additional rate tax being paid which maybe unnecessary.
The government has also changed any ruling concerning the need to purchase an annuity. There is now no need to purchase an annuity at any point.
They have also changed the ruling on death benefits. If you were to pass away before age 75 the benefits of your pension can be taken as a lump sum, income for a spouse or dependant free of any tax charges including inheritance tax. After age 75 a 40% tax charge is still in force at present on lump sum withdrawals on after death. If a spouse or dependant income is taken then there is no tax charge. The income will be tax under the spouse or dependant income tax rate.
Whether you have a final salary scheme or personal pension we are here to guide you through your options and help you make the correct choices for you. 
Please Note that
·         Your retirement income will be reduced by unlocking a pension early 
·         There may be penalties for releasing your pension early
·         You could incur penalties for taking it early (e.g. market value reductions)
·         You could lose guaranteed benefits
·         You may lose a future guaranteed income
·         Any income could be taxed
·         There could be loss of benefits for your partner and/or children
·         You may lose benefits in the event of ill health
·         Taking benefits could mean that you cannot claim some state benefits, either now or in the future
·         There are costs incurred with unlocking a pension


Final Salary Pensions



Group Pension Plan/Stakeholder Pension

Executive Pension Plan

Self Invested Pension Plans (SIPPs)

Auto Enrolment 


A pension is a type of savings plan that is designed to provide an income when you retire. It can be set up by you or your employer and regular monthly contributions or lumps sums can be paid in.

During your working life you earn a salary (income), but when you retire, you’ll no longer have this. With a pension plan, the contributions you have made into it will become your income.

If you have paid full National Insurance contributions throughout your working life, when you get to pension age, you will also receive the State Pension but this is only designed to provide a minimum income to cover the basic cost of living. The government is extending the dates that you will be entitled to this, and if you complete a BR19 from the HMRC it will inform you about your contribution history, your state pension start date and in today’s terms the pension amount you would receive.

The advantage of paying into a pension is that you receive tax relief at your highest marginal rate. This means that if you are a 20% tax payer and pay in £100 per month, your pension fund would receive your £100 and a further £25 in tax relief, £125 in total. Another way of doing this is by way of salary sacrifice and JDFC have provided more details below. One of the downsides is that your money is locked away until you reach retirement age and any income you take from your pension is taxed at your highest marginal rate. 55 years old is the earliest point at which you can start to take any benefits from your pension.

You can take 25% of your pension fund as a Pension Commencement Lump Sum (PCLS) and this is tax free and can be used for any purpose. If you had £100,000 in a pension, £25,000 could be taken tax free and if you have three different pension policies, you could take 25% from each plan. 

What happens at retirement age.

When you reach the stage where you choose to retire, semi-retire or want to take the benefits from your pension and keep working, you are about to make a decision which could map out your retirement.

The Options are:-
Buy an Annuity
Buy an Impaired Annuity
Phased Retirement

Withdraw some or the whole fund as of 6th April 2015

Final Salary Pensions

Final salary pensions are fast disappearing for new employees and care must be taken when transferring from these plans.

Final salary pensions are based on four key areas:

  • The length of the pensionable service you were credited with as being an active member of the scheme, not necessarily the time you have worked for the company.
  •  Your pensionable salary.
  • The formula or rate of ‘accrual’ which uses service and salary to work out your pension.
  • The circumstances under which benefits are taken from the scheme (retirement, early payment, early leaver, ill-health, death etc).

Using these four key areas, the pension scheme will have a formula for calculating the income you will receive. There are many different types of final salary scheme, each having its own formula to calculate member’s benefits.

Example of a final salary formula:

Length of pensionable service x final pensionable salary
Accrual rate

What is an accrual rate?

The ‘accrual rate’ is the rate at which you built up pension benefits whilst you were an active member of the pension scheme.

It is most commonly expressed as a fraction, such as 1/30th, 1/60th, 1/80th, 1/120th etc. The lower the bottom number, the better the pension benefit you will receive for an equivalent amount of pensionable service e.g.

Example 1, using a 1/60th ‘accrual rate’:

Pensionable Service 20 years
Final Pensionable Salary £30,000
‘Accrual rate’ 1/60th
Pension: 20 years x £30,000
= £10,000 p.a.  

