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Pension Freedoms

Comparing the pension situation in 1990 with today is a little like comparing Stevenson’s Rocket to the Japanese bullet train.

Back in the 80s and 90s we had no choice, you could take some of your pension fund as a lump sum and had to buy an annuity with the rest. That income ceased when you died or, if you opted for a joint life income, when the spouse died and that was it. The insurance company kept any money left over as profit.

The main attractions back then were that the income was guaranteed to be paid for life, no matter how long you live, and you could get 10% or more income from your “pot”. Provided one of you lived for at least ten years, you were well into profit.

Today you can still have the same option but the income will be considerably less, around 4 to 5%, because interest rates are lower and we are living longer; which means you have to live around 20 years before you get to a profit situation.

It is no wonder then that annuities are not in vogue and drawing whatever amount you want from your pension “pot” when you want it is proving very popular.

Two drawbacks are that your pension “pot” must be invested and reviewed regularly which costs money and if your pension investments fall in value you must be able to reduce or stop your withdrawals or your fund would soon be gone and you would have no income. 

A great attraction of pension freedoms however is the ability to pass your fund on your demise to your spouse and on their demise to your children and on their demise to your grandchildren and so on.

There may be some income tax to pay when they draw on the fund but no Inheritance Tax, which makes this freedom so valuable.

It makes perfect sense to me that one’s lifetime savings, rather than be lost to an insurance company or the Inland Revenue on your death, can be passed down the family, for them to build on and enjoy rather than start a pension fund from scratch every generation.

Living off a pension pot requires expertise if you are to draw an income from it and build up the fund for your family. See your IFA for all the help you need, but do it now!
Not all pensions allow “freedoms” so your plans may need bringing up to date and possibly invested differently as the money could be invested for a very long time.

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Christmas is creeping up

The summer holidays are but a distant memory.  The children are well into their autumn term and we are all starting to think about Christmas and all that entails.

For parents who don’t live together, it can be a challenge to agree where the children will spend Christmas and what time they will share with each parent.  Christmas is seen as one of the most important family occasions in the calendar and it is understandable that emotions run high.  In an ideal world, children would be able to see both their parents on Christmas day but in some instances this is not possible or practical. 

The starting point for all separated parents should be communication.
  They should start talking in good time – not on 20 December – in order to make suggestions as to how the arrangements might work.  Here is our guide to the actions you might take:

1.         Even though you may have to compromise, if you can reach an amicable solution that seems fair, this is obviously the best option for everyone.
2.         If you can’t reach agreement, seek early legal advice.  This puts you in a better position of understanding what can and cannot be achieved and, importantly, the timescales of which you need to be mindful.
3.         Mediation provides a neutral venue in which parents can communicate through an independent mediator.  However, it might take more than one session to resolve matters as it is likely you will be talking about ongoing arrangements for the children – not just Christmas – and sessions often take place weeks apart. 
4.         Court application is an option but it should be your last resort, as opposed to your first.  Any application (unless it is very urgent and has been left until the last minute) is subject to the court’s timetable, not yours!  As the sound of Santa’s reindeer gets closer, the court often gets busier!
5.         Alternative Dispute Resolution (ADR) is another option.  It is binding, is often cheaper and can sometimes be dealt with quicker than a court application.  However, it is still a timetabled process. 

Muntech Kaur is a member of Birkett Long’s specialist divorce and separation law team at Birkett Long and will guide you through the legal position regarding access to your children.  For a free 15-minute telephone consultation call 01268 824938 or email