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Long-Forgotten Plans

Managing your pension savings effectively and efficiently from a single pot

If you have worked for two or three different employers, it is possible you could have a workplace pension from each of them. Combine this with any personal pensions you may have set up and your total number of pension pots can quickly add up.

Pension consolidation lets you simplify your pension arrangements and makes it easier to manage your pension savings effectively and efficiently from a single pot. There is a danger that long-forgotten plans could end up in expensive, poorly performing funds, and the paperwork alone can be enough to put you off becoming more proactive.

Easy to manage

Is transferring or consolidating everything into one easy-to-manage pension the way to go? There are advantages to consolidating your pensions, but there are also pitfalls. The best course of action will depend on the types of pension you have and your term until retirement.

Having lots of different pensions could mean paying lots of different charges. It also means you’ve got to think about where your funds are invested in each of your different pensions to make sure you are keeping an eye on performance. In addition, to make any changes to your ever-growing number of pensions, you will have to deal with each of the numerous pension providers.

The pros and cons

Pensions are important, so it is crucial that you take time to understand exactly what you’ve got and exactly what you would be sacrificing by transferring out of an existing pension.

Before you transfer any pension, you need to be sure that you are not giving up any protected benefits such as protected tax free cash or protected pension age. You should also consider any features the plan has, like guarantees or life assurance benefits.

Remember that what you receive depends on several factors, for example, how your investments perform and how they are taxed, and you may get back less than you originally invested.

If you are considering consolidating your pension plans, this is a very specialist area, and you should seek professional financial advice.

Getting it right could mean a higher income

Making the most of your pensions now will have a significant effect on your happiness in retirement. Getting it right could mean a higher income, or even retiring earlier.

Planning for the future can be difficult, especially when it is so far in the future and a life you can’t imagine. It’s easy to think that you have a huge amount of time to save for your retirement, but research has shown that nearly 40% of retirees wished they had started saving earlier.* The government has yet again raised the state pension age, so if you want to retire before 68 you will have to depend on either a work place or personal pension.

This blog post will give estimates on how much you should be saving dependent on your age, as well as tips for saving the most.

Research conducted by consumer watchdog Which? calculates the average person currently needs an annual income of £26,000 to fund a comfortable retirement.

Age Saving for State pension age Amount to save
20 48 years 68 years old £131
30 38 years 68 years old £198
40 27 years 67 years old £338
50 17 years 67 years old £633


In your 20s

If you’re in your 20s, now is the best time to start saving as you have the best chance to save as much as possible. Undoubtedly, saving for a house, a car or even going travelling may be at the top of your priorities list, but if you want to have a comfortable retirement now is the best time to start saving.

Below are some tips to help you towards your retirement savings:

  • Avoid opting out of your automatic enrolment if you are in employment.
  • Pay more into your workplace pension than the 1% minimum contribution. By 2019 employer contribution will rise to 3%, so by then both yourself and your employer combined could be paying 4% or more.
  • You could also consider a Lifetime ISA which allows you to pay £4,000 a year with the state paying a 25% annual bonus.

In your 30s

Priorities start to change when you hit 30, for example you may get married or start a family. Therefore, you may feel the squeeze of your finances even further, but it is still just as important to save for your retirement.

The older you get and the further your career progresses, your salary should follow suit. So now would be the time to increase your percentage contributions for your workplace pension.

In your 40s

If you’re lucky, when you get to 40 you may only have around 20-ish years left until retirement. Hopefully your earnings will have peaked while sizeable outgoings such as your mortgage will be under control. Because of these factors, now would be a good opportunity to assess the size of your pension pot and how it is invested. Your 40’s is a good time to take higher risk with your investments after building up a solid base and these should pay off in the long-run.

In your 50s

Thoughts of retiring should now be looming, now is the time when you should decide when to call it a day. Before making any decisions you should find out your state pension age, so you are aware when you can start claiming.

