Pensions Guide: State Pensions By Benedict Rohan

The most important financial decisions you’re likely to make in your life are those concerning your retirement. To have a secure future with a comfortable standard of living after you’ve stopped working, you’ll need to plan your finances carefully.

Pensions are becoming more and more important as people now live longer into their retirement. Lifestyles have also changed – people often take out mortgages later in life than they used to, meaning that they may still have a mortgage to repay when they stop working. And as people are experiencing better health and longer retirements, they want to have a reasonable disposable income in order to enjoy more leisure activities in their later years.

This is the first of two guides outlining the fundamentals of pensions. It’ll help you understand more about state pensions and how they are calculated. The second guide focuses on private pension schemes. These articles do not constitute financial advice and should only be used as an introductory informational guide to pensions. For advice on how to plan your finances for your future, seek professional advice from an independent financial advisor.

Definition

First, back to basics – what is a pension? It’s a regular source of tax-free income for you to live on when you retire. As contributions towards your pension fund during your working life also receive tax relief, it’s a more tax-efficient than other methods of saving.

The government department responsible for managing and administering state pensions and other pensions related benefits is The Pension Service, which is part of the Department of Work and Pensions.

State pension

The government provides a state pension, which can be claimed by men over the age of 65 and women over the age of 60 (although this will increase to 65 in line with the male pension age by 2020).

Not everyone qualifies for a state pension, and even those who do will receive different incomes depending on their working history. Entitlement is calculated according to the number of national insurance contributions (NICs) you (or your partner/spouse) have paid, which are converted into ‘qualifying years’. You’ll need to have worked and paid contributions for around 90% of your adult working life in order to receive the full state pension. If you’ve been out of work for long periods in order to bring up a family or look after someone, you’ll be compensated for missing NICs through ‘Home Responsibilities Protection’. If you’ve been out of work for other reasons and have been claiming benefits such as jobseeker’s allowance, or income support, the government will have paid your NICs on your behalf for the period(s) in which you claimed benefit. The minimum you need to get the basic state pension is 25% of the qualifying years. If you have anywhere between the minimum and maximum amount of qualifying years, the amount you receive in your state pension will be adjusted in relation to how many qualifying years you have, so the more you have, the better. Those who have less than 25% of qualifying years won’t be able to claim any state pension at all, although there are other government pension benefits to assist those on low incomes in retirement, such as pension credits or the Over 80 pension.

Additional state pension schemes

In addition to the basic state pension, the government has a top-up scheme to enable people to increase the amount of pension income they receive.

SERPS (State Earnings-Related Pension Scheme)

Until April 2002, SERPS was the government’s second pension scheme, which allowed anyone earning more than £75 per week to make additional NICs. The level of NICs paid was earnings-related. However, the government deemed SERPS unfair on people with low incomes and those with big gaps in their employment history, so it was crapped and replaced with the Second State Pension in 2002 with the aim of allowing everyone to save more for their retirement.

SERPS gave the option of ‘contracting out’, which could be done for one of two reasons: in order not to pay the additional NICs, or to put the additional NICs towards a private pension fund.

Second State Pension

People who were paying into SERPS will now be paying into the second state pension and may therefore receive their additional state pension from two different sources when they retire.

The Second State Pension is still linked to earnings. However, it’s calculated in a way that provides better support to those on low incomes, or people who don’t have constant work because of illness or disability. In these cases, the government tops up their credits to a flat rate of £12,100, so they will receive NICs as if they had earned an annual salary up to this amount.

As with SERPS, it’s possible to ‘contract out’ of the Second State Pension, either to stop paying the additional NICs or to put them towards your own pension fund.

Finding out how much your state benefits are worth

To help you plan your savings towards your retirement, the government offers state pension forecasts to let you see how much you’ll be likely to receive as retirement income. Visit the Government Pensions Service website for more information (www.thepensionservice.gov.uk).

Resource: http://www.isnare.com/?aid=80318&ca=Finances

Pensions Guide: Private Pensions By Benedict Rohan

It’s now unlikely that the state pension will be enough to keep you living comfortably when you retire. It provides only basic support, and the government itself is keen to encourage people to save as much as they can to supplement their state pension and give themselves a comfortable income in retirement. Combined with better health in the general population – meaning longer life expectancies – and dwindling stock market returns over the last decade or so, the so-called ‘pension crisis’ is a call to action for people to plan their finances carefully and put more and more cash aside to ensure a safe and secure future for themselves.

