Personal Pension? – Minimum Retirement age 55 from 6th April 2010!

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Current Personal Pension Minimum Retirement Age is 50

Did you know that, if you’re lucky enough to be in the position, you can at present take your personal pension benefits from age 50?

Increasing to 55 from 6th April 2010

The rules are changing though – from 6th April 2010 the minimum age for taking personal pension benefits is increasing to age 55. The change in the pension rules could mean those people who are now aged 50-54 and wanting to take their pension benefits early being forced to take pension benefits from age 55 – thereby having to defer retirement for up to 5 years.

So, it pays to plan ahead!

Does this just affect people who want to take an annuity from their personal pension plan?

No – it also affects anyone who wants to move into “income drawdown” before age 55 as well as anyone receiving pension benefits in the form of “phased retirement” – this is whereby you take a percentage of your pension plan each year and is designed, through a combination of tax-free cash and annuity income, to provide you with a level of pension income which allows your remaining pension plans to remain invested and benefitting from tax-efficient growth.

Any unvested (i.e. pension funds which you have not taken pension benefits from) will have to remain so until age 55.

If you’re currently aged under 55 you seriously need to speak to your pension/financial adviser as soon as possible.

Action

  • If you’re in “phased retirement” through your personal pension and are currently under 55 then urgently speak to your financial adviser about what actions you need to take as your income could be cut short from 6th April 2010.
  • If you’re aged 50-54 now and plan on retiring in the next few years you should consider taking benefits now to ensure you don’t fall foul of these changes in personal pension minimum retirement ages.

Naturally, before taking any actions with regard to your personal pensions or any other investments you should seek advice from a suitably qualified professional adviser.

And finally……

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Related Posts

How to Maximise Pension Income in Year One

Pension Planning for Non-Earners

Instant Returns on Pension Contributions

Personal Pension Plans – an Introduction

19 Essential Money Tips for Students

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Thousands of students will be leaving home and heading off to places new, far afield, in search of education and trying to avoid poverty.

Here are 19 tips which helped me through Uni on a tight budget.

1. Which bank should I open a student account with?

Find out which bank has a branch close to campus – it can be useful to bank with the local branch as they will generally be more understanding of student needs – remember they are trying to capture you as a lifelong customer (it’s a dog eat dog world out there!), although in this day and age of cash machines and internet banking it might be more important to you to choose the bank which is offering the best “enticement” to bank with them.

In an article I will be writing next week I will compare and comment on the student offerings of the various banks – be sure to subscribe to ensure you receive a copy once published.

2. Make a budget and stick to it!

Ensure your money doesn’t run out before the end of term – you might like to use our income and expenditure spreadsheet to plan how your money will be coming in and going out (!).

3. Do I need a credit card?

Many institutions will be offering you a credit card which can be tempting – we’ve all been there! The thought of a £1,000 or more credit facility can be very tempting – but remember, that it’s not really a credit card – it’s a debt card and unless you pay off the balance in time, each and every month, you will start paying interest – then that great bargain you saw whilst out shopping will not be such a great bargain once the interest starts accruing.

Did you know you can get a prepaid credit card – these allow you to add money to them – either online from your bank account or through a Post Office – I have one for travelling and it is a Mastercard – ensuring it can be accepted at all places where Visa and Mastercard are accepted. There is no possibility of incurring any interest or debt with these and are a wise choice for students as parents can top them up at home for you as well with the money normally being available almost instantly if credited at certain retail outlets – ideal for those emergency situations.

4. Set aside your rent before you do anything else!

Once you have your funds in place, whether that be a student loan or money which you have saved personally, set aside your rent for the term or academic year in a savings account to ensure your don’t spend it elsewhere – many students, myself included, had to go cap in hand to their folks asking for a “loan” a couple of weeks before the end of term.

5. Fresher’s fair – beware of “joining societies” syndrome

Freshers fair is a bustling hive of activity – all the societies and clubs will be vying for your membership – we all thought it would be a good idea to join plenty of clubs and societies – “a discount if you join today!” – only to never attend a single event – beware – choose carefully!

