PRIVATE PENSION ARRANGEMENTS

If you are a Dental Associate or Principal who has a relatively small amount of NHS fee income and will therefore not receive a large NHS pension or perhaps you are a Doctor or Consultant who has a private income which you wish to pension thus reducing your liability to income tax, you may benefit from making additional private pension contributions.

In these circumstances Private Pension arrangements still provide a valuable and highly tax efficient method of making retirement provision for the higher rate taxpayer.

Recent history has shown us that careful planning and the selection of the correct investment funds has become even more important and therefore it is strongly recommended that you take Specialist Independent Financial Planning Advice.

Personal Pension Plans

With Stakeholder Personal Pension Plans, Personal Pension Plans and Self Invested Personal Pension Plans there is no direct link to the main NHS Pension Scheme, and there is no requirement to draw benefits from these schemes at the same time as they are drawn from the NHS Scheme. Maximum contributions limits are set by the government.

• Stakeholder Personal Pensions

  These pension plans became available from 6 April 2001. The main advantage of these schemes is their extremely low charges and in addition, the schemes must offer early transfers without penalty.

• Personal Pension plans

  Personal pension plans would be suitable for the individual who wants access to a wider range of pension funds than are available via Stakeholder plans and is happy to pay these increased costs in the expectation of superior returns.

• Self Invested Personal Pension Plans

  For the investor who requires a greater degree of diversity with regards to the choice of investments available, or who wishes to exercise a greater degree of control and self-involvement with regards to the investments held within their pension plans then a Self Invested Personal Pension Plan may be entirely appropriate.

  With conventional pension arrangements the individual only has access to the pension investment funds available from the provider. However, with Self Invested Personal Pension Plans you have access to a wider range of investments and these can be as diverse as securities listed on recognised stock exchanges, futures, options, unit trusts, investment trusts funds, offshore funds, commercial land and property.

  One of the main benefits associated with a Self Invested Personal Pension Plan, is its ability to assist with the purchase of commercial property. This facility is particularly useful where an individual – for example, a dental practitioner – may want to use his or her pension funds in order to purchase a property by way of establishing a new dental practice and as such it can be an extremely tax and cost efficient way of acquiring a commercial property.

The final benefits provided by private pension arrangements will be entirely dependent upon the investment success of the selected funds and prevailing annuity (income) rates at the point of retirement.

Financial Planning with Stakeholder/Personal Pensions

Up to £3,600 per annum can be invested into a Stakeholder/ Personal Pension Plan without evidence of earnings. This opens up a number of interesting financial planning opportunities, for example, Pension Plans can be set up on behalf of non-working wives, and children.

In addition, a number of practitioners employ their spouses on their behalf to carry out such duties as secretarial work paying them just below the National Insurance threshold. More recently this arrangement has come under close scrutiny by the Inland Revenue and has had a direct impact on the pension planning that a practitioner was able to make on behalf of the spouse. The advent of the new pensions regime allows a contribution to be made on behalf of a spouse of up to £3,600 per annum without evidence of earnings. These contributions can be treated as a business expense.

There is a wide range of different private pension arrangements available and the most suitable type of plan and retirement strategy needs careful consideration, therefore it is strongly recommended that you seek Specialist Independent Financial Planning Advice

Non Pension Related Options

Whilst the tax efficiency of pension arrangements cannot be denied, it has to be weighed against the lack of access to the funds invested within these contracts and the fact that in the vast majority of cases, with the exception of defined benefit schemes, the plan holder has to buy an annuity related contract at his or her retirement date. In recent years annuity rates have fallen substantially and whilst they may recover there is no clear indication that this is likely to happen in the near future. As such, when planning a balanced retirement strategy you may wish to include a number of non-pension related options, as, whilst these may not be as wholly tax efficient as pensions, they may offer a greater degree of flexibility and may, in certain cases, be free of many of the rules associated with pension arrangements.

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