Why should you consider pension alternatives?

On the 1st March, the European Court ruled that current use of gender to calculate insurance premiums, including pension annuities, are in breach of sex discrimination laws. If unisex rates come into force, men, whose current annuity rates are said to be up to 10 per cent higher than those offered to women because of lower life expectancy, could see their annuity rates slashed. It is unlikely that womens’ annuity rates will increase to line up with mens’ rates. You would be wise, not just those approaching retirement, to consider alternative investments to provide for your retirement. On top of reports that annuity rates fell 3% in 2010, once again, the dreams of many for a comfortable retirement could take a further battering, as they realise their annuity rates could be cut between a further five and ten percent. Such a change is likely to create further resentment by investors who are passing their capital to an insurance company, rather than to their heirs. From 6th April the compulsion to buy an annuity has been scrapped. Many pension professionals advise those capable of meeting the government's minimum requirements and demonstrating that their fund, plus their state pension will generate an income of around £20,000 a year, to look towards investment freedom and consider alternative options for their pension pot. A combination of steadily rising rentals, a fundamental shortage of housing and the UK pension situation looking increasingly frightening to people approaching retirement, is presenting appealing opportunities for passive buy-to-let investors. With improved loan performance in the buy-to-let market, which grew 7% in 2010, experts have suggested that the buy-to-let market is on the front foot again and entering a period of growth. This is even more true of the overseas property investment market, where foreign lenders show considerably more enthusiasm and flexibility towards property lending than their UK counterparts. Even better returns can be found in the Self Invested Pension Plan (SIPP) market. Overseas property investment is very tax-beneficial in a SIPP with the majority of foreign economies recovering at better rates than the UK, and property values increasing at between 5% to 7% - even in the Spanish and United States markets, which took such a dramatic hit at the beginning of the credit crunch. Some advisors still see SIPPs as a medium to high risk, but it depends very much on the criteria you assess by. Improving property market values have already been addressed. With the majority of SIPP investments being high-end resort and spa complexes, tourism rapidly increasing, and holidaymakers looking for a more luxurious destination there is a ready and increasing market. A rapid search on the internet will demonstrate the sort of rental income that can be achieved. What is essential, is that projections are based on realistic incomes and levels of occupancy, as well as visibly achievable property value increases and transparent exit strategies. These issues are addressed by the development companies used by Viva Costa International, who can assess all of the issues raised and recommend the best options. When handled correctly, the benefits are twofold, providing regular rental income along with increasing capital gains. Crucially, the rental income will rise over time in line with wages and prices, so in real terms you'll be protected against inflation as you get older. Plus, unlike many annuity schemes, the assets remain untouched within the SIPP ready for when you decide to start drawing income. As the rules for a SIPP are the same as for a personal pension, if the SIPP fund has sufficient liquid assets you can draw 25% of the fund as tax-free cash and draw down a regular percentage thereafter from age 55. Or, sell the assets to increase the SIPP’s drawable assets. Unlike an annuity, the remainder of the SIPP will go into your estate on death and could be passed on to heirs. For further information, contact me on the number below, or e-mail. Martin Wollaston Legal Estate Planning Specialist Tel: 0161 486 0653 Mob: 07812 463047 E-mail: martin.wollaston@aps-legal.co.uk Website: www.martinwollaston.co.uk