6. Pay your Bills on Time

For many it will be the first time they have had to manage their own finances – ensure that your mobile phone, gas, water etc bills are all paid on time – you don’t want to receive red letters and be charged fines for missing payments – you probably don’t have enough money as it is!

7. Try not to use a car

Many students feel the need to use a car whilst at University – not only are they expensive to run but they also affect the environment and cause local congestion in the University city in which you live.

  • Walk if possible
  • Live on a bus route – most cities have excellent transport facilities to and from University campuses
  • If you must use a car try car sharing – sharing the petrol and cutting down on the congestion

8. Earn some money

Most students I knew had to supplement their income by working, either during term time or after the end of term in the holidays. Make sure that any work you do does not interfere with your studying – that’s what you’re at University for! You can earn £6,475 in the current tax year (up to 6th April 2010) without having to pay any income tax – ensure your employer gives you the correct tax code.

9. Start your Own Business

Today there are more opportunities for students to earn a living on the side – selling stuff on Ebay, car boot sales, writing a blog and earning an income from advertising (not easy) – be creative – you don’t need to stack shelves in a supermarket!

10. If in trouble ask for help

If you have money problems speak to someone about it – parents, friends, Student Union (they will have excellent staff who can really help you sort things out) – the worst possible thing you can do is stick your head in the sand and ignore an issue – it won’t go away and will most likely get even worse.

11. Avoid fraud

Be wary of any offer which looks too good to be true – it often will be! There are a lot of scumbags out there trying to take your money off you – just be careful.

12. Don’t carry lots of cash

There is no need to carry lots of cash with you – you might drop or lose your wallet or purse, or even worse. Get a pre-paid credit card – it can be cancelled and be replaced – cash can’t

13. Get contents insurance

Many specialist insurance companies offer policies ideally suited for students. You may not think you need insurance but consider how much it would cost for your replace that laptop or that hifi, that nice new LCD flatscreen. Policies are not expensive and are strongly recommended – it’s a sad fact that student accommodation can get burgled – we were but thankfully we were insured.

14. Shopping around can save you money!

You don’t need me to tell you that buying the latest DVD etc in the shops cannot be improved on by shopping online – make sure you shop around to get the best deal going – there is no need to pay top dollar for any purchase – and as a student you will have plenty of free time to shop around and plan ahead for birthday and christmas presents.

15. Student Card – Use It!

Many retailers in University towns will offer discounts to students – your Student Union will probably issue you with a list of local traders – use them – save money.

16. Student Nights

Many clubs will offer student nights – usually in the week – when I went to Uni back in the early 90’s it was free entry and £1 a pint! Cheaper than drinking in the local pubs and clubs.

17. Don’t hang out with frivolous people!

“Keeping up with the Jones’s” when you are at University and it is fair to say that some students will have considerably more money than you – it’s difficult to keep up a champagne lifestyle on a tap-water income! Choose your friends wisely – you will probably spend the next 3 years trying to shake off the friends you make in the first 3 weeks anyway!

18. Buy One Get One Free!

Take your time in the supermarket – there are some great offers if you look. Learn to cook – there are loads of simple recipes online for students – here’s a site I just found – it can be fun to cook your own food – pre-packed meals are boring and if you cook too much save some for later or invite some friends over.

19. Avoid getting into trouble – get a TV License

If you live away from home you may need to ensure there is a TV licence in place. Visit the TV Licensing website to find out about your own particular circumstances.

Please share your own hints and tips by adding a comment below.

And finally……..

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All our articles are also available through our personal finance RSS feed.

Interesting article –

Check out this article over at moneywatch.co.uk – the most expensive and cheapest University towns

Top 10 Personal Finance Articles – August 2009

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The following is a list of the top 10 read articles in August.

1. Pay Yourself First – the first step in wealth creation

This article discusses the need to save from income before spending it! This is a form of deferred consumption and by saving first and then spending what is left you can build a solid foundation to your financial future.