If your earnings allow, you should increase contributions to any pension pots or ISA’s you have. You can usually access any personal pensions from the age of 55, with options including annuities, income drawdown and taking either lump sums or the whole pot. The first 25% of your withdrawal will be tax-free, although the rest will be taxed as income.

In your 60s

With your retirement edging ever closer, your pension pots should be at their maximum. Getting updates on your state pension forecast from the government and all of your pension providers will tell you what you will receive and when. This will also give you time to contemplate what you want to do with the money, including any options to buy an annuity to provide you with a steady income for the rest of your life.

Make sure any outstanding debts are paid off as you won’t want to be carrying these into your post-work life. Pay off your mortgage and any credit cards debts if you haven’t already done so.

*Pentegra Retirement Services

The UK tax system has a variety of specifications and guidelines that should be followed strictly as deviation can result in serious penalties. Reliefs and allowances are also offered as they encourage spending and investment; these should also be followed just as strictly as they can also result in penalties.

To ensure you avoid penalties we have generated a tax planning guide with tips to help you save on your personal taxes:


As long as you’re eligible, you can open an Individual Savings Account (ISA) to help save on income tax. ISA’s are tax free and you can receive a 25% bonus on your savings. ISA’s are particularly useful if you are a first time buyer, there is a help to buy ISA. The maximum investment into all ISAs is £20,000 per adult per year.

Distribution between family

Sharing income or gains around the family can reduce the marginal tax rates for the highest earners, and make use of the allowances available to those on lower incomes. To be most effective, the lowest earner must own the investment or bank account which produces the gain. If you have a family business, ensuring each family member is either employed by or has a share within the business can assist with income sharing and therefore tax savings.

Marriage allowances

Marriage has a whole host of benefits, including a variety tax benefits. Married couples or civil partners can generally transfer assets between them without charges. A spouse with a high income can transfer assets into joint names to save on tax.

Where both spouses or civil partners pay tax at no more than 20%, and one of them doesn’t use all their personal allowance, that person can transfer £1,150 of their personal allowance to their partner. This saves tax of £230 in 2017/18. This marriage allowance can also be claimed for 2015/16 and 2016/17.


If your household is claiming child benefit and the highest earner in the house has an income of £60,000 or more, the benefit will be clawed back as a tax charge. To avoid this you can either opt out of receiving child benefit or arrange income sources so neither parent earns over £50,000.

As long as you are eligible, it is important that you claim child benefit, even if you opt out of receiving the payment for a period. This is because the benefit claim provides national insurance credits for the non-earning parent, and in-turn helps towards building state pension entitlement.

Sundry income

Earning small of amounts of extra income can be tax free as long as they fit within the guidelines that follow:

  • £7,500 from letting a room in your own residential home
  • £1,000 from letting a property which doesn’t qualify for rent-a-room relief
  • £1,000 from providing services, hiring assets or selling goods

Employee benefits

You may be offered non-cash benefits by your employer, those that are NI and tax free are worth taking up. Take a look at our employee benefits blog post to see which benefits are tax free.

Arrangements such as salary sacrifice can be taxed as if they are salary, so we would always suggest gaining advice before going ahead with such an agreement as they can be very complex.

Employee pension schemes

Pension’s are probably one of the most tax-efficient savings methods. Your employer will receive tax relief on the full amount paid into a pension scheme as long as the contributions are reasonable for the work you do. The money contributed from both yourself and your employer will be built up inside a fund, tax-free.

The only time you will start to pay tax on a pension is if you go over the annual pension allowance, which is usually £40,000.

You should always take qualified independent financial advice before making a significant investment into a pension fund, or other savings scheme, and beware of pension scammers. John, our financial adviser would be happy to help with any pension advice

For any further information or advice, get in touch with your client manager or call us on 0845 054 8560.

Between May and August more than 100,000 small employers and their business advisers complete and submit a Declaration of Compliance to The Pensions Regulator. 

