0117 980 9926 | www.hl.co.

uk
Top 10 tips
to improving your pension
> Why consolidating pensions often makes sense
> How you can reap rewards when you keep an eye on your pension investments
> Why it pays to shop around at retirement
Best SIPP Provider - Hargreaves Lansdown
2007, 2008, 2009, 2010, 2011, 2012
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 1
Top10Tips
1
Have you ever planted
anything in your
garden?
If so you probably kept an eye on its
growth, watered it and dug out the
occasional weeds that threatened to
smother it. Had you walked away and
come back many years later, you
wouldnt be too surprised to find it
wasnt faring too well. But that is
exactly how millions of people treat one
of their most important assets their
pension. They take the important first
step of setting up a pension, but then
fail to follow this up by making sure
their pension is prospering.
Over 16 million people have NEVER
reviewed their pension plan, according
to research conducted by Barings. This
will not affect their daily lives while
they are still at work, but it could have
serious implications for their comfort in
retirement. It is already too late to do
very much about it if you look inside
your pension for the first time when you
retire. If it wont buy you the income you
expected you have two pretty
unpalatable options: work for longer
or simply accept a lower income for
the rest of your life.
By keeping a regular eye on your
pension you can help to ensure that it is
still on course to provide you with the
income you need. We would suggest you
review your pension at least once a year.
It will probably be helpful when you do
so to use a pension calculator; one is
available on our website at
www.hl.co.uk.
You can use this tool to estimate the
income you could receive in retirement,
based on the value of the personal
pensions you have built up so far and
the contributions you are making. You
are then forewarned about any shortfall
in your plans and can take action to
help plug the gap, perhaps by
increasing your contributions, moving
to a better fund or seeking a lower cost
pension. When it comes to retirement
planning forewarned is very much
forearmed and regular attention to your
pension will give you a better chance of
living through retirement with an ample
income.
Review your pension regularly
2
3
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 2
Top10Tips
Your pension will contain
at least one investment.
Usually this will be a
managed fund of some
description. Often this managed fund
will be run by the pension provider,
usually an insurance company.
Insurance companies are very good at
measuring and analysing risk, but may
not specialise in investments.
But the performance of your pension
fund can make a huge difference to
your comfort in retirement. Here is
what a 10,000 pension pot could be
worth after 30 years depending on the
growth your fund achieves.
Clearly there is a lot at stake here, yet
this is an issue which is neglected by
most pension investors. Dont be one of
them. Monitor your pension
investments regularly to make sure they
are up to scratch. If necessary you can
switch your pension into a fund with
better prospects. This may be possible
within the pension you already have,
depending on the funds available.
Otherwise it is possible to transfer your
pension to a new pension provider with
a better range of funds.
Past performance is not a guide to
future returns, so it can be difficult to
pick out funds which will perform well
in the future. To help those who want to
choose their own funds we publish the
Wealth 150, our list of favourite funds
across all the major sectors. This is
compiled by our Head of Research Mark
Dampier and his team, who conduct
hundreds of fund manager interviews
every year to try to pick out tomorrows
winners. If you would like a copy
please go to our website at
www.hl.co.uk or call our Pensions
Helpdesk on 0117 980 9926.
2
3
Monitor your pension investments 3
Importance of fund performance
3% 5% 7% 9%
Annual fund rcwth
15,520
27,635
/8,673
8/,835
This is just an example to illustrate the importance of
investment performance. In reality investments rise as
well as fall in value so you could get back less than you
invest. 1.5% annual charge assumed. Ination will
reduce the value of money over time.
P
e
n
s
i
c
n