Historically final salary schemes have given better income than personal pensions however, these are now scarce. The pension scheme could also fail if the business that supports the scheme fails.



This type of pension is where you, your employer or both can contribute to your pension plan which match your investment attitude.

These funds will rise and fall with investment performance and it is important that these funds are regularly reviewed, as with any investment, they aim to grow the fund. This can be better than conventional savings.



This is the same as a personal pension plan, but the individual plans are part of a scheme, so basically an employer has a pension scheme where there are a number of individual plans within it.


Group Pension Plan/Stakeholder Pension

This is the same as a personal pension plan, but the individual plans are part of a scheme, so basically an employer has a pension scheme where there are a number of individual plans within it.


Executive Pension Plan

This is a plan which works the same as a personal pension plan but is usually used for the directors or senior staff.

There were significant advantages to investing in these products in the early 1980’s but due to pension regulatory changes this is not the case in today’s terms. If you already own one of these pensions, advice must be sought as the terms and conditions were very favourable and would be lost if the pension was transferred to another scheme. JDFC can help - call us on 0845 370 0070


Self Invested Pension Plans (SIPPs)

This type of plan works very similar to a normal company pension plan except that it gives the individual members a choice of how to invest the contributions. Some investors want more control on how their pension is invested; by investing in a SIPP it gives the investor a greater choice and flexibility.

Some of the different types of investment are:

• Deposit accounts (in any currency providing they are with a UK deposit taker)
• Government securities and other fixed interest stocks
• Unit trusts
• Open ended investment companies (OEIC’s)
• Investment trusts
• Insurance funds
• UK stocks and shares including shares listed on the Alternative Investment Market (AIM)
• Overseas stocks and shares quoted on a Recognised Stock Exchange
• Unquoted shares
• Commercial property
• Ground rents in respect of commercial property
• Traded endowment policies
• Permanent Interest Bearing Shares (PIBS)
• Warrants
• Futures and Options

Many directors use their SIPP to purchase commercial property to help their business. You can also borrow up to 50% of the pension fund, for example if you have a pension fund of £100,000 then you could borrow an additional £50,000 to purchase a property for £150,000.

Please note that although the legislation allows you to invest in these areas it doesn’t follow that you should. Some of these investments are high risk and we will not recommend our clients to invest in them, for example, unquoted shares.



Auto Enrolment

The Government has made changes to the way we are saving for our retirement. Previously, employees were not encouraged to join a workplace pension scheme but, with effect from October 2012, the Government now requires all employers to enrol all eligible workers into a workplace pension scheme if they are not already in one. Automatic enrolment has already started and will be fully rolled out by 2018. Depending on the size of the company, will depend when your employer would need to ensure they have a workplace pension in force.

If you meet with any of the following criteria, then you are eligible to join:-

• You are not already in a suitable workplace pension scheme
• You are at least 22 years old, but under State Pension age
• You earn more than £10,000 a year (tax year 2015-16)
• You work in the UK

The following employees must also be signed up to a workplace pension scheme:-

• Full-time
• Part-time
• On a short-term contract
• Your wages are paid via an agency
• You are off work on maternity/paternity, adoption or carers leave

Even though your employer must enrol all eligible employees into their workplace pension, you do have the option of opting out.

The financial Conduct Authority do not regulate auto enrolment.

Notes for employees: Whether you decide to join the workplace pension or not, your employer must contribute in to it. If you decide not to pay contributions, this means you have opted out of joining and you will lose out on tax relief from the Government on your contributions. If you do choose to opt out, you must complete an opt out form which you can obtain from the person arranging the workplace pension. Your employer must give you the choice to opt back in every 3 years.

Even if you started a salary sacrifice scheme today it could be withdrawn at any stage and the tax and NI advantages removed by HMRC.

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

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


It's rarely too late to make plans and as part of the Quilter Financial Ltd we can now offer even more competitive financial products. Contact John and Adam and we can help you - our clients come from all walks of life, some wealthy, others are ambitious, some just need our occasional help but we offer practicality, confidentiality and honesty.

The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. Further consumer information is available from the Financial Conduct Authority via the following link - click here