Monday, 17 October 2016


Cash please

Those who are 55 and older can now draw out all (!) of their pension fund as cash. So you can ask to have it all as cash (!)   BUT…

Tax! The downside is that with each pension only 25% of the fund can be taken tax-free.

Any amount that you take over and above this tax-free 25% will be taxed as if you had earned it in the Tax Year in which you draw it out. That amount is added to your other income and is taxed accordingly.
A person aged 55 is earning £20,000 per annum and paying about £1,800 in tax on those earnings. He has a pension fund worth £40,000 and he wants to take it all out. He would get the first £10,000 tax free. The remaining £30,000 would be added to his £20,000 other earnings and he would be taxed
as if he had earned £50,000. This would result in him paying £9,200 in tax instead of £1,800. So he would lose £7,400 of his £30,000 pension to the taxman. A person already earning enough to put him in the higher rate tax bracket (40% tax where the total income exceeds £43,000) could lose 40% of the money he takes out over and above the tax-free amount. In our example of a £40,000 pension fund, he would still get the £10,000 tax-free but lose £12,000 of the remaining £30,000 in tax). Therefore it is important to take tax into account when working out when to take money out of the pension.
(Note: this article refers to personal pensions only; the rules are different for a Final Salary Scheme where the benefit is based on the salary and years of service and some other special types of  pensions.)

Income Options
(Note: all these options assume that you take out the tax-free cash.)

Option 1: Leave the balance invested with the option to take out further funds in the future – either when your need is greater or when your tax position is more advantageous. This is called a Flexi-
Drawdown arrangement as it provides the flexibility for you to draw out whatever sums you want at any time you want them. But remember that once you have drawn out the tax-free element, any other monies you take out will be taxed. Such an arrangement also involves investing your pension fund so you would need to consider both the risk that comes with such investments as well as the provider’s charges for running the pension.

Option 2: Use the balance left over to set up a guaranteed income for life (an “annuity”). The amount of income received would depend on your age – the older you are, the more you would get. The amount of income you would get also depends on your state of health – the worse off you are health-wise, the greater the income you are likely to receive. You can set it up on just your life or so that it covers both you and your spouse/partner. The idea of guaranteed income is attractive but the current annuity rates are quite low so the amount of money you can obtain may be a bit disappointing.

Option 3: Take a short-term guaranteed income (a “temporary annuity”). This pays out a guaranteed level of income for a fixed number of years and then pays out a guaranteed sum on maturity – which can then be used again in Option 1 and 2 above or to repeat this Option 3 for a further term of years.

Thursday, 6 October 2016


It is still early days but there is a surprising resilience in the property and financial markets

following the BREXIT vote. Residential property prices have remained reasonably stable

and mortgage rates remain at the lowest levels on record.

Pensions and taking the benefits from them, however, remain a complicated area. To help understand

the options here follows: A New Retirement Menu for Personal Pensions. We know that the subject

of pensions is confusing to most people, so do feel free to contact us with your questions. Do note

that the “Retirement Menu”  relates to Personal Pensions only. The regulations for Final

Salary Pensions where the benefit is linked to years of service and salary are different.

Menu to follow ......

Wednesday, 21 September 2016


It is all too easy to let the annual pension report and mortgage statements and investment data just accumulate in a drawer. By reviewing these at least  once a year, you can stay on top of your finances and ensure they are doing as good as possible. If you need any help with this, contact us.

Sovereign Finance 01342 313302 or

Thursday, 15 September 2016


One of the cheapest financial planning and protection tools is still term life assurance. The amount that is insured will be paid out on death at any time during the agreed term of years. It really is a must for young families where husband and wife can be covered by a single policy and get substantial cover for less than £10.00 per month.

We would be happy to provide quotes by return of e-mail. Contact us on 01342 313302 or

Monday, 5 September 2016


By survey what our clients value, and why they continue to come back to us, is our independent and unbiased advice on financial matters and mortgages, utilising our extensive knowledge and know-how gained over the last 35 plus years.

Here are a few recent client comments:

“Thank you so much for being super quick and efficient and guiding us through this. I have already recommended your services to 2 of my friends and am sure we will have some more work coming your way in the near future.”  – Mr RW and Ms NF of Kent

“Many thanks for all your patience, guidance and expertise in arranging this for us, your help is much appreciated.”  – Mr & Mrs PL of Redhill, Surrey

“Usual thanks and best wishes for excellent service.” – Mr IB of Leeds

“As ever your advice is clear and constructive; we will certainly come back to you as and when we decide to take the next step.”   – Mr & Mrs AM of Uckfield, East Sussex

Wednesday, 31 August 2016


If you have a business with even just one person on PAYE (other than yourself  if you are the director), you need to find out what you are expected to do as regards having a Workplace Pension. This has been going on since October 2012 starting with the companies with the most employees. Over the next year or so it will catch up businesses even with just an employee or two. There are pretty steep penalties for not meeting your obligations in this regard. If you have been sent your “Staging Date” (the date at which you are required to have the Workplace Pension set up and operating in your business), you should not ignore it. If you are not sure, you can check on your Staging Date by going on-line to

Monday, 22 August 2016


There are many more choices on taking your pension benefits than ever before. It is a good idea to get professional advice to help you make the decisions that best suit your plans. As the rules have changed as regards how pension benefits are treated on death, this too is something important to know about. We would be happy to assist.