v
a
l
u
e
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 3
3
Almost every week in the
financial press you will
find a story about someone
who has been paying into a
pension for twenty years or more, only
to find that at the end of the day they
have less than the money they put in.
One reason for this has already been
covered: investment performance will
vary depending on the fund. However,
another common reason is that high
charges have eaten into the value of
their pension fund.
Pensions in general now have lower
costs than was previously the case.
However many people still have older
pension contracts that were set up in
the 1980s, 1990s and early 2000s. In
those days charges were often much
higher, and those who set up their plans
back then may still be paying more than
they should for their pension. It would
not be unusual for an older pension
contract to take a fixed monthly fee or a
percentage of your monthly
contributions as a charge before
investing them. The investments
themselves could carry a percentage
charge as well. On top of that you
would probably pay an annual
management fee.
Happily, things have changed. You can
now set up a pension without paying
any initial charge. You will still pay an
annual management charge.
4
Beware of high charges 3
Top10Tips
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 4
It can be difficult to keep
an eye on how your
pensions are doing if they
are split up among
different companies. Many of us
accumulate pensions through the
workplace, and through changing jobs
we leave behind a trail of separate
pension pots. You may find these easier
to manage if you consolidate them. You
can do this by transferring them to a
Stakeholder, Personal Pension or SIPP
(Self Invested Personal Pension). If you
are happy to take control of your
investment decisions you could choose a
SIPP. You can also have the added
benefit of online access to your pension,
so you can monitor it and make changes
as often as you want at the click of a
button.
There are some pensions that it may not
be wise to transfer. For instance final
salary schemes carry valuable
guarantees which you should not give
up without good reason. Sometimes
other pension schemes can have
guarantees attached, perhaps in the
form of the annuity rate that will be used
to convert your pension pot to an income
at retirement, or perhaps in the form of
the growth that your pension fund will
enjoy. If you and your employer are
paying into a current workplace scheme
then it normally makes sense for that to
remain where it is too, otherwise you
may lose out on employer contributions.
Before transferring you should always
check you will not lose any valuable
benefits, guarantees or incur excessive
exit fees.
4
5
Consolidate pensions 3
Top10Tips
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 5
5
You might think joining your
work pension scheme is
enough to provide you with
a comfortable retirement. If
this is a final salary scheme and you stay
in that employment for most of your
working life, then you may be right.
However very few people outside the
public sector are now offered a final
salary scheme. In fact many existing
schemes are closing down.
Most people nowadays are typically
offered membership of what is called a
defined contribution (also known as
money purchase) pension. Unlike a
final salary scheme the employer does
not promise an income you will receive
at retirement. Instead both you and
your employer will pay an agreed
contribution and your retirement
income will depend on the value of
your invested pot and annuity rates
when you retire (see page 14). While
this is an excellent start to pension
saving it is unlikely to be all you need
to do to secure a comfortable
retirement. In many cases it will
therefore make sense to top up by
making additional pension
contributions.
Many people start pension saving later
in life, and even then may have periods
when they dont contribute to a
pension. Consequently it often makes
sense to top up your pension provision
whenever possible. This could be a
lump sum contribution as a result of a
bonus for instance, or perhaps as a
regular contribution if you have room
in your monthly budget for additional
retirement savings. Remember, once
you have put money in a pension you
cannot normally access it until age 55 at
the earliest when you can normally
take up to 25% as a tax free lump sum
and a taxable income from the rest.
You can usually make additional
savings into your existing workplace
pension scheme. Alternatively if you
want greater investment freedom you
might consider topping up a SIPP (Self
Invested Personal Pension). If you are a
member of a final salary scheme you
may be able to pay money to build up
an additional pension pot or to buy
added years to give you more income
from your pension. If these options are
available to you they are definitely
worth considering.
To determine how much you should