With this in mind, we share below an article from The Pensions Regulator (TPR) entitled AE and what you need to know about completing a declaration of compliance.

All employers have workplace pensions’ duties which mean they will need to automatically enrol certain staff into a pension scheme and make contributions to it. They need to assess their staff, put those that they need to into a pension scheme, and tell them about automatic enrolment. They should start planning for automatic enrolment 12 months before their staging date. This is the date their duties come into effect.

Who needs to complete a Declaration of Compliance?
All employers with one or more staff have a legal requirement to complete a Declaration of Compliance. Even if they do not have any staff to put into a pension, they must complete the declaration to confirm they have met their duties.

When does it need to be completed by?
Each employer has a declaration of compliance deadline which falls five months after their staging date. Their declaration of compliance needs to be completed and submitted to TPR by this deadline. Although employers have five months to complete their declaration, we recommend they start completing it as soon as possible after their staging date. Filling in details as they go through the automatic enrolment process will help employers avoid missing their deadline.

What if postponement has been used?
If postponement has been used, a declaration of compliance cannot be completed until after the postponement period has ended. However, don’t leave filling in the details until then as there may be very little time between the end of the postponement period and the declaration deadline. It’s a good idea to fill in the details as you get them so that you do not risk running out of time.

What if I don’t complete the declaration on time?
Failure to complete your declaration on time could lead to a fine.

How can I access the Declaration of Compliance?
The declaration is a secure, online form. You will need to register with Government Gateway before you can complete a declaration of compliance.

What information do I need to complete it?
If you have all the relevant information to hand it can take as little as 15 minutes to complete your declaration. Information you’ll need to complete the declaration:

  • Government Gateway User ID
  • Letter code from TPR
  • Your contact details
  • Your relationship to the employer
  • Name of the employer
  • Employer contact details
  • Employer email address
  • Employer correspondence address
  • Type of pension scheme(s) used for AE (personal or occupational)
  • Employer pension scheme reference (EPSR).

Top tips

  • make a note of all logins and passwords
  • start your declaration before your staging date; you can save your progress and return at a later date
  • if postponement has been used for any staff, the declaration cannot be submitted until after the postponement period has ended
  • save your declaration at regular intervals as the system will timeout after a short period of inactivity
  • remember to select ‘submit’ at the end of the form to complete the process.

Frequently Asked Questions
Q: Only one member of staff and don’t want to be in a pension scheme. Does a declaration still need to be completed?
A: Yes – every employer with at least one member of staff will need to complete a declaration of compliance. If only one member of staff needs to be put into a scheme, they’ll still need to be automatically enrolled before they can ask to opt out.

Q: What happens if the declaration is not completed by the deadline? Can it still be completed if it’s late?
A: It is the employer’s legal duty to complete their declaration of compliance correctly and on time. If it is not completed on time, then action is likely to be taken by TPR which could lead to a fine. If you are having difficulties implementing automatic enrolment or gathering the information to complete your declaration by your deadline, please contact TPR immediately.

Q: I’ve signed up for a Government Gateway ID and it says I’ve enrolled, but I haven’t had to provide any information apart from a letter code and PAYE reference number – does this mean I’ve completed the declaration?
A: No it doesn’t. When you successfully sign up for a Government Gateway account, you’ll receive a message confirming this. It doesn’t mean that the declaration has been completed, it just means you’ve successfully created a Government Gateway account. Once you have an account, you can then complete your declaration of compliance online.

Q: Can I provide approximate figures at declaration and then confirm them at a later date? Can this information be updated after the declaration is submitted? If so, how long do I have to update it?
A: You are legally responsible for ensuring  the information you submit is complete and correct and you will be required to confirm this on the declaration.  You must not submit the declaration with inaccurate information as it’s an offence to knowingly or recklessly provide false or misleading information. If, after you complete your declaration, you find out you have mistakenly provided incorrect details, you should update them as soon as possible. You’ll need to confirm again that the information provided is correct and complete before re-submitting the declaration of compliance.

