Your Retirement Questions Answered
For some people, facing retirement feels like stepping into the unknown. Here are some answers to important questions relating to retirement.
Q. I’m approaching retirement age, and only just realised that pensioners are taxed on their pension and their savings. This seems grossly unfair. Are there any plans for the Government to change this?
A. It is hard to disagree with you that taxing pensioners on their savings and income is unfair. Taxing the over-65s on what is already a severely reduced level of income seems like a strange reward for a hard life of working. Pension shortfalls, stockmarket crashes and savings rates reaching record lows, have all added further insult to injury.
It is estimated that over nine million of Britain’s pension population depend on their savings to help supplement their pension income. Despite this it seems that those who need an income are being squeezed out.
It is highly unlikely that any UK Government would be willing to cut off such a valuable revenue stream such as the tax on pensions. However, the Conservative Party has been arguing that the Government is not doing nearly enough to protect pensioners’ income. They would like to see a suspension of all taxes on the interest earned on their savings, as long with tax-free dividends on their investments. The campaign has also featured strongly in the Telegraph, so if you’d like to add your support, you can find out more.
Q. I’m 63 and I’m thinking about working beyond my retirement age of 65. Do all employees have to retire when they reach retirement age, or can I ask my employer if I would be allowed to stay on?
A. You are entitled to ask you employer whether you can stay working beyond your retirement age. However, whether they agree to your request is entirely up to them. Employment regulations state that employees are able to make a formal request to continue to work beyond their retirement age, although you would need to tell your employer if you wished to continue working for an indefinite period, or had a firm retirement date in the future.
Your employer has a duty to fully consider your request, so you might get the answer you’re hoping for. Good luck!
Q. I’m invested in a money purchase pension scheme, but recent stockmarket volatility is making me nervous. Should I be worried, and should I think about other ways to build up a retirement fund?
A. No doubt you will be aware that the UK stockmarket has suffered heavy losses during 2008, falling from around the 6500 mark in January 2007 to roughly 4400 in January 2009. This fall continues to have an impact on UK pensions. It is estimated that there are roughly four million UK employees who are saving into a stockmarket-related pension.
Your money purchase scheme requires you (and also potentially your employer) to pay in a percentage of your salary to a pension fund manager, who will invest your contributions in the stock market in a variety of different assets.
The aim is to build up a fund capable of delivering consistent growth over the years and hopefully providing each employee with a sizeable retirement fund. Not as easy as it sounds.
Bear in mind though that a pension is a long-term savings vehicle, and periods of volatility are part and parcel of investing. If you are in your 30s or 40s, you should try to take a long-term view – there’s a good chance that your pension will recoup its losses and still be able to provide a good overall sum on retirement.
If you are closer to retirement, you should be more concerned. Your pension will find it harder to recover. You might want to think about increasing your contributions or increasing your tax free investments and make use of your Individual Savings Account (ISA) allowance.