Pensions

Our new Informed Pensions brand

Lemonade launches DB member options service for schemes

In the news! Our new Informed Pensions brand has been featured by Professional Pensions! You can see the article HERE.

We have just launched a new brand, Informed Pensions, to focus on the bulk DB member options market.

Informed Pensions aims to make retirement better through a unique combination of technology, advisers and great communications.  This provides a range of tools to help DB pension members fully understand the options available to them.

Our ethos of ‘simplicity and clarity’ runs through the work that Informed Pensions carries out, ensuring members understand the bigger picture when making important decisions about their retirement. 

Lemonade listened to market feedback in order to shape the look and feel of the new Informed Pensions brand to ensure it resonates with members of retirement age.

Working with employers and trustees to help DB members through their options at retirement, Informed Pensions offers impartial advice through a simple 3-step process. This ensures members get the appropriate advice as well as reducing risk for the sponsor.

David Pugh, Managing Partner, Informed Pensions said: 

“Our new brand has already helped deliver a number of significant new projects. Working with most of the big pension consultancies has given us the opportunity to create this new approach and better engage the target audience.”

You can contact Informed Pensions through their new website > www.informedpensions.co.uk

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Have you identified your top earners? (Video demo)

Have you started identifying your top earners to make sure they avoid any unexpected pension tax charges?

We can create a user friendly web portal for your company to effectively explain the Annual Pension Allowance to your top earners.  

The web portal allows them to assess their own situation and outlines the solutions available. 

Play the videos below to run through the steps.

Step 1

Start by entering your salary and contributions.


Step 2

Any other income such as a bonus goes here.


Step 3

These lower your income for Annual Allowance purposes.


The results…

Red light means stop – you are due a tax charge. Click on ‘What action can I take?’ for potential solutions.

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Next steps…

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‘Cliff Edge’ retirement unpopular with majority of today’s workers

Tips from our experts on enjoying a phased retirement

A recent survey* has found that half of over 50s shunned the traditional ‘cliff edge’ retirement, preferring to ease themselves in with a ‘phased’ approach.  This could mean drawing down some pension income to allow part-time working without compromising on total income.  

The appeal of a transitional approach allows workers to adjust the amount of time they work before giving up work entirely.  For example, if you can afford to retire age 65, then phased retirement might mean you can reduce your working hours from age 62 and stop work altogether at age 68.

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There are many pros of a phased retirement but also some cons to consider.  Our experts have detailed these below to help workers think about how they might like to take their retirement.

PROS:

      • INCOME ADJUSTMENT - most people will have a lower income in retirement than they do through their working life. Phased retirement can provide a middle ground that helps them to adjust gradually to living on a tighter budget and transition from building their savings and pension assets to living off what they have. This requires a sharp change of mindset for those who retire ‘cliff edge’.

      • EARLY RETIREMENT - if you could ordinarily afford to retire age 65 then phased retirement might mean you can reduce your working hours from an earlier age and stop work altogether later on.  Plus, some people actually like their jobs!

      • ACTIVE MIND – besides the financial changes, retirement involves a significant lifestyle shift. Some people can quite happily fill seven days a week with leisure activities.  However, many like to have some structure to their week, enjoy interacting with their colleagues. Working a lighter schedule can extend the number of years an individual can continue to work for.

      • FINANCIAL BENEFITS - if in good health workers are more likely to stay in employment longer which brings financial benefits as well as more time for leisure activities.  This means workers get the best of both worlds, benefitting mentally and socially from work, as well as continuing to receive an income and enjoying more leisure time.

      • GROW INCOME - continue to grow your retirement income, while enjoying the extra flexibility of a shorter week. Employer and personal pension contributions can continue AND you delay or reduce the need to access your existing pension savings.

      • PRESERVE CHILDREN’S INHERITANCE - by working part-time and delaying pension withdrawals or reducing what you’d need to withdraw if you retired completely, you preserve more of your pension pot.  This maximises the death benefits of a pension, providing an opportunity to pass more of your money to children/beneficiaries free of inheritance tax. 

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CONS:

      • TAX MAN – receiving pension income and income from employment could result in paying income tax at a higher rate.

      • MORE WORK LESS PLAY - continuing to work reduces the amount of time spent enjoying holidays and leisure activities whilst still in good enough health to do so.