Case study
Swindon Town Football Company Limited (STFC) received fines from The Pensions Regulator totalling of £22,900 after it failed to put eligible workers into a pension scheme or comply with other workplace pension duties. STFC was issued with a compliance notice on 18 August 2014 directing it to automatically enrol staff and pay contributions but failed to comply by the deadline of 17 October 2014. There were several further delays in the employer complying with their duties, and as a result TPR’s intervention escalated from a focus on remedial action to one of enforcement action

Alongside auto-enrolment, is the lifetime ISA the new pension for the under 40s? 

From April 2017, any adult under 40 will be able to open a new Lifetime ISA from which they will also be able to withdraw amounts they have contributed.

Making contributions
Up to £4,000 can be saved each year. The government will pay in a 25% bonus on these contributions at the end of the tax year (i.e. up to £1,000 each tax year).

Savers will be able to make Lifetime ISA contributions and receive a bonus from the age of 18 up to the age of 50. No additional contributions will be allowed after the age of 50.

Tax free funds, including the government bonus, can be used to buy a first home worth up to £450,000 at any time from 12 months after opening the account. The funds, including the government bonus, can be withdrawn from the Lifetime ISA from age 60 for any other purpose.

Lifetime ISA managers will claim the bonus due on the accounts they manage from HMRC. Where the individual is purchasing a home they will be able to receive their bonus in-year based on the contributions they have made in that tax year. They will not have to wait until the end of the tax year to receive their bonus.

Individuals will be able to transfer savings from other ISAs as one way of funding their Lifetime ISA. In line with existing rules, transfers from previous years’ ISA contributions do not affect that year’s £20,000 overall ISA limit.

During the 2017-18 tax year only, those who have a Help to Buy ISA will be able to transfer those funds into a Lifetime ISA and receive the government bonus of 25% on those savings. Any Help to Buy ISA funds that were saved prior to the introduction of the Lifetime ISA on 6 April 2017 will not count towards the Lifetime ISA annual contribution limit.

Contributions made after this point to the Help to Buy ISA and transferred to the Lifetime ISA will count against the annual contribution limit of £4,000. At the end of the tax year they will receive a bonus on the full amount of the transferred Help to Buy ISA and their Lifetime ISA contributions.

Withdrawal to purchase first home
First time home buyers will be able to withdraw up to 100% of their Lifetime ISA balance, including the government bonus (which will have been added to the account at the end of each tax year and up to the date of purchase in that tax year).

Their withdrawal can only be put towards a first home located in the UK with a purchase price of up to £450,000.

The Lifetime ISA must have been opened at least 12 months before the withdrawal that is to include the government bonus for the first home purchase.

If more than one person is buying their first house together they can each use a Lifetime ISA and each benefit from their government bonus.

The withdrawal must be for a deposit on a property for the first time buyer to live in as their only residence and not buy-to-let.

The account holder will inform their ISA manager of the house purchase, who will claim any additional bonus due up to that point from HMRC and the funds will then be paid direct to the conveyance. If a purchase does not complete after a withdrawal has been made then the funds will be returned to the same ISA manager by the conveyancer and will not count against the annual contribution limit.

The Help to Buy ISA will be open for new savers until 30 November 2019, and open to new contributions until 2029. Savers will be able to save into both a Help to Buy ISA and a Lifetime ISA, but will only be able to use the government bonus from one of their accounts to buy their first home.

The following options will be available:

  • use their Help to Buy ISA with the government bonus to purchase their first home and save with their Lifetime ISA to make withdrawals after age 60 with the government bonus
  • use their Lifetime ISA with the government bonus to purchase their first home and withdraw the funds held in their Help to Buy ISA to put towards this purchase but without the government bonus
  • use their Help to Buy ISA including the government bonus to purchase their first home and withdraw from their Lifetime ISA to put towards the purchase. Although the government bonuses on the Lifetime ISA savings would be returned to HMRC and the individual would be required to pay a charge as set out below.