This article is the second of two guides examining the fundamentals of pensions. The first guide focuses on state pension provision, while this one outlines some of the possibilities for making personal pension arrangements. They are intended for information only and do not constitute financial advice. It is recommended that you speak to a financial advisor for professional advice on planning your finances for retirement.

Saving for the future

There are lots of ways in which you can save for the future – savings accounts, stocks and shares and property investment, for example. However, all of these are subject to tax. Pension schemes are much more tax-efficient as tax relief is given on contributions made and the income they provide during retirement is tax-free. This is why pensions are a common way of saving for retirement.

There are two main types of personal pensions – final salary and money purchase. The first can only be provided through occupational schemes, but the second can be purchased privately on an individual basis.

Final salary

Final salary schemes, also known as defined benefit schemes, provide a guaranteed income based on a percentage of salary earned during your final year of work as well as length of service with the company. It’s possible to retire on up to two thirds of your final salary.

As it guarantees to provide a certain level of income, it’s often considered to be the best type of pension scheme available. However, there has been a decline in the number of employers offering final salary schemes in the last few years because of the expense of maintaining them. Falls in the stock market have seen many pension investment funds drop drastically in value, meaning that the employer must make up the difference in order to provide the guaranteed income to the scheme’s members. Another expense for employers with final salary schemes is the 10% tax levied on dividends, a measure introduced by the government in 1997, which again can have a detrimental impact on the size of pension funds.

Money purchase

With money purchase schemes, also know as ‘defined contribution’ plans, members make payments into a fund which is then invested into the stock market. On retirement, the accumulated funds are used to buy what’s called an annuity, which provides a regular retirement income. The amount you’ll receive in retirement isn’t guaranteed – it depends on how well the stock market has performed and on annuity rates at the time that you take out your annuity. Whereas final salary pensions put the burden of risk on the employer, who must make up the amount to a guaranteed level, it’s the member who’s responsible for the risk of a shortfall in money purchase schemes. Members may therefore need to save more cash independently to ensure they’ll have a comfortable retirement.

You’ll have some flexibility to choose what funds your money is invested in, and your decisions will depend on your attitude to risk. Higher risk investments can provide much greater potential returns, but at the same time can also make the biggest losses. ‘Safer’ investments will reduce the risk of losses but will not be likely to yield as big returns as higher risk investments.

Annuities

An annuity is a fixed, regular amount of money paid to someone, usually for the rest of their life, which is purchased using a lump sum from a pension fund, for example. It’s invested in the stock market, usually in funds considered to be safe. Annuity rates have plummeted in the last decade, meaning that many people are now expecting lower annuity incomes and are having to change their retirement plans. However, there are various different options when it comes to annuities. Members aren’t obliged to take out the annuity offered by their own scheme – they can use their accumulated pension funds to buy an annuity from any annuity provider on the open market, where they may be able to get a better rate. It’s also possible to take up to 25% of the pension fund as a tax-free cash lump sum, leaving the other 75% to purchase an annuity. A third option is to take out a short-term annuity of up to five years to keep your pension invested for a little longer in the hope that it will increase in value to allow you to purchase a better lifetime annuity further down the line. Another way of delaying taking out an annuity is to receive an income directly from your pension fund, keeping it invested in the hope of gaining higher returns to sustain the income received. However, the value of the funds could fall just as easily as they could rise, which may leave you worse off. This option is known as an ‘unsecured pension using income withdrawal’. Finally, it’s possible not to purchase an annuity at all and instead receive an income directly from your pension fund from the age of 75 with an ‘alternative secured pension’. Before 2006 it was a legal requirement to purchase an annuity from pension funds by the age of 75, but the law changed to allow people over 75 to receive this type of income instead, although the total amount of income that can be drawn down from it is 70% of a lifetime annuity. It’s intended for people who are opposed to purchasing annuities on ethical grounds as a result of their religious beliefs.

Stakeholder schemes

Stakeholder pensions were set up by the government in 2001 with the aim of facilitating access to personal pensions for people whose employers don’t run occupational schemes. As with money purchase plans, stakeholder pensions invest in the stock market, bonds and cash savings accounts and accumulate funds which are used to purchase an annuity upon retirement. They’re designed to be easy to understand, flexible and lower cost than other pension plans. The maximum charge that administrators will be able to charge each year for managing the funds is 1% of the value of the fund, and they cannot charge penalties if members wish to transfer cash in or out or stop contributing. However, there’s a limit to the amount that can be invested, so they’re designed for people on low to middle incomes rather than high earners.