add to your pension, a useful exercise
is to use a pension calculator. You can
plug in the pension savings you already
have and how much you and your
employer are currently contributing.
The calculator will then project how
much income you might be on course
to get in retirement. You can then use it
to work out how much more you might
need to put in to achieve your target
6
Top up 3
Top10Tips
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 6
The money you put into a
pension will almost
certainly be invested and
therefore subject to
investment risk.
Why take any risk at all, you might ask.
The reason is that risk and reward are
related; the greater the risk of loss you
take on the greater the return you
should expect for doing so.
If you are very averse to investment risk
you can usually choose to invest your
pension contributions into a very low
risk fund, for instance a fund that
invests in cash deposits only. However,
as a result over the long term you could
receive lower returns. Indeed, there is a
risk that the interest earned on your
cash may not even keep pace with
inflation, in which case the savings you
are making would actually be losing
their buying power. This is why most
pension investors invest in a managed
fund which invests in stocks and
shares. They have historically
performed better than cash over the
long term, although there are no
guarantees this will continue.
Furthermore the value of stock market
investments can fall as well as rise. So
you could get back less than you invest.
When you are choosing investments
within your pension, it might well pay
to spread your investments around to
reduce the risk you face from poor
returns in any one sector or indeed
from any one fund. For instance,
investing in just one UK growth fund
means that if that particular sector does
badly your entire pension fund will
suffer. Likewise by investing in just one
fund in that sector you run the risk that
the manager performs poorly.
You can address this problem to some
extent by investing in a number of
funds. Depending on your attitude to
risk this could be anything from cash
funds through to emerging markets
funds. Generally speaking the closer
you are to retirement, the smaller your
appetite should be for investment risk.
For instance with 30 years until you
6
7
Manage your investment risk 3
Top10Tips
income. It is a good idea to do this on
an annual basis as investment returns
will vary from assumed growth rates. A
pension calculator is available on the
pensions section of our website at
www.hl.co.uk.
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 7
6
draw on your fund you have a long time
over which to ride out the ups and
downs of the stock market. You also
have a longer time to rebuild your
portfolio if you do suffer investment
losses. With, for instance, three years to
go until retirement the situation is
much different because if you sustain
losses there is less time for you to make
good that shortfall.
In the run up to retirement it is
important therefore to normally move
from riskier to safer assets. Some funds
do this automatically for you. These are
called lifestyle funds and will
gradually move out of equities and into
bonds and cash. The process normally
starts either 5 or 10 years before your
stated retirement date.
Lifestyling is a sensible option for those
with little or no interest in where their
pension is invested. However, there are
two main problems. The first is you
may not have a fixed retirement date in
mind; perhaps you will want to retire
sooner or later than the deadline to
which your lifestyle fund is running.
The second is the switching programme
is automatic and consequently your
fund could be selling out of shares at
exactly the wrong time. For instance
there will be some lifestyle funds that
sold out of equities at the bottom of the
market in March 2009, simply because
they were programmed to do so.
Most pension providers will inform you
when the lifestyling process is due to
start. This enables those who are
willing to take control of their pension
investments to take an active approach
to the de-risking process.
That way you can make adjustments to
your strategy if your retirement date
moves, as well as taking an intelligent
approach to the precise points at which
you sell out of certain funds.
8
Top10Tips
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 8
Investing in a pension for a
non-working spouse not
only is one of the most tax-
efficient ways to save, it may
also provide additional tax-free income
in retirement.
Everyone can receive a certain amount
of income tax free, before starting to pay
tax. This is known as the personal
allowance and is currently 9,440. Those
born before 6 April 1948 may have a
higher personal allowance. This means
there is a potential for a tax-free income
of 18,880 per couple. One of the best
ways to make use of both your tax-free
allowances is with pension income.
Current rules allow pension savers to
