Aims And Objectives Of Retirment Planning

Question 1

What are the 3 major workplace e pensions?

Answer 1

Sharia compliant

Question 2

What strategies are there for life styling?

Answer 2

Shifting into fixed interest near retirement. Ie 20% in the last 5 years
This aligns more with annuities, which are based on gilts.

Move funds into cash to fund a PCLS

Question 3

Who does lifestyle work well with?

Answer 3

People wanting to take annuities
Those who don’t intend to work with an advisor with yearly reviews

Question 4

Who does lifestyling work less well with

Answer 4

Those planning to enter drawdown
Those wishing to remain invested in retirement.

Question 5

What are target date funds?

Answer 5

Funds set up to deliver returns by a certain date.
Take higher risk early on and less when getting less to the date.

Question 6

What is NESTS target date strategy?

Answer 6

Cautious for people in 20s (due to them being put off by falls)
Then, it adopts targeted growth period.
Consolidates in the last years but still aims for real growth as the member may remain invested or take drawdown.

Question 7

What is the purpose of investment pathways?

Answer 7

To help people without advisors achieve better outcomes.

Advisors can still recommend

Question 8

What are the investment pathways

Answer 8

1 do not intend to touch the pathway in 5 years

2 intend to buy an annuity in 5 years

3 intend to take another form of long-term income in the next 5 years

4 if you plan to take all your money from your pension on the next 5 years

Question 9

What should be considered first for young people before taking out a pension?

Answer 9

LISA, since tax relief is the same on the way in.
Tax is better on the way out
Potential to access funds before 60

IhT could be an issue, though, as ISAs can’t be put into trust

Question 10

What are the forms of equity release?

Answer 10

Lifetime mortgage
Home reversion

Question 11

What are the problems with equity release?

Answer 11

Limited providers
Strict criteria
Punatively high interest
Potential impact on state benefits

Question 12

What are the advantages of equity release?

Answer 12

Lowers a person’s estate for IHT purposes.

Question 13

What is the advantage of downsizing?

Answer 13

Lowers eatate value for IHT liability

Question 14

What are the advantages of using a business for retirement?

Answer 14

Businesses may pay corporation tax at a lower rate than income tax
Likely exempt IHT
Gains may attract entrepreneurs’ relief. (10% off 20% or 24%)
More control and influence over investments

Question 15

What is using a business for retirment high risk?

Answer 15

Lays fortunes on a single company
Buyer may not be found
Appetite for business may wane in later life.

Question 16

Sumarise private equity

Answer 16

Question 17

How much of a pension fund can be borrowed to facilitate investment in wider area of self-invested portfolio?

Answer 17

50% of the net assets of the pension scheme- net assets are always after borrowing.

Question 18

What can a loan on a SSAS be used for?

Answer 18

A loan to a sponsor8ng employer but rates must be higher than it costs the scheme.

Question 19

What are the rules for a loan on a SSAS held in commercial assets

Answer 19

Must be on commercial terms with interest at least 1% above average rates of the 6 main clearing banks rounded to nearest 0.25%

Max term 5 years and only rolled over once.

Secured on charge on the business assets of at least the same value

Must be repaid in capital and interest installments

Question 20

What are the limits an SSAS can invest into sponsoring employer?

Answer 20

5% scheme assets in an individual

20% of scheme assets between more than one but only upto 5% each.

Question 21

What is a cashflow model?

Answer 21

A piece of software that demonstrates how long retirement funds will last for.

Question 22

What is the safe withdrawl rate?

Answer 22

Model that proposes that no more than 4% of original funds should be taken each year adjusted for inflation in order to make funds last.

This works on retirement of 30 years
Realistic asset allocation

Question 23

What action should be taken if a review shows a clients funds are drifting off course?

Answer 23

Reduce withdrawls in the deccumualtion phase or alter investment strategy

Increasing contributions in the accumulation phase, adopting a more aggressive investment, revising downward the income requirment or putting back planned retirement age.