Resource: http://www.isnare.com/?aid=80320&ca=Finances

How To Find Free Government Grant Money By Phil Monkton

Finding free government grant money can be time and labor intensive. Identifying the specific agencies and their purposes and specific subject areas can involve a lot of research work. Ads that claim the process is easy usually involve some sort of fraud and are untruthful. Government grant money will need to be answered for very specifically in today's world.

Free government grant money does actually come with at a price. It does not have to be repaid, but it does come with strict conditions and restrictions on how it is spent. There are usually strong sanctions involved when used improperly as it is to be used directly for the outlined project and within the objectives of the funding source.

Locating free government grant money for new and existing for-profit businesses is difficult. Typically, the free grant money is given to non-profit organizations that provide some sort of community social service function and benefit everyone. Despite this, it should be noted that there is still free grant money available from the government to entrepreneurs in competitive fields of business.

The U.S. government's grant.gov website would be the best place to look to find available free grant money. Here, you will be able to find and apply for competitive grant opportunities from all federal granting agencies online. The application and approval process is automated to improve the process. The site also offers a free sign up for notification of future grant opportunities.

The government's Catalogue of Federal Domestic Assistance (CFDA) is another source to find free available grant money. The CFDA.gov website lists government grants and assistance for homeowners, renters and even small business start-ups. Grant information is available by category, topic and key words. Eligibility requirements are listed for all grants to determine if you qualify for them.

Keep in mind while searching for free government grant money that it is not available in any specific area year-round. You must apply when advertised and meet a deadline if you want a chance to qualify for it.

Resource: http://www.isnare.com/?aid=69981&ca=Finances

Get Rid Of Your Arm: Refinance Your Property Loan By L. Sampson

Chances are, if you have an ARM (adjustable rate mortgage) on your property, than you got it when interest rates were quite low. Now, however, interest rates are on the rise, and with an ARM, it means you could be paying quite a bit more per month on your loan. Whether your property is a primary residence, investment property or business property, you can refinance your property loan for a fixed rate, creating stability in your payments and saving money in the long run.

Replacing your ARM with a fixed rate loan

The adjustable rate mortgage is one in which the interest changes as the Federal Reserve changes the interest rates up or down. If rates stay steady, or if they fall, an ARM can be a great thing. Your payments are lowering on a regular basis. Unfortunately, interest rates are not always falling. This means that more than likely, your payments are steadily increasing, especially if you got your property loan at a rock-bottom rate. Getting a fixed loan when you refinance your property loan means that the interest rate is “locked in” and that you do not have to worry about rising monthly payments.

Saving money in the long run

When you refinance your property loan using a fixed mortgage to replace your ARM, you can save money in the long run. If you keep having to pay more due to interest rate changes, you will pay thousands more over the life of the loan than you would pay if you had a fixed rate. Even though the interest rate on an adjustable rate mortgage goes down on occasion, over a 30-year period that rarely actually ever evens out. As a rule, a fixed rate (as long as it is relatively low) saves you more money than an ARM.

Refinancing your property loan

Most lenders will refinance your property loan as long as you have fair credit. Some will even help you if you have poor credit. It also helps to have some equity in your home. You will have the easiest time if you are doing a straight refinance, rather than a “cash out” refinance. Also, you need to check your original loan terms. Some loans penalize you for paying them off early, and your property loan refinance may result in a prepayment penalty.

Resource: http://www.isnare.com/?aid=79819&ca=Finances

Obama's New Plan to Boost Economy with Debt Reducing Government Grants - Pay Off Personal Debt

The only way that these government grants will work to help the economy is if more people apply to them. Yes, there is an ulterior motive for these programs, but if they are helping families that are desperately in need that that shouldn't really matter. In the end, they are both good reasons.

These grants come in a number of forms so that they can give more people assistance. In fact, most people that are drowning in debt that fit under the $30,000 income mark should be able to find something that suits them. There are small business grants, mortgage forgiveness funds, education grants, and loan consolidation monies. There are also tax rebates or credits available plus assistance in paying medical bills.

Once enough people take advantage of these grants, the institutes that were once short of this money will start to flourish again. They can start making proper business relationships once more and perhaps the job cuts will stop and go in the opposite direction. The families who have this debt taken from their shoulders will have extra money to put towards other things and cash will be entering the economy again. This will spruce up business for various other companies that might be finding it difficult right now. Anywhere that this extra money ends up, a portion will go back to the government in the form of taxes. So from these grants everyone really does win. If you want to help yourself and the economy of the country, check out the government grant website and see which ones will take care of you.