take a lump sum from their pension
usually up to 25% completely tax free,
and a taxable income from the rest.
It therefore makes sense to save into
pensions in both your names even if
one of you does not work.
This will help to use both of your
personal allowances when you take
retirement incomes and potentially
boost the amount of tax-free income
you receive as a couple.
This type of planning could be
especially helpful if either of you were
born before 6 April 1948 and have an
income of more than 26,100. For every
2 of income above that, you lose 1 of
your personal allowance until it reaches
the standard personal allowance.
Below is an example, based on a couple
with a joint retirement income of
40,000 a year. The income they receive
after tax will depend on how this
40,000 is split between them.
If they maximise tax efficiencies, they
could receive 1,312 extra a year.
7
9
Top10Tips
Dont forget your spouse 3
0rcss inccme
Perscnal tax-free
allcwance
1axable inccme
1ax (zo%)
Pcst tax inccme
Total as a couple ,
Person A
35,000
9,//0
25,560
5,112
29,888
Example 1: no tax planning
Couples income = ,
Person B
5,000
10,500
0
0
5,000
0rcss inccme
Perscnal tax-free
allcwance
1axable inccme
1ax (zo%)
Pcst tax inccme
Total as a couple ,
Person A
20,000
10,500
9,500
1,900
18,100
Example 2: tax planning
Couples income = ,
Person B
20,000
10,500
9,500
1,900
18,100
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 9
7
One situation where it might make
sense to be selfish with pension
contributions, though, is if you qualify
for higher-rate tax relief and your
spouse does not.
Please note tax rules can change and
the benefits depend on your
circumstances. It is also worth bearing
in mind you may have additional
sources of income, which you will need
to take into account.
For instance, both you and your spouse
will probably have some entitlement to
a state pension (you can find out
roughly what to expect at www.gov.uk).
10
Top10Tips
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 10
It might sound like a painful
experience, but a salary sacrifice or a
bonus sacrifice arrangement is
probably the most efficient way of
contributing to your pension. Such an
arrangement involves giving up some of
your salary in exchange for a pension
contribution from your employer. In
doing so you pay a reduced amount of
income tax and in addition to this both
you and your employer make a
National Insurance saving.
Where such arrangements exist, the
employer can give up some or all of the
saving they make to you, by paying it
into your pension.
For example, assuming a higher rate
taxpayer receives a 10,000 bonus from
their employer, using salary sacrifice
can mean the difference between
receiving 11,380 in their pension or
just 5,800 in cash*.
Thats a pretty attractive proposition if
you can get it and are happy for the
money to be tied up until your
retirement. The only tricky bit might be
getting your employer to adopt such an
arrangement and nominating a pension
into which the payment is to be made.
If you are due a bonus or want to know
more about your companys policy on
salary sacrifice, it may be worth
speaking to your Human Resources
Manager or Financial Manager.
There are some potential drawbacks to
entering into a salary sacrifice
arrangement which need to be
considered.
For instance, you may face a reduction
in your contractual entitlement to sick
pay, overtime rates and paternity and
maternity pay, though most of these
issues can be overcome by your
employer maintaining a reference
salary on which these benefits are
based. However, because you are
paying less National Insurance you
may find that your entitlement to
certain state benefits or statutory
entitlements is reduced. Your reduced
salary may also affect the amount of
money mortgage lenders are willing to
loan to you.
*The example assumes a 40% taxpayer
and a 13.8% employer National
Insurance saving paid into your pension.
8
11
Top10Tips
Sacrice salary 3
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 11
12
Is it better to save for retirement into a
pension or a Stocks & Shares ISA? This is a
question many people ask because both
tax shelters enjoy a generous tax
treatment, though the pension is generally
considered more tax efficient, particularly
for higher rate taxpayers. Workplace
pensions often come with a valuable
employer contribution too. However ISAs
have attractive features, in particular the
flexibility of drawing on them if the need
arises. Importantly when saving for
retirement you do not have to choose either
a pension or an ISA, you can invest in both.
Indeed many people like to complement
their pension savings using Stocks &
Shares ISAs to reap the benefits of both tax
shelters. Here is a rundown of the main
features of both. Please note tax benefits
depend on your circumstances and can be
changed by the government.
Top10Tips
Consider ISAs 3
Product feature
Maximum annual contribution

