Planning for Retirement
We all work hard and dream of enjoying a comfortable retirement
one day. But to have the retirement you want takes planning – usually,
over many years!
Assess your retirement income
The starting point for any retirement planning is to assess how
much income you expect to receive after you finish work. Your retirement
income might come from a number of sources:
From the Government…
• The Basic State Pension
The current Basic State Pension is £82.05
per week for a single person and £131.20 per week for a couple.
It’s payable from age 65 for men and age 60 for women (rising
to 65 between 2010 and 2020). To receive the full Basic State Pension
you must have paid, or be treated as having paid, National Insurance
Contributions for sufficient qualifying years.
• State Second Pension (S2P)
This was previously known as the State
Earnings Related Pension Scheme (SERPS). Employees with earnings
over a lower limit build up entitlement provided they aren’t
contracted out of SERPS or S2P through a private pension plan.
Earnings over an upper limit don’t count for SERPS or S2P.
The rules governing S2P are complicated, so it’s difficult
to work out what you’re entitled to. But help is at hand – your
annual benefit statement now contains a State scheme forecast.
Alternatively, the DWP’s State pension forecast service will
calculate your expected State pension.If you’re a member
of the final salary section of the Kingfisher scheme (or if you
were a member of the Kingfisher Retirement Trust), you won’t
build up S2P, but you will build up S2P if you are a member of
the money purchase section.
• Pension credit
This was introduced in October 2003, and
although it isn’t really a pension, it guarantees everyone
aged 60 and over an income of at least £109.45 for a single
person and £167.05 for a couple. If your total weekly income
falls below the single or couple limits, the Pension Credit will
make up the difference. Between 2010 and 2020 the starting age
will gradually rise to age 65. You should remember that the Pension
Credit could be subject to change by a future Government.
Income from a private pension…
• Kingfisher Pension Scheme
The Scheme offers two types of pension:
•
If you joined the Scheme before 1 April 2004, you might be building
up what’s known as a final salary pension. This is calculated
as a proportion of your salary at or close to your retirement,
e.g. 1/60th or 1/80th of final salary for each year of service
while a member of the scheme. So if you complete 30 years’ service,
your pension will be half (i.e. 30/60th) of your salary when you
retire.
•
If you joined the Scheme after 1 April 2004 or haven’t yet
joined, you will build up what’s known as a money purchase
pension. Both you and your employer pay contributions at a fixed
rate which are invested for you until you retire, when the value
of your retirement account will be used to buy your pension. The
amount of pension isn’t fixed and depends on the value of
your retirement account and the cost of buying annuities when you
retire. If you were a member of the Kingfisher Retirement Trust,
this also provided pensions on a money purchase basis.
Planning for Retirement We all work hard and dream of enjoying
a comfortable retirement one day.
• Other pensions
You may also have built up a pension in a personal
or Stakeholder pension plan or an occupational (company) pension
scheme run by a previous employer. If this was a money purchase
arrangement you should receive a statement telling you about the
value of your retirement fund and a forecast of the pension it
will provide at retirement. If it was a final salary arrangement,
you may not receive a statement annually, but you are entitled
to request a statement from the administrator of the scheme once
a year.
Building up a retirement income
If you haven’t done so already, you can begin to build up
a pension by becoming a member of the Kingfisher Pension Scheme.The
Scheme offers a tax efficient way to build up a pension - and the
Company helps too by matching your core contributions to the Scheme.
Simply by making payments while you’re working, you will
be building up income to help protect your lifestyle after retirement
and for the rest of your life.
Brief details of the pensions offered
by the Kingfisher Pension Scheme are provided in our article, Kingfisher
Pensions at a Glance here. Alternatively, you can find out
more from the Member’s Guide and the Investment Choices booklet
or from the pensions website www.kgbd.co.uk,
or ask your local HR contact for assistance.
Increasing your Kingfisher pension
You can increase the benefits you receive at retirement by paying
Additional Voluntary Contributions (usually known as AVCs) or,
if you are a member of the money purchase section, by paying additional
core contributions. As with ordinary contributions, paying additional
contributions is a tax-efficient way of providing extra benefits
- if you are a standard rate taxpayer, for every £100 you
pay, the overall cost to you is just £78, and the saving
is even more if you pay higher rate tax. Of course, these tax concessions
are limited by the Government and at the moment your total contributions
in any tax year cannot exceed 15% of salary, although this will
increase from April 2006.
If you are already paying additional contributions or are considering
your options, it is important to choose the right long-term investment
fund for your particular circumstances. This will depend, for
example, on your age now, how many years until you want to retire,
how much you can afford to pay and your attitude to the amount
of risk you are prepared to take.
• Money purchase (KPS-MP) AVCs
If you are a member of the money purchase
section, then like your normal core contributions AVCs are credited
to a retirement account. However, they won’t be matched by
the Company.
• Money purchase (KPS-MP) Additional
Core Contributions
If you are
a member of KPS-MP, then instead of paying AVCs, you can increase
your Kingfisher pension by paying additional core contributions.
Normally, additional core contributions won’t be matched
by Company contributions, but once you have been in continuous
membership of a Kingfisher pension scheme for 5 years (earlier
in some circumstances) matching amounts will be credited to your
retirement account of up to 2% of your basic salary. Special terms
apply for managers.
Both AVCs and additional core contributions
are invested in the same way as your core contributions. Information
about investment options is provided in the Investment Choices
booklet you were (or will be) given before joining the pension
scheme. Additional copies can be printed from the pensions website
at www.kgbd.co.uk.
•
Final salary (KPS-FS) AVCs
If you are a member of KPS-FS, the Scheme
offers a number of investment choices for your AVCs :
•
A With-Profits Fund, currently invested with the Prudential Assurance
Company, which aims to provide steady growth with a guarantee that
if the monies are left in the Fund until retirement, they will
only increase in value.
•
Unit-linked funds, where the value of the funds are directly linked
to stock and bond markets. Unit-linked funds are currently invested
with two AVC providers, Merrill Lynch Investment Managers and the
Legal and General Assurance Company, who offer a range of investment
funds.
Details of these AVC arrangements can be found in the explanatory
booklet The KPS AVC Guide available from our website www.kgbd.co.uk or
from your HR contact. Details of the value of your AVC funds
are included in your personal benefit statement.
• Other ways to increase your pension
You can increase your pension
independently of the Kingfisher Pension Scheme by contributing
to a Stakeholder or personal pension plan (subject to certain income
restrictions), or to a free standing AVC arrangement. If you are
a member of the money purchase section, you could also use this
type of pension plan to contract out of the State Second Pension.
However, the Company won’t contribute to a Stakeholder or
personal pension plan, and you should seek independent financial
advice before joining such an arrangement.
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