Withdrawals after 60 years of age
Full or partial withdrawals including the bonuses can be made from age 60 and used for any purpose and will be free of tax. Funds may remain invested and any interest and investment growth will be tax-free.

Withdrawals in other circumstances when bonus can be retained
Tax free withdrawals including the bonuses will also be allowed where people are diagnosed with terminal ill health regardless of the individual’s age. The definition of terminal ill health will be based on that used for pensions.

Withdrawals in other circumstances when bonus will be returned to the government
Savers will be able to make withdrawals at any time for other purposes, but with the government bonus element of the fund (including any interest or growth on that bonus) returned to the government, and a 5% charge applied. The individual saver will still have access to those savings and any interest or growth earned on those savings minus the 5% charge.

Balance held on account when the individual dies
Upon the death of the account holder, the funds will form part of the estate for inheritance tax purposes. Their spouse or civil partner can also inherit their ISA tax advantages and will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance.

Points for the government to explore in the future

  1. The government wants it to be easy for individuals to save additional funds on top of those receiving a bonus and will explore the best way to achieve that. For example if individuals want to save more than £4,000 per year or keep contributing after the age of 50.
  2. The government will explore whether savers should be able to access contributions and the government bonus for other specific life events.
  3. The government will explore whether there should be the flexibility to borrow funds from the Lifetime ISA without incurring a charge if the borrowed funds are fully repaid. For example some set percentage of the savings could be borrowed subject to some maximum value.

ISA update

Other ISAs
The total amount which can be saved each year into all ISAs will increase from £15,240 to £20,000 from April 2017. Therefore if someone saves £4,000 in a Lifetime ISA in 2017/18 that person will also be able to save up to £16,000 in other ISAs in that year.

From 6 April 2015 to 5 April 2016 the annual amount which can be paid into an ISA has been £15,240. This can be in a cash ISA, a stocks and shares ISA or any mix of both types of ISA. Withdrawn funds cannot be replaced by paying more into an ISA unless still within the £15,240 annual allowance. For example, if during the year to 5 April 2016 £14,000 was paid into an ISA then £5,000 was withdrawn only a further £1,240 would be able to be paid into the ISA (i.e. £15,240 less £14,000).

From 6 April 2016 savers will effectively be able to re-invest withdrawals into ISAs if within the same tax year. For example, if during the year to 5 April 2017 £14,000 was paid into an ISA then £5,000 was withdrawn a further £6,240 would be able to be paid into the ISA (i.e. £15,240 less (£14,000 less £5,000)). Each tax year will be considered in isolation so for the following year to 5 April 2017 withdrawals and contributions in the previous tax year will be ignored.

Not all providers may be able to offer this additional flexibility, even though they are allowed to under the new regulations.

Help to Buy ISAs
These were introduced from 1 December 2015 and are available to first-time residential property buyers. Such savers, when saving for a deposit, receive a £50 contribution from the government for every £200 the individual contributes subject to a maximum government contribution of £3,000. Savers can pay up to £200 per calendar month into a help to buy ISA except for the first month the account is opened when an extra £1,000 can be paid in making £1,200 in total for that month. These are only available to first time home buyers, so are not available to people who already own a property or have done so in the past.

The government bonus is only paid when the property is purchased so will not be paid if the money is used for another purpose. It is not limited to newly built homes although the property should cost no more than £250,000 or £450,000 if buying in London.

If purchasing a property with other first time buyers, each first time buyer is entitled to this account and the government bonus. So if two first time buyers are purchasing a home together, each would be entitled to a bonus of up to £3,000 making £6,000 in total.

Innovative finance ISAs
These are being introduced from 6 April 2016 and will have effect for qualifying peer to peer loans made on and after 6 April 2016. This account will be available to investors aged 18 and over. Along with loan repayments, interest and gains from peer to peer loans will be eligible to be held within this type of ISA, without being subject to tax.

