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Pension Liberation
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Steve Hopkins
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There's been a lot of press coverage recently about firms who advertise that they're able to obtain for you instant cash from your pension funds.
The term for this is "pension liberation" and involves taking cash from your pension fund before you reach the retirement age set by your pension scheme.
HM Revenue & Customs website states:
"If you have savings in a pension pot you may be targeted and approached to unlock your pension or access it early.
Unscrupulous firms are using misleading information, including offering personal loans or cash incentives to entice savers to cash in their pension pots early. This is known as "pension liberation". Even if you are not approached but take the initiative yourself to access your pension early, some or all of your hard earned pension savings may be at stake.
You'll be liable to pay a tax bill of more than half of your pension savings that you access and may have to pay tax penalties".
They go on to give an example that you can read here of Bill who receives a tax message asking if he wants to release money from his pension.
Pension rules are complicated and great care needs to be taken at all times.
Our message therefore is for you to be extremely careful and if you're approached by any organisation offering this "pension liberation" please consult your Financial Advisor here at Firth & Scott Financial Services Ltd on 0115 8400 333 immediately.
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Student Loans
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Recently I was approached by a client who asked my opinion as to whether they should pay out of their own personal savings the cost of their son going to university from September 2013.
They were in the fortunate situation, if they felt this would be in their son's best long-term interest, of being able to pay the full cost of his university education upfront. They'd always encouraged their children to "pay as they go" rather than borrowing and this was an ethos the whole family had followed for many years.
I would encourage all parents faced with this situation to have a look on MoneySavingExpert.com, where you'll find an explanation to the new system in a very understandable form.
However, I think the most important point is that students start repaying student loans and interest in the April following graduation.
The repayments are solely based on earnings, not on the amount borrowed. For example, you repay 9% of everything earned over £21,000 (although it's wiped after 50 years regardless). If you never earn above £21,000 you never repay. One proviso is that the £21,000 threshold will rise with average earnings from 2017 so as people earn more the threshold goes up.
So let's take a look at one scenario. At the maximum £9,000 per year fee level, the total three year costs to pay upfront are £27,000.
In the extreme case that the child graduates and:
- Becomes a low paid artist or
- A part-time social worker or
- A full-time parent or
- Dies or
In any other scenario where they never earn over the threshold they'll never need to repay a penny meaning that you've paid £27,000 that would never have needed paying back.
As previously stated this is an extreme case and there are many more examples given with the article. The point being made is that everyone's situation is different and the new student loan system is to a certain extent misunderstood.
Article written by Steve Hopkins FCII
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Landlords & Property Investors
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 | | Justin Hevness |
Here in a recent blog post
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To discuss any of the points raised in the articles above, please don't hesitate in contacting me here at Firth & Scott Financial Services Ltd.
Yours sincerely,
Steve Hopkins, FCII
Chartered Financial Planner
Managing Director
Direct Line 0115 8400 322
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The information contained in this message may be confidential and is intended for the addressee only. Any unauthorised use, dissemination of the information, or copying of this message is prohibited. If you are not the addressee, please notify the sender immediately by return e-mail and delete this message. Although this e-mail and any attachments are believed to be free of any virus, or other defect which might affect any computer or system into which they are received and opened, it is the responsibility of the recipient to ensure that they are virus free and no responsibility is accepted by Firth & Scott Ltd, 579 Mansfield Road, Sherwood, Nottingham NG5 2JN for any loss or damage from receipt or use thereof.
Firth & Scott Financial Services Ltd, Tel No 0115 8400 333, are authorised and regulated by the Financial Conduct Authority.
Registered Address: 579 Mansfield Road, Sherwood, Nottingham, NG5 2JN
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IMPORTANT NOTE
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This newsletter is designed to provide you with general information only and does not attempt to give you advice on any particular investment or to recommend any particular investment to you. If you have any doubt as to whether a particular investment is suitable for you you should contact Firth & Scott Financial Services Ltd for advice.
Firth & Scott Financial Services Ltd are Independent Financial Advisers and are authorized and regulated by the Financial Conduct Authority.
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