A pension. Like a will and insurance, you know you should have it, possibly even do but aren’t entirely sure if you’ve done it properly or whether it will be sufficient.
If you’re like the majority of the population, your pension from various previous employments will be sitting with a provider somewhere, typically an insurance company, ticking over but not really working for you. It shouldn’t be this way.
It would make for a dull read but all five things you need to know about Jersey pensions should start with advice. Not just a friend or relative but a qualified, Independent Financial Adviser (IFA).
It is the responsibility of the IFA to establish a selection of investments suitable for your pension plan and retirement planning needs. They will take a look at your overall financial situation, including any existing pension arrangements and help you decide your best option.
Pension provisioning is a very long-term plan but annual reviews should be a key part of your thinking. This way you can ensure there will be no surprises when you do retire and it is also a good time to take account of any changes in your personal circumstances or ask any questions you may have.
Old world versus new
In December 2007, certain changes were made to the local Jersey Income Tax Law, for the first time enabling the use of Jersey trusts for personal pension planning. Up until these changes were made, the majority of Jersey residents were limited to the use of insurance company schemes as provision for their retirement.
These traditional insurance companies pulled out of the Jersey market, leaving local pension providers to take up the reins with innovative new trust solutions. However, many people are still in these old schemes, caught in a limbo between the old world and the new.
With the new personal pension schemes, known as Retirement Trust Schemes (RTS), transferring and perhaps consolidating your existing pensions to a more flexible product has never been easier or more beneficial for the people of Jersey.
Hide and seek
Finance companies and the pensions industry in general have been guilty in the past of being rather opaque. Combined with the fact that you may have pensions with a variety of different of providers, actually tracking down old schemes and understanding your financial position can be hard work.
In 2013, Jersey underwent a Review of Financial Advice, having taken a lead from the UK’s own Retail Distribution Review. This helped to ensure that there is now more transparency and fairness in the investment industry and you should always be sure to discuss and understand all fees and charges with your IFA.
Most advisers should be able to give you a simple summary of the impact that fees and charges will have on your pension, throughout the potential lifetime of your plan, including if you want to terminate their services at any time prior to retirement.
Despite the saying, life isn’t a rollercoaster. It’s a theme park full of rollercoasters, ghost houses and lots of food that’s probably not too good for you. What this means for financial planning is that it is important that your IFA helps you to navigate your way through the myriad of life’s events such as children, buying a house, getting married or going travelling, by recommending the most appropriate and flexible pension solutions
Also, the last thing you want to be worried about on a beach in Thailand is whether the direct debit to your pension fund has processed or how your pension fund is performing, so making sure that you have secure, online access to your account is essential when discussing options with your IFA.
When you retire, the chances are that you will be in a very different position to where you are now.
Maybe you’ll be looking to move house, visit relatives on the other side of the world or just want to spoil yourself (and your loved ones) in your retirement. Using a Jersey RTS for your pension plan is flexible enough to cater for all of these events. Once you exercise your option between the age of 50 and 75, you can take up to 30% of your accumulated value as a lump sum, completely free of tax, draw an income from the plan or if you prefer, purchase a traditional annuity from an insurance company.
And it happens to everyone so it’s best to talk about it and be prepared for it. In the event of your death, you want to be sure that your pension funds are passed on to your nominated beneficiaries hassle free. The Jersey RTS is designed specifically for this eventuality.
By speaking to an IFA about a Jersey RTS, you will be able to understand exactly where you are currently, create peace of mind for you and your family as well as benefitting from the world-class providers and administrators that we have on the island.