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Pensions

Independent financial advice

Pensions are arguably one of the most useful tools used in financial planning. However, there’s often a lot of confusion about what a pension is, how it works, and how it can be used in retirement. If you’re looking for pension advice, you’ve come to the right place.

Pension Plans

There are two broad types of pension plans: Defined Benefit and Defined Contribution plans. A defined benefit plan is becoming rarer. This is a plan which an employer may provide promising a set income on retirement determined by a formula based on earning history, years of service and age amongst other criteria. It does not depend on investment performance.

A defined contribution plan is more common. This is where an employer, employee, or a mixture of both pay into the plan. In its most simple form, a defined contribution pension is simply a savings plan. It is designed to help people to save for income later in their lives.

Once money has been paid into the plan, either as a lump sum or on a regular contribution basis, it can be invested in various ways depending on the type of pension. It is important to make sure that the money is invested in line with your attitude to investment risk, as the value of investments can go down as well as up, and is managed appropriately given your objectives such as how much income you may need in retirement and how long you have until you intend to take income from the plan.

Our team of pension advisors can help you arrange an appropriate pension plan and work with you to keep this plan on track through our ongoing advice service.

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Benefits of a Pension

Given that the government want to encourage people to save for their income later in life, there are various tax advantages and incentives to paying into this savings plan.

A benefit of investing into a pension is tax relief. This is essentially free money, paid into your pension on top of your contribution by the government. The tax relief you receive (up to certain limits) is based on your level of income tax you pay:


  • 20% for basic rate taxpayers (or nil taxpayers)
  • 40% for higher rate taxpayers
  • 45% for additional rate taxpayers

As an example, if you’re a basic rate taxpayer if you put £100 into your pension, you’ll get £25 tax relief so £125 will actually be paid into your plan.

Please note the rates for Scotland differ and tax treatment will depend on individual circumstances, tax rules could change in the future and not all areas of Estate Planning or tax planning are regulated by the Financial Conduct Authority.

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Pension Restrictions

There are also restrictions as to when money can be removed from the pension, this is to encourage people to use their pension funds later in life. For most people this will mean they will be able to access their pension plan from age 55. Usually 25% of the pension fund can be taken as a tax free lump sum, income is generally taxed at usual income tax rates.

How you Receive a Pension

After the age of 55 you can receive income in different ways. This could be via:


  • Using the entire fund to purchase an “annuity” which is a product which will pay you a guaranteed income for the rest of your life
  • Using part of the fund to purchase an annuity and leave the rest invested
  • Take regular income from your pension plan, keeping the pension invested to provide this income
  • Take periodic lump sums from your pension
  • Cash in your entire pension fund in one go
  • A mixture of all the above!

Having a pension gives great flexibility. As your pension advisors, we can work in partnership with you through our ongoing advice service, not only to keep the pension plan on track whilst you are saving for your retirement, but also to manage and advise on your income during retirement. If you’re looking for pension advice in Chester or Shrewsbury, please get in touch today.

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