Pensions

Question 1

What is the current State pension age (SPA)?

Answer 1

66 yrs

Question 2

When will SPA increase and to what values? [2]

Answer 2

• 2028: 67 yrs
• 2037: 68 yrs

Question 3

State Pension £

• Per week
• Per year

Answer 3

• £221.40 per week
• £11,502.40 per year

Question 4

State Pension eligibility

• Min. yrs of NI contributions

• No. of yrs to get full amount

Answer 4

• 10 yrs

• 35 yrs

Question 5

Age you can access pension?

Though increasing to ____ from year ____

Answer 5

55

increasing to 57 from 2028

Question 6

According to research by the Pensions Policy Institute, how many pensions are lost in the UK and to what value (total and per pot)?

Answer 6

• Almost 3 million
• Almost £27 billion (c.£9,500 per pot).

Question 7

What are 3 ways to trace an old pension?

Answer 7

1. Contact old company / scheme and provide personal information.
2. Govt. backed MoneyHelper service template letter.
3. Govt. Pension Tracing Service. (Also individual companies e.g. Vanguard).

Question 8

How does a DC scheme work?

Answer 8

The amount paid into the pension by the employer and the individual is a specific percentage of salary, but the income that the pension will eventually generate depends on stock-market performance and is not guaranteed.

Question 9

How does a DB scheme work?

Answer 9

Defined benefit (DB) or final-salary schemes, on the other hand, are administered by the employer rather than a pension company, and offer guarantees related to the income they’ll eventually provide.

Question 10

To preserve your portfolio’s long-term spending power without radically impacting the yearly amount you withdraw, you could consider a ‘dynamic spending’ strategy’.

How does this work?

Answer 10

This method involves setting a ‘ceiling’ and ‘floor’ (or maximum and minimum) on how much you can withdraw, depending on how market performance impacts the value of your pension.

Question 11

What ‘tax uplift’ do you get with pension contributions as a basic rate taxpayer?

Answer 11

Where you get 20% tax relief on the contribution but only pay an effective 15% tax when you withdraw.

Somebody who is a basic rate taxpayer, for example, could take out £10,000 from their pension, with the first £2,500 tax-free and the remaining £7,500 taxed at 20%. That would equate to an effective tax rate of 15% (£7,500 x 20% = £1,500, or 15% of £10,000).

Question 12

What is the 4% rule and who came up with this rule?

Answer 12

• Investors can safely withdraw 4% of their retirement pot and adjust for inflation without running out of money over a 30 year time horizon.
• Bill Bengen.