Tip – aim to start saving 10% of net income each and every month – it won’t be easy at first but your budget and lifestyle will adapt over time.

2. Get Money for your Old Mobile Phone

Many of us have old mobile handsets lying around – did you know you can sell yours online – here is an article discussing this – I recently sold my old Sony Ericsson K800i and received £28.00.

3. New Tax New ISA Allowance – ISA 2009/2010

In just over a months time the ISA allowance for over 50’s increases to £10,200, with the allowance increasing for the remainder of the population on 6th April 2010.

4. Cashflow forecasting – income and expenditure spreadsheet

Our free income and expenditure spreadsheet remains as popular as ever and we are receiving some great feedback from people who are using it – thanks!

5. Investment Bonds – an introduction

An investment bond can be a shrewd financial planning tool as well as an investment vehicle.

6. It’s not how much you save but how long

This article discusses how, over time, money make money – with interest earned on a savings account itself earning interest. The longer you can save for the more money you will build up – start saving as young as possible.

7. Non-taxpayers – ensure you receive your bank and building society interest without tax deducted

Completing a simple form can ensure that non-taxpayers, both young and old don’t pay unnecessary income tax on the interest they receive on their savings accounts. With interest rates as low as they are at present every penny counts so ensure you’re registered to receive your interest gross if applicable.

8. Personal Finance Blogroll

A list of the other personal finance blogs I visit on a regular basis – makes for some interesting reading!

9. Retirement is an Income not an Age

Many have fallen into the trap that retirement occurs at a particular age. Unfortunately for most of the population this occurs simply because they haven’t secured sufficient income to retire earlier. By targeting a specific income and going for that it is possible to retire early. In a forthcoming article on “goal setting” we will discuss how this can be achieved.

10. Buy a Financial Calculator

If you’re serious about planning your own finances I strongly recommend buying a good financial calculator – ideal for calculating rates of return, how much to save on a regular basis to build a certain sized fund etc.

And finally……

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Also – did you know you can receive our blog posts via RSS.

We’re going to spend our way out of recession!

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I was reading this interesting article over on the thisismoney website about Alistair Darling’s plans to spend “whatever we can” to keep people in jobs during this recession. Now this course of action might be commendable as it is an attempt to keep people in work and off benefits – which I guess would cost the country more in the long-run.

In a country where the economy is inextricably linked to the housing market, can it be wise for a Government to simply try and spend its way out of recession?

I don’t like “big government” and feel that the exit from the recession should be down to market forces. What this government should be focussing on is improving the education system and retraining those people who are currently or who have recently been working in dying industries – those industries in which we are no longer competitive on an international playing-field.

Funding this expenditure will only lead to further raising of finances by the Governement which will generally be through higher taxation.

Whilst the Government is spending, most of us will be saving, rebuilding our portfolios and taking advantage of depressed stock markets for longer term capital growth and real income.

Just a reminder – the ISA allowance increases for the over 50’s on 6th October 2010.

Personal Finance Questions – August 2009

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In this post we will answer some of the many questions we are receiving from visitors to the site. Although we cannot answer your questions directly and we are not authorised to give financial advice were we see a theme running through questions from our readers we will provide a generic answer on the site.

I remember at school the teacher always used to say “ask a question – if you have a question you can guarantee that half the class also have the same question but are too scared to ask!”.

Where can I get a free income and expenditure spreadsheet?

We posted an article a number of months ago which has proved to be extremely popular. Our Excel spreadsheet allows you to enter income and expenditure over a 12 month period, broken down into months to see when your cashflow will be good, and not so good.

Here is the article – Cashflow Forecasting – Income and Expenditure Spreadsheet

When does the ISA allowance change?

The ISA allowance is set to increase to £10,200 for the over 50’s on 6th October 2009, with the increase coming into effect for the under 50’s from 6th April 2010.

More info on changes in ISA allowances 2009/2010 can be found in these articles:

New Tax Year – New ISA Allowance – 2009/2010
Changes in ISA Allowances – Budget 2009

How can I avoid paying tax on my Bank Interest – I am a non-taxpayer?

