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

Auto enrolment is not regulated by the Financial Conduct Authority.

Pensions have been radically transformed in the last number of years. The main points under Simplification are:

Lifetime Allowance

For this present tax year – 2018/19 the maximum permitted tax exempt fund at retirement is £1.073 million.

Contributions and Annual allowance

The figure for the year (2011/2012)had been reduced from £255,000 to £50,000.  For the current tax year the figure is £40,000.  Anyone can contribute up to 100% of their earned income subject to the annual allowance or £3,600 if they have no earned income and receive tax relief. Eligible members of registered pension schemes may carry forward unused annual allowance of up to £40,000 a year for 3 years from 2010/2011

Pension Commencement Lump Sum (tax free cash)

A maximum of 25% of the value of the pension fund can be taken tax free. (some transitional protection can be applied for if built up prior to 2006.)

Retirement age

Since 6th April 2010 the minimum retirement age is 55 .

Death Benefits

The maximum is equal to the lifetime allowance which presently is £1.073 million

Drawing your pension

You can do this in one of 4 ways:

  • Scheme pension – this is drawing from an employer’s occupational scheme.
  • Lifetime Annuity – basically this is exchanging your pension fund for an income.
  • Unsecured pension – this is income drawdown.
  • Alternatively secured pension – This is available from age 75.

In the Budget, the Chancellor announced on 20th March 2014 that the Pension money could be taken as a whole and therefore there is no requirement to buy an annuity. These are the main headlines of Simplification. There are factors which should be considered which may affect an individual based on their own circumstances. If you’d like to discuss your circumstances contact us for advice.

Tax treatment varies according to individual circumstances and is subject to change.

Company Pensions

These relate to Employer’s schemes.

They can be either

  • Defined benefit schemes
    that is benefits paid in retirement based on age, length of service and pensionable salary. Sometimes they are called “final Salary Schemes” or
  • Defined contribution schemes.
    These are basically money purchase schemes. The pension one receives from such a pension depends on how much is paid into the pension pot and how the investment has grown. At the point of retirement the size of the pension pot will determine the benefits in retirement.

Group Personal Pensions

These are a low cost Personal pension with less onerous administration. These are increasingly popular amongst employers. The employer usually contributes to the GPP and also deducts from Salary/Wages a % of your earnings. There are specific criteria in terms of one’s eligibility to join such a scheme. For more details on Personal pensions please see section on PP.

Personal Pensions

These were originally designed for those who had no access to a Company Scheme. They are normally offered to people by Insurance companies or banks.

These contracts are very flexible and are suitable for employees or self employed or indeed non earners. The maximum that can be paid into a Personal pension is either 100% of earnings or up to £3,600 if non earner. Contributions can be paid into the pension by third parties. In each case there is tax relief. For example a parent or grand–parent could contribute into their relatives pension £2,880 and the government would make it up to £3,600.

These contracts are money purchase schemes, that is, the contributions build up over the years and depending on investment growth the pension benefits will be paid from the “pension pot” at point of retirement. The Pension pot can fluctuate in its value over the years. You can also transfer your pension from one company to another.

At the point of retirement there is the option to take a 25% Tax free lump sum and a lower yearly pension or a yearly pension based on the full pension pot fund.

So in effect a personal pension is a long term saving vehicle with the advantage of a very tax efficient environment.

The Government has introduced major changes to the Pensions Bill of 2006 and on 1st October 2012 they are beginning to implement the National Employment Saving Trust.  This is to try and ensure that more people are  prepared for their retirement years.  See Document on NEST for more information.

At Retirement, each person has the option of receiving their pension from the company they saved with or they can go to another company if the pension is greater. This is called the open market option. See more on Annuities for further information.


Stakeholder Pension.

This is just another type of Personal pension. It is designed particularly for the low paid and it has restrictions in terms of charges and access within a standard framework set down by the government. It is also limited in terms of where the contributions can be invested.

Self Invested Personal Pension.(SIPP)

This allows investors to shelter their own investments within a pension. This includes commercial property. Eg Business premises are held within the SIPP and the business pays rent into the SIPP.

There are advantages such as

  • Rental income accumulates tax free
  • When the property is sold there is no Capital Gins Tax

There are also disadvantages including

  • Property maybe difficult to sell
  • Lack of diversity in the pension
  • High costs of buying and selling and managing the property

Overall the costs are greater than a standard Personal Pension.



This word simply refers to an exchange of a Pension fund for a monthly or Annual income. Please note:

  • An annuity once it is purchased cannot be changed.
  • The level of income at retirement depends on several factors including
    • The value of the Pension Fund
    • The Age of the Annuitant
    • Health
    • Sex
    • And the annuity rates offered at point of retirement.
  • Annuities can be set up with different benefits including
    • Spouses pension
    • Guaranteed payment for 5 or 10 years
    • Escalation of benefits to protect against inflation
    • They can be linked to Investment performance

In general terms the older you are at the time of purchase, the higher the Income. Also a male receives more than a female simply because statistics indicate a female will live longer.  The government have announced that as from 2015 you do not have to take an annuity with your Pension pot

Alternatively Secured Pension

Unsecured Pension

This is an alternative to purchasing an annuity. You “draw” an income directly from the Pension Fund whenever you want additional income. This means

  • There is added flexibility
  • It enables a phased retirement
  • This can be complex and it will not be suitable for everyone. Contact us for advice.

There are some drawbacks including

  • Normally higher charges and only suitable for those with a large Pension Fund
  • The 25% Pension Commencement Lump Sum is only available at the time the fund designated for income withdrawals is crystallised.
  • The fund could potentially run out and taking an income draw down will mean that the client will be taking on the risk directly. This means you don’t have the security that annuities could potentially offer.

Auto Enrolment/Workplace Pensions

Will you be ready for auto-enrolment/workplace pensions? Even if you only employ one person, you will have to take action.

What is auto enrolment?

All employers must have a qualifying pension scheme in place and make contributions based on the employee’s earnings. This will be overseen by The Pension Regulator.

When will this affect me?

Every employer will have a “staging” date by which they must have a qualifying pension scheme in place. This will have been determined by the number of employees on your payroll in April 2012. You can go to The Pension Regulator website, and follow the relevant instructions. You will receive a letter from The Pension Regulator 12 months prior to your staging date informing you of your responsibilities and the date by which you must have a scheme in place.

How will this affect me?

From your staging date you must have a qualifying scheme in place and have the facility to pay contributions from yourself as the employer and also for the employee’s contributions.

With effect from October 2018, the total contribution must be 8% of qualifying earning with at least 3% being payed by the employer.

Your staff will need to be assessed to see if they are Eligible, Non-Eligible or Entitled. You will have different duties for each category of employee. Once you have a scheme in place, you have 5 months to register it with The Pensions Regulator. You also have on going duties to asses your staff each payroll period, make appropriate contributions, deal with opt-outs and re-enrol and re-register every 3 years.

What happens if I do nothing?

The Pension Regulator could apply hefty penalties.

To discuss this in more detail, please contact us.

We would be happy to come to your place of work to discuss your responsibilities in more detail if required.

Fortress Financial Services are an appointed representative of Quilter Financial Services and Quilter Mortgage Planning, which are authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate auto enrolment, inheritance tax planning, trusts & wills.