Your Money

Police pension information

http://www.yourpensionservice.org.uk/police

Police pension calculator:

http://www.policemutual.co.uk/police-retirement/my-pension/police-pension

When it’s time to collect your pension, you have two choices to consider:

Option 1 – Take up to 25% of your pension fund as a tax free lump sum.

Option 2 – Leave your pension fund intact and receive a larger monthly pension.

Any initial lump sum is tax free.  Monthly pension payments are taxed at usual income tax rates.

No National Insurance required to be paid.

Personal Taxation 2016/2017

• The first £11,000 of personal income is tax free.
• Then from £11,001 to £43,000 is taxed at 20% (Basic).
• £43,001 and above is taxed at 40% (Higher).

If you decide to take another pension in your next employment, as is your right to do, then it’s worth knowing that it is a tax efficient way of investing.  For example, if you were to contribute £400 a month to a new job pension, because the government gives you 20% tax relief, you get £500 added to your pension pot.  If you are a higher rate tax payer, you could claim another 20% tax relief through your self-assessment return.  This is an effective way to invest for the future.

Investing

It’s always worth considering putting some money aside on a regular basis for the future and investing your spare income is nothing new.  What you may wish to consider is both your options for investing and your attitude toward it.

Access to the money – Generally, the longer you are prepared to tie up your money, the better return you will get.  Whatever pile you are sat on, it’s worth having some that you can quickly make use of for a rainy day if you do want to commit the remainder to a better rate.

Income or Growth – Some investment options are geared towards growth i.e. the amount you put in is intended to sit there and grow with the reinvestment of the interest or other gains.  If you have a larger amount to play with, you may wish to receive a regular monthly income from it and if so, you can choose an option where the initial investment doesn’t grow because the money it makes is returned to you on a regular basis.  The downside to taking an income is that if the initial investment isn’t allowed to grow then because of inflation, it is effectively worth less each year.

Risk Appetite – The phrase ‘high risk high reward’ applies here.  If you want to expose your money to little or no risk then by playing in into a bank or building society savings account, you will receive a nominal amount of interest.  Such are the rates in 2016 that you may find inflation is higher than the interest rate and so your money is actually worth less each year, even if you allow it to grow.  If you hope to see some better returns then you can consider some of the riskier options like Share ISAs, Unit Trusts and any other product linked to share investment.  We recommend taking professional independent financial advice to source the best product for your needs.

Current Outgoings – Your ability to save/invest will be linked to what you have going out of your account each month.  With all borrowing rates higher than investing rates, it usually pays to reduce your monthly outgoings by paying off debt.  If you have received a lump sum, it’s worth considering clearing credit cards, loans, car loans and finally, chipping away at your mortgage if you still have one, because every pound that you don’t have to pay out each month is one less that you need to earn.

Three steps to bear in mind:

• Seek independent advice
• Banks / Building societies can only sell their products, which can be limiting.
• Do plenty of research and look for product reviews.