If you’re a non-taxpayer you can register to receive your bank and building society interest gross (i.e. with no tax deducted). All you need to do is fill out a simple form and pass it to your bank or building society.

See this article:

Non-taxpayers – ensure you receive interest on your savings with no tax deducted

I am a non-taxpayer – can I pay into a personal pension?

Yes you can, you are entitled to invest up to £3,600 (gross) each tax year (before 5th April 2010) and receive tax relief on the money you invest – basic rate income tax relief is received on each contribution you make – you effectively only have to invest £2,880 to have £3,600 invested – the pension company reclaims the difference from the Inland Revenue (HMRC) even though you have paid no income tax!!!

See this article:

Pension Planning for Non-Earners

Is Inheritance Tax payable on ISA Investments?

Yes, at the date of death the ISA loses its tax-free status and forms part of the deceased’s estate for calculating any liability to inheritance tax.

I want to surrender my Investment Bond but the life insurance company says it will apply a Market Value Adjustment – what is this?

MVA/MVR’s can be applied to a with-profits investment at the time of encashment if there has been a fall in the stock market during the period before surrender. This is to ensure the person surrendering the investment receives a “fair value” for their slice of the with-profits fund and to protect remaining investors from those taking their money out.

Some investment bonds have an MVA free date – usually on the 10th anniversary – check your paperwork issued at the time you took out the investment or phone your life company for more details.

Article – With-Profit Bonds – Avoiding a Market Value Reduction

Can a Personal Pension be paid to Both Partners?

No – the pension is only payable to the “annuitant” (the person who took out the pension and bought an annuity – an income for life – with the fund at retirement).

A widow(ers) pension can be added to an annuity as an option, at the time the annuity is purchased – usually 50% or 66% of the pension if the person whose pension it is dies first.

Did you know you can shop around for your pension at the time of retirement – it’s called the Open Market Option – more information on Personal Pensions

Can additional lives assured be included on an Investment Bond?

Yes – you can have more than one “life assured” on an investment bond at outset. Parents might like to consider adding their children – this allows the investment bond to continue after death of the parents. Consult an Independent Financial Adviser.

Is it true that the longer you save the bigger your money will grow?

Yes – this is related to “compound interest” and the “time value of money”. In basic terms, interest earned on a savings account will, in subsequent years also earn interest.

For example, if you invested £100 in year 1 at an interest rate of 10% (if only!) – at the end of year 1 you would have £110. In year 2 you would earn interest on the £100 initially invested and the £10 interest received in year 1 – so the interest received in year 2 would be £11 (£10 on the initial amount invested and £1 interest on the £10 interest added at the end of year 1!).

Interesting articles: –

It’s not how much you save but how long
The Rule of 72 – The Time Value of Money

This is a selection of the many questions we receive – please contact us if you have a question and we will try to answer it in a future posting.

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Buy a Financial Calculator

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Anyone who is committed to increasing their personal wealth would be strongly recommended to buy a financial calculator.

I bought my first financial calculator when I was at University some 18 years ago, it was a Hewlett Packlard 10B Business Calculator, and I still use it today. The model has been updated now – Hewlett Packard 10BII – but the new model still offers the same great facilities I have come to know and love.

It carries out all the normal calculations you would expect of a scientific calculator, but also provides the ability to calculate the following:

Growth of a set level of regular savings, given amount, rate of interest and term in years is known
Net Present Value (of a range of regular inflows of cash)
Internal Rate of Return
Compound Interest Calculations
Time Value of Money

For example, if I save £100 per month, for 25 years, at 6% interest this calculator will calculate the future value of my savings (the answer is £69,299!). If I change this to 26 years, the answer is now £74,807 – an additional £5,508 for investing for another 12 months!!!

For retirement planning, say I have identified that I need a pot of £360,000 in 23 years time to retire on the income I need to live in retirement, I can calculate how much I need to invest on an annual or monthly basis, assuming any rate of return, to hit the target.