Peer to peer lending platforms with full regulatory permissions from the Financial Conduct Authority (FCA) will be eligible to offer the Innovative Finance ISA in accordance with the ISA Regulations. Like other ISA providers, these platforms will be required to supply HMRC with information about the accounts they provide. Various account requirements set out in the ISA Regulations will be amended to accommodate the Innovative Finance ISA.

These changes will mean that an ISA investor will be entitled to subscribe new money each year to a maximum of one Innovative Finance ISA, one cash ISA and one stocks and shares ISA. The amount of new money paid into all of the ISAs held by an investor must not exceed the overall ISA subscription limit for the year. For the year ended 5 April 2017 that limit is £15,240 and the limit will increase to £20,000 for the year ending 5 April 2018.

Chancellor Osborne stated in the Autumn Statement that tax reliefs on pension contributions could be subject to further change. While he has not confirmed what, if anything, will change, many reputable sources and commentators are reporting a ‘flat-rate’ savings incentive of between 25% and 33% for everyone, irrespective of what your marginal rate of tax is.

If correct, higher and additional rate tax payers are expected to lose tax benefits of up to £8,000 per annum (the difference between 45% and 25% of the annual allowance being £40,000) plus any potential tax relief on any un-used allowance from the previous 3 tax years – potentially a loss of £36,000 if fully funded and with sufficient income in the additional rate tax band. Although bear in mind that those at the top end of higher rate and those in additional rate will potentially have a lower annual allowance from 2016/17 under the tapered annual allowance rules.

The current annual allowance restricts the amount of tax-relieved pension saving an individual can make each year. For most individuals it is £40,000. It is possible to carry forward unused allowance from the previous three tax years to offset any excess in the current year.

George Osborne has already announced that from tax year 2016/17, people with income plus pension contributions of over £150,000 then their annual allowance will be reduced on a 2:1 basis until their annual allowance is £10,000 per annum – ie for income between £150,000 and £210,000 is reduced on a £2 for £1 basis. For people earning £210,000 or more the annual allowance will be £10,000 per annum.

The restriction affects any individual with “threshold income” – broadly the individual’s total earned and unearned income for the tax year – of more than £110,000. If threshold income exceeds £110,000 the individual must calculate their “adjusted income” for the tax year, which includes the value of pension savings, including employer contributions to defined contribution schemes and its share of the value of defined benefit accrual (calculated in the usual way by multiplying accrued pension in the year (after an allowance for inflation) by 16). If adjusted income exceeds £150,000 the taper will apply.

The Bill contains some detailed anti-avoidance provisions designed to prevent individuals from reducing their threshold income by making pension contributions under salary sacrifice, or flexible remuneration arrangements, made after 8 July 2015.

The annual allowance is measured over pension input periods (PIPs) which do not always match the tax year. So, in order to introduce this measure, transitional arrangements are necessary to align PIPs with the tax year from 6 April 2016.

The Finance Bill sets out these transitional arrangements, under which tax year 2015/16 will be split into two tax years for the purposes of the annual allowance. The “pre-alignment tax year” will run from 6 April 2015 to 8 July 2015 and any open PIPs will be treated as having ended on 8 July 2015. Any pension savings made in PIPs that ended in the pre-alignment tax year will be tested against an annual allowance of £80,000 (plus any available carry forward).

The period from 9 July 2015 to 5 April 2016 is the “post-alignment tax year”. The annual allowance for the post-alignment tax year is £nil, but individuals will be able to carry forward up to £40,000 of unused allowance from the pre-alignment tax year. For example, if an individual had made savings of £20,000 in PIPs ending in the pre-alignment tax year, they could still make further savings of up to £40,000 in the post-alignment tax year. If someone had made savings of £60,000 in the pre-alignment tax year, they would be able to make further savings of up to £20,000 in the post-alignment tax year.

It is highly likely that there will be changes to tax relief on pensions in the Budget and it is important to establish if they could have an impact on you.