      • MONEY PURCHASE ALLOWANCE – the money purchase annual allowance reduces an individual’s yearly pension contribution allowance from £40,000 (or 100% of salary) to just £4,000 in the tax year. It applies when you begin taking money out of your pension as a flexible income. You can do this when you reach 55.

        If the pension benefits are accessed flexibly, which is common in phased retirement, this reduces the amount that can be put into the pension. This will limit the scope you have to save for retirement and can even result in a tax charge if contributions exceed the limit – contributions from your employer count towards the limit.

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The Pension Freedoms have provided workers with more options in terms of how they access pension benefits. As a result, there are significant tax planning opportunities for those considering phased retirement which can help to mitigate the potential negative tax implications.

Lemonade’s Retirement Options Planner allows workers to input their pension information, so they can easily compare their three options (drawdown, annuity & cash out).  This clever tool also helps them to understand when they can afford to retire which can help with their decision on how best to take their retirement.

 

* Source:  Research conducted by Aegon in conjunction with Opinium, based on responses from 1007 UK workers aged 50+ earning £20k+ between 30 November and 6 December 2018.





Are mortgages delaying retirement?

For most 25-35 year olds, getting on the property ladder is at the forefront of their financial focus.

Which makes sense... Owning a property comes with many advantages;

- The ability to store equity in the property
- The potential to profit from continued growth in the housing market
- Having a place to call your own

However, rising housing prices, while nice for those who already own a property, have only made it more of a stretch for first-time buyers to get their foot on the ladder!

In the last few years, there have been measures introduced to help first-time buyers, such as the Help to Buy and Lifetime ISA’s.

In a more recent move, some lenders have started offering maximum mortgage terms of up to 40 years (up from 35 years) and increasing the maximum mortgage age to 70 (up from 65).

So what does this mean?
A longer mortgage term generally results in lower monthly repayments, even though you’ll pay interest over a longer period. Some people may prefer this as it frees up disposable income however, it's worth considering how this might affect your intended retirement age!

For anyone planning to retire at age 65, this would mean taking out a 40-year mortgage at age 25, and for many, owning a property by age 25 is fairly unrealistic. Therefore anyone aged 25+ may need to consider pushing back their intended retirement age to ensure their mortgage is paid off before they stop working.

However, it's not all doom and gloom as lenders will now consider mortgages that run into retirement. This does mean meeting eligibility criteria, such as providing proof of retirement income. This may be difficult for anyone in their late 20’s and early 30’s to determine but could be provided at the point of remortgaging in the future.

Is renting such a bad thing?
If we look at other parts of Europe such as France and Germany, the share of rental property far outweighs home ownership. In Berlin, for example, the rental property share is 90%. Although this means you’ll continue paying rent into retirement, it takes away to pressure of trying to save an enormous deposit. It also means people aren’t fixed to an area, they can travel or move elsewhere at a months notice, without worrying about the time and cost involved with selling a property and most importantly it shouldn’t affect your retirement age as there are no borrowing age/time restrictions and the rent can be built into your retirement planning.

 

Disclaimer :- Your property may be repossessed if you do not keep up repayments on your mortgage

Does retirement really mean no more work?

Does retirement really mean no more work? 

The most common question we come across from employees when it comes to their pension is, what age will I be able to retire? Which makes sense, it’s the whole reason we put money away each month!

Well, according to research completed by the Post Office, 1 in 5 people are forced back into work following their retirement! This is a scenario, I’m sure, that most of us would ideally like to avoid.

This is most likely down to a lack of sufficient planning. For retiring members, it can be complicated trying to figure out not only a life without work but exactly how much they are going to need to get by!

We found from our research that 83% of members are in the dark when it comes to when they will be able to afford to retire, which would go some way in explaining why 1 in 5 are having to return to work after retirement, because of poor planning and uninformed members!

A few things put in place will go a long way ensuring your members are fully informed and aren’t left in a situation where they are forced back into work.

Access to a portal and tools - Providing employees with 24/7 access to an online retirement income modeller is a game changer when it comes to retirement planning and financial education!

Access to advisers - Having a chat with an adviser will go a long way in clearing points up and discussing the numbers further!

Early communication - Communication 5 or more years before retirement means members are 2.5 times more likely to understand when they can afford to retire!

Everyone's circumstances are different, and retirement can throw up some costs that were never expected, but early planning and the correct support can ensure employees are as prepared as possible for a happy retirement!


By David Pugh - Managing Partner

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