The third calculation I like to use the calculator for is calculating how long money will last for, for example, I have £10,000 today and I wish to draw £250 per month from it. Based on an interest rate of 4%, my calculator shows me that my money will last for 43 months.

Here’s the manual (4.0MB) for my Hewlett Packard calculator – it shows all the different calculations you can do with a financial calculator.

Buy a financial calculator from Amazon.

Related articles:

Rule of 72 – Time Value of Money

It’s Not How Much you Save, But How Long

Five Wastes of Money to Cut Out

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As part of my ongoing frugal blitz of my finances I have now identified 5 things I waste money on on a regular basis which I will now cut from my expenditure going forwards. These are common items which most people will buy now or at some time.

By opting for an alternative I can save a considerable amount of money each month!

Pre-packed Sandwiches

This is big business – everyone is selling them – supermarkets, newsagents, petrol stations. I usually buy a sandwich for my lunch as there is a large supermarket near my office. When you add the cost of the sandwich, a packet of crisps, a drink and some fruit I am easily spending upwards of £5.00 per day for lunch.

A typical pre-packed sandwich will contain the following:

1 Slice of bread
Some margarine
A filling (normally more salad than filling)
Plastic packaging

From now on I will buy sandwich bags from the supermarket and make my own sandwiches.

Bottled Water

Crikey – this stuff is more expensive than petrol! If I am in dire need of buying a bottle of water I will always opt for the larger 1.5 litre bottles as the smaller bottles are prohibitively expensive in my opinion. I have invested in a water filter for the office and keep it in the fridge.

Monthly Gym Membership

I signed up for the local gym about 18 months ago and, at first, I was very regimented and went 3 times each week. The monthly subscription started at £60 per month, which, based on my initial usage was £5 per visit, which I considered good value for money based on use of the gym, sauna, steam room, jacuzzi and a few lengths in their olympic-size pool.

Time and work pressures mounted to a point were now I go one a week if possible – this works out at £15 per session which is not great – I have looked around and can get the same equipment at my local “leisure centre” for a third of the price – so I am cancelling my gym membership but will reinstate it if my use of the local leisure centre increases again in the future.

Extended Warranties

I, like many others, are offered extended warranties when I buy goods in electrical stores. I never take the extended warranty as I don’t personally believe they offer great value for money – I instead ask what the cost is and place that amount in a savings account – I have managed to accumulate over £1,400 in the last 3 years.

Instead, I rely on the Sale of Goods Act 1979 – all products should be fit for their purpose and of merchantable quality. I have had to argue on a couple of occasions with shop managers but both times I have managed to get my item replaced.

Newspapers and Magazines

I generally find that newspapers and magazines are filled with articles I am not interested in or page after page of advertisements. Knowing that the majority of magazines with low circulation make their income from selling advertising space rather than selling copies, many magazines these days seem to simply be a collection of adverts, interspersed with the odd article.

Any news in print is out of date! I can get instant news online and therefore have no need to purchase a newspaper any longer.

Can you think of any other wastes of money? Please add your comment below.

Personal Finance Blogroll – a list of great personal finance sites

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This post is inspired by Rob over at moneywatch.co.uk who has published his personal finance blogroll – a list of hte personal finance sites he reads on a regular basis and I am proud to see that shrewdcookie.com is one of them!

This is a list of the sites I read on a regular basis through their RSS feeds – any time their sites are updated I can read the new posts they have written through a feed-reader. I use the one which comes installed with Internet Explorer 7. Up on the toolbar you will see a little symbol which looks like this: –

Shrewdcookie.com - personal finance RSS feed

This is the RSS reader – it simply shows the text version of latest posts published on a blog – when the symbol is greyed out there is no RSS feed – when it is coloured orange then there is an RSS feed present.

Click on the above symbol to see my RSS feed. If you then click on “subscribe to this feed” you will then be able to view all new posts I publish under the “Favourites” button on your menu bar by choosing the “Feeds” tab.

