We all look forward to the day when we can retire away from the stress and pressures of work, but will you be able to afford the quality of life you dream of, let alone worked so hard for? Planning for your retirement as early as possible will help you be more secure and financially worry free later in life.

At Birchwood, we regard pension schemes as investment plans with tax relief.  Accessing pension savings from the age of 55 is now much more flexible with pension freedoms as well as having extra tax benefits.

  • Someone with a personal pension, or other defined contribution pension pot, can choose from options including buying an annuity, withdrawing the whole amount or taking part of the pot, with the first 25 per cent tax-free and the rest taxed at their marginal (highest) rate, leaving the rest invested to provide a retirement income.
  • They can also take lump sums when they like, with the first 25 per cent of each tax-free and the rest taxed at their marginal rate, but with no regular retirement income.
  • People with a defined contribution pension who die before the age of 75 can pass on unused pensions without the beneficiary paying tax. For deaths after 75, withdrawals are taxed at the beneficiary’s marginal rate. In both cases, the fund is free of inheritance tax and can be passed down the generations on the same basis.

Birchwood can help you to adequately plan your pension needs and identify if there is a shortfall between your pension income and your retirement needs.

An Introduction to Inheritance Tax and Wills

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Occupational Pension Schemes

These are organised by employers for the benefit of employees. Traditionally they have been linked to an employee’s salary under that employment and years of service and been very secure. More recently many employers have found this an expensive option and have introduced defined contributions schemes that limit the employer’s liability to the level of contribution they commit to contributing to the scheme on behalf of employees.

Auto-enrolment Pension Schemes

Auto-enrolment is a government initiative to encourage more people to save for retirement. It began in October 2012 with the largest businesses and by 2018, all employers will be legally required to enrol eligible jobholders into a qualifying workplace pension scheme, although workers can opt out. Both employers and jobholders must make minimum contributions to the pension.

Additional Voluntary Contributions (AVCs)

Employees who are members of occupational schemes may choose to increase their pension provision by making contributions to an AVC scheme. This can be linked to the main scheme or may be free-standing in order that the employee can use a provider of their choice rather than be limited to the provider selected by the trustees of the occupational scheme. Regulations were also introduced in April 2006 that permit employees to contribute to a personal pension at the same time as they are members of an occupational plan.

Personal Pensions

Traditionally used by the self-employed or employees who do not have an occupational pension scheme available, they offer very flexible options. They are offered by a large number of providers and it is possible to select a broad range of investment options to suit the risk profile and term to retirement of each individual.

Stakeholder Pensions

This type of personal pension was introduced by the Welfare Reform and Pensions Act 1999 to ensure that all employees had access to a pension scheme through their payroll with a limit on maximum charges.

The rules for stakeholder pensions changed on 1 October 2012 and employers no longer have to offer access to a stakeholder pension scheme.

If someone is in a stakeholder pension scheme arranged by their employer before 1 October 2012, their employer must continue to take and pay contributions from the worker’s wages until the employee leaves, asks them to stop or stops paying contributions at regular intervals.


Income from a pension at retirement is frequently achieved by purchasing an annuity. The accumulated fund, after withdrawal of 25% as tax-free cash, is paid to an insurance company that guarantees a set level of lifetime income. It is possible to include benefits such as regular increases, a widow’s benefit, or guaranteed periods of payment but additional benefits will reduce the income payable.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested.


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Contact us to find out more on how we can help you

Birchwood Investment Management Ltd,
8 Prospect Place, Welwyn, Hertfordshire, AL6 9EN

01438 840888 *

* Please note calls to and from the above number are recorded for training purposes.