by Michael Ormond on August 20, 2008
We receive many enquiries regarding the terminology used by financial advisers and in news articles. It can be confusing when one service – that of pension release – is known by a variety of names.
We have put together this short guide to help the uninitiated understand the different monikers for pension release services.
The main terms that are used regularly to describe the release of pension proceeds prior to retirement age include Pension Unlocking, Pension Surrender, Cashing Pensions and Selling Pensions
Pension Unlocking – this comes from the idea that your pension fund is “locked” until you retire. So naturally, to unlock your pension would mean to make the funds available prior to retirement.
Pension Surrender – this is a peculiar term as surrendering is usually used in the context of not having a choice – you always have a choice in these matters and it it worth discussing your situation with an approved financial adviser before going through with the pension release process.
Selling Pensions – although it has entered common parlance, strictly speaking you are not able to sell your pension. Still, the term is often used when someone wants to take a lump sum of cash from their pension fund before retirement.
Cashing Pensions – Cashing pensions has an obvious root – pension holder obtain cash lump sums from their pension funds and so are considered to have “cashed in” their pension as opposed to receiving payments on retirement.
So as you can see, the terms that also get used to describe pension release have a variety of sources and even one that is a totally inaccurate turn of phrase for the process.
If you are unsure of any terminology used in the pension release process, contact us and we will be happy to talk you through the service.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on August 18, 2008
People with Self-Invested Personal Pension schemes, or Sipps, may face hefty tax bills due to a loophole in the way that pension statements are regulated, according to some pension providers.
According to experts, the Financial Services Authority’s rules for scrutinising partially reconciled Sipp statements are not as clear cut as they are for “fully reconciled” ones.
This has produced something of a grey area regarding rules around partially reconciled Sipp statements and industry voices are saying this is ripe for misinterpretation.
Potentially, the rules could be interpreted in quite a wide variety of ways and it is suspected that different providers will interpret them in a way that suits them and saves them the most money.
The predicted effects of this are that the providers will have inadequate controls in place to ensure the Sipp is doing what it is allowed to do. These lack of controls and smudging of the interpretation of rules could leave Sipp holders vulnerable to unexpected tax hikes due to inexperienced investment managers investing in assets that are not Sipp-permissible. If details like this emerge lateer on, it could lead to a big tax bill either the customer or the provider.
Some sources state that the very public voicing of such concerns is purely scaremongering with very few Sipp clients – those who hold taxable property in their Sipp – being affected by the loophole.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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by Michael Ormond on August 6, 2008
The 100th anniversary of the start of the state pension system is celebrated this month. The Old Age Pensions Act was passed in August 1908 and the first payments to pension fund holders were made on 1 January 1909.
Over half a million people – comprising of the old and very poor of society at that time – queued up at their local post offices to collect the first state pension payments available in the UK but when the details of the system are looked at, it seems hard to draw a line between the original system and that in place today by anything other than name.
Initially, the maximum weekly payment of five shillings (25p) for a single person was considered a meagre sum – it’s modern day equivalent would have been around £20 – and to get even that the person would have to be at least 70 years old. This might seem a only a slight difference to todays pensionable age but at the turn of the century, without the improved living conditions of today, only 5% of Britain’s population were older than that.
To add to difficulty in receiving pension benefits, the new pension system was means-tested to boot. A person would only be eligible for pension payments if their income was less than 12 shillings per week, and having too much furniture in their home could see their payment reduced.
Convicted criminals, drunks, the voluntarily unemployed and individuals of “bad character” might have their pension payments refused outright.
The eligibility of claimants was inspected by pensions officers – civil servants who would visit potential and current claimants in their homes to make assessments of the person’s circumstances. These reports would then be passed on to a separate pensions committee for review.
The 1908 Old Age Pensions Act was bought in due to neccessity. As living conditions improved, people were starting to live beyond the point where they were physically capable of working. While the Friendly Societies of the time were geared towards supporting prosperous workers and workhouses were built to house and employ the destitute, there was no support for the emerging generation of elderly, unemployable people. The Victorians called the phenomenon retirement that this generation experienced “retirement”.
It took 30 years and the election of Liberal government to see a system put in place that would support the unemployed elderly.
Over the years the pension system has seen many changes – in 1928 the pension age reduced to 65, in 1948 national insurance contributions were taken into account and the pension age for women was reduced to 60 – and with the pensionable age set to reach 68 by 2048, the pension system in this country will look a distant relation to the original 1908 Old Age Pensions Act.
Michael Ormond is a Financial Advisor specialising in Pension Release services.
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