Anyway, here is a list of the personal finance sites/RSS feeds I read on a regular basis: –

RSS Feed – Get Rich Slowly

RSS Feed – Money Dashboard

RSS Feed – Money Watch (highly recommended)

RSS Feed – Money High Street

RSS Feed – Money Magpie

RSS Feed – Plonkee

RSS Feed – Seth Godin (marketing not money related but a fantastic read)

RSS Feed – The Money Well

RSS Feed – UK Money Pot

RSS Feed – Wise Bread

RSS Feed – Money Hospital

There are many more which will be published in a future article.

If there is a website which I have missed from this list which you feel I should read on a regular basis (!) please add a comment with a link below.

Are you £1 ahead or £1 behind?

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I was reading an excellent post over at Seth Godin’s blog which got me thinking about budgeting, wealth and financial independence.

The article talks about how over 2 billion people on this planet live below the poverty line. Now for one moment, the chances are that if you are reading this article, you are not living in the abject poverty being suffered around the world but you could be in a state of personal financial “poverty”.

Do you spend more than you earn? Does more money float out of your bank account each month than flows in?

If you spend just one more £1 than you earn each month, you will get further and further into debt. If you spend £1 less than you earn each month that is £1 extra put in reserve.

To achieve financial freedom in your life time you need to spend money only on necessities, and save for a later time, when you can afford to buy luxuries.

Actions:

1. Prioritise your debts – pay those carrying the higher interest rates first

2. Draw up a cashflow forecast – see how your money comes and goes each month over the next 12 months.

3. Prune all those “luxuries” you don’t need – e.g. possibly downgrade on your satellite or cable package, cancel that gym membership you never use.

4. Destroy those credit cards – only use cash for purchases – open a separate savings account for those large, one-off purchases you need to make each year.

5. Live by the mantra, “10% of all I earn is mine to keep forever”.

What else can I add to this list – please comment below.

Top 10 Articles – July 2009

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The following is a list of the top ten articles visited in July 2009: –

1. Pay Yourself First

This article stresses the importance of saving first from your income, and then living off the remainder, rather than the other way around. Those who save first and spend what is left invariably become richer than those who spend first and save what is left, if anything. A great lesson for us all!

2. Cashflow Forecasting – Planning Income and Expenditure

The basis of any budget is knowing what income you have coming into the household, compared to what is going out in the way of expenses – this extremely popular spreadsheet will help you with this vital task.

3. New Tax Year – New ISA Allowance – 2009/2010

The Chancellor increased the ISA allowance to £10,200 from 6th October 2009 for those over the age of 50, with the remainder of the population enjoying this allowance from 6th April 2010.

4. Investment Bonds – An Introduction

The investment bond has been a key financial planning tool for a number of years – this article discussed the benefits as well as some of the shortfalls of this often misunderstood investment vehicle.

5. Retirement is an Income, not an Age!

Many people think they have to work to a certain age – unfortunately for most people this is a reality as they never take control of their finances and make their money work for them. By setting an annual income goal, and by paying yourself first, it is possible to retire when you want and not when you have to.

6. Small Increases in Income Make a BIG Difference!

When we consider income and expenditure, most if not all people have fixed costs each month – rent, mortgage, food, insurance, car etc. This article discusses how small increases in income can have a big effect on your standard of living and quality of life.

7. Non-taxpayers – ensure you receive interest on your savings with no tax deducted

Many non-taxpayers are, unfortunately, paying tax on their bank and building society interest – they don’t have to! Completing a simple form provided by the taxman can put more money in your pocket.

8. Over 60? A great free book from the Government

This book contains lots of useful information – download it now for yourself or pass a copy to a relative.

9. State Pension – how much will you get?

Get a free state pension forecast – it’s worth planning ahead – especially if you’re not going to get the full State Pension – check to see what your position is now.

and finally…..

10. New Passport Fees – act quickly to save money

If you’re within 9 months of renewing your passport do it now – save having to pay the 7.64% increase in price coming in September – consider it another way – if you could find a savings account paying 7.64% net after tax would you put money in it!!!!!

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