Aims And Objectives Of Retirment Planning Flashcards
What are the 3 major workplace e pensions?
Sharia compliant
What strategies are there for life styling?
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
Who does lifestyle work well with?
People wanting to take annuities
Those who don’t intend to work with an advisor with yearly reviews
Who does lifestyling work less well with
Those planning to enter drawdown
Those wishing to remain invested in retirement.
What are target date funds?
Funds set up to deliver returns by a certain date.
Take higher risk early on and less when getting less to the date.
What is NESTS target date strategy?
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.
What is the purpose of investment pathways?
To help people without advisors achieve better outcomes.
Advisors can still recommend
What are the investment pathways
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
What should be considered first for young people before taking out a pension?
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
What are the forms of equity release?
Lifetime mortgage
Home reversion
What are the problems with equity release?
Limited providers
Strict criteria
Punatively high interest
Potential impact on state benefits
What are the advantages of equity release?
Lowers a person’s estate for IHT purposes.
What is the advantage of downsizing?
Lowers eatate value for IHT liability
What are the advantages of using a business for retirement?
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
What is using a business for retirment high risk?
Lays fortunes on a single company
Buyer may not be found
Appetite for business may wane in later life.
Sumarise private equity
How much of a pension fund can be borrowed to facilitate investment in wider area of self-invested portfolio?
50% of the net assets of the pension scheme- net assets are always after borrowing.
What can a loan on a SSAS be used for?
A loan to a sponsor8ng employer but rates must be higher than it costs the scheme.
What are the rules for a loan on a SSAS held in commercial assets
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
What are the limits an SSAS can invest into sponsoring employer?
5% scheme assets in an individual
20% of scheme assets between more than one but only upto 5% each.
What is a cashflow model?
A piece of software that demonstrates how long retirement funds will last for.
What is the safe withdrawl rate?
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
What action should be taken if a review shows a clients funds are drifting off course?
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.
