You have a great pension scheme in AFPS15, but will you have sufficient funds in retirement? It’s important to explore other common methods of boosting your retirement income.
Added Pension: If you’re still serving you could purchase Added AFPS 15 Pension either by instalments or by lump sum. To start, contact Veterans UK by submitting an AFPS Form 6 to request a pension quote and explore improvement options. Before submitting, use the Added Pension calculator to estimate potential costs. After receiving your Form 6, Veterans UK will provide a quote. If you wish to proceed, complete AFPS Form 6a included with the quote. A booklet with more information on Added Pension for AFPS 15 is also available.
What else is there?
Bank or building society, allows easy access to your money, though there might be an interest penalty. A downside is that low historical interest rates can reduce the real value of your savings. Basic rate taxpayers can earn tax-free interest up to £1,000, while higher rate taxpayers have a £500 allowance.
Premium Bonds allow instant access without penalty, your capital is not at risk and winnings are tax-free BUT your money doesn’t earn interest and profits depends upon Lady Luck! Premium Bonds could be attractive to those who have used their ISA allowance.
Individual Savings Accounts (ISAs) are a popular savings vehicle and could be:
- Cash ISA: If you are considering a cash ISA, interest rates vary. Very often investors are offered an attractive introductory interest rate for, say, the first couple of years, after which the rates fall to a less generous level. This is no real problem as you can shop around and transfer your ISA to a new provider offering a better deal – and, yes, it is easy!
- Stocks and shares ISA: The stocks and shares ISA allows you to invest in shares, funds etc and can be withdrawn free of capital gains tax (18-24% depending upon whether you are a basic or higher rate taxpayer).
- Lifetime ISA (LISA): The LISA is particularly interesting if you are considering boosting your pension as, although you can only use £4K of your ISA allowance on a LISA, the government will contribute and additional 25% to the value of the amount that you deposit in it. So, if you deposit £4K the government will contribute an additional £1K. LISAs can only be started by those aged 18-40, and contributions cannot continue beyond age 50. The fund can only be used for the purchase of a first property or from the age of 60 it can be withdrawn without a tax charge or penalty.
The annual ISA investment limit is currently £20,000 and may be split between different types of ISA. You can withdraw money from a cash or stocks and shares ISA at any time without losing tax benefits. Here’s more information on ISAs
A Personal Pension would be a Defined Contribution arrangement, so the yield will depend upon how much you save and where it is invested – remember, investment values can go up or down. Contributions may be made by regular payments or by lump sum and these normally attract tax relief – so keep an eye on your Annual Allowance. More info here
Finally, a word about the stock market. The yield, which is subject to capital gains tax, depends on how your investments perform. Some investments are riskier but offer higher potential returns. A good Financial Advisor can help you understand this complex market.
Find out more about how to make more out of your savings from this year’s UK Savings Week Campaign
*Figures correct at time of writing