Y



Minimum age to invest
Maximum age to invest
Tax relief on contributions? Y

Tax relief on investments

Minimum age for withdrawals
Withdrawals

9
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 12
13
Top10Tips

Personal Pension, including SIPPs
You can normally contribute and get tax relief on as much as you
earn each tax year, broadly subject to a 50,000 annual limit
(reducing to 40,000 in 2014/15). Non-earners can pay in up to
3,600 and receive tax relief.
Stocks & Shares ISA
11,520
From birth 18 (from birth for Junior ISAs)
Tax relief not available after 75 No maximum age
Yes. 20% for basic rate and non-taxpayers. Up to 40% for higher
rate taxpayers and up to 45% for top rate tax payers.
No
Yes, there is no UK capital gains tax or further
income tax to pay.
Yes, there is no UK capital gains tax or further
income tax to pay.
Generally 55 No
Up to 25% can be drawn as a tax-free lump sum. The remainder
can be made available to provide a taxable income.
Up to 100% can be drawn as a tax-free lump
sum, or a tax-free income can be drawn as
required.
Tax rules can change. The value of tax benets depends on your circumstances.
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 13
It is crucial that when you
draw your pension you
shop around for the highest
income you can get. You
could get extra income each year for the
rest of your life. It is therefore
remarkable fewer than half of people
actually take this simple step. The
probable reason is many do not realise
they do not have to accept the
retirement income offered by their
pension provider; they are free to take
their pension pot to a different
insurance company offering them a
higher income.
This pension income provided by
insurance companies is called an
annuity. You give your pension pot to an
insurance company and in return they
pay you a secure income for the rest of
your life. This will be paid to you each
year until you die. However there can be
a big difference in the income different
insurance companies will provide and
your pension provider may be offering
you an annual income that is hundreds
if not thousands of pounds short of
what you could get elsewhere.
The case for shopping around is even
more compelling if you smoke or have
any medical complaints. This is because
some insurers will offer you an
enhanced annual income because they
expect such conditions to have an
impact on how long you will live and
consequently how long they have to pay
Top10Tips
10
Shop around for the best
retirement income
3
14
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 14
Top10Tips
15
your income. By shopping around and
declaring your lifestyle or medical
conditions, you could secure up to 54%
more income.
The list of medical complaints that can
qualify you for an enhanced annuity
runs to over 1,500. They include
common conditions like high blood
pressure, high cholesterol and diabetes.
It is estimated that up to 40% of people
could qualify because of ill health or
lifestyle factors like smoking. You must
shop around to find out if you can lock
into such an enhanced rate.
The chart above gives a snapshot of the
difference in the annuities that can be
found at the time of writing.
Shopping around for an annuity is easy
using our annuity supermarket. You can
get an instant quote of the best rates
either by telephone on 0117 980 9940
or online at www.hl.co.uk/annuity. As
well as searching for the best rates we
can provide you with live quotations for
enhanced annuities, annuities that
keep pace with inflation and annuities
which continue to be paid to a spouse
or partner after your death.
Please note annuity rates are subject to
change. Once set up an annuity cannot
be changed.

1
,
7
0
2
.
8
0

1
,
4
8
4
.
4
0

1
,
4
5
8
.
4
8

1
,
2
5
1
.
0
0

1
,
9
3
5
.
3
6

1
,
8
5
2
.
9
2

1
,
7
1
9
.
3
6

1
,
7
0
1
.
1
2

1
,
4
4
0
.
8
4
1,000
1,250
1,500
1,750
G
r
o
s
s

i
n
c
o
m
e

p
e
r

a
n
n
u
m
5
4
.
7
%

M
o
r
e
4
8
.
1
%

M
o
r
e
3
7
.
4
%

M
o
r
e
3
6
.
1
%

M
o
r
e
3
6
.
0
%

M
o
r
e
1
6
.
6
%

M
o
r
e
1
8
.
7
%

M
o
r
e
1
5
.
2
%

M
o
r
e
2,000
L
o
w
e
s
t

h
e
a
l
t
h
y
l
i
f
e

r
a
t
e
H
i
g
h
e
s
t

h
e
a
l
t
h
y
l
i
f
e

r
a
t
e
H
i
g
h

b
l
o
o
d
p
r
e
s
s
u
r
e

a
n
d
h
i
g
h

c
h
o
l
e
s
t
e
r
o
l
S
m
o
k
e
r
S
t
r
o
k
e
P
a
n
c
r
e
a
t
i
c

c
a
n
c
e
r
(
w
i
t
h

r
a
d
i
o
t
h
e
r
a
p
y
&

c
h
e
m
o
t
h
e
r
a
p
y
)
A
n
g
i
n
a
D
i
a
b
e
t
e
s

(
i
n
s
u
l
i
n
d
e
p
e
n
d
e
n
t
)
H
e
a
r
t

a
t
t
a
c
k
Source: HL Annuity Calculator, 25 March 2013. The information relates to a 65 year old
with a fund of 25,000 and an average rated postcode. The annuity is single life and
level, with a ve year guarantee, paid monthly in arrears.
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 15
04/13
This guide is published to help clients make their own investment decisions. It does not
constitute a personal recommendation in any way whatsoever.
All investments should be held for the long term as their value does fall as well as rise, therefore
you could get back less than you invested. Neither capital values, nor income, are guaranteed.
Past performance is not a guide to the future.
If your employer offers a pension you should consider joining or making additional contributions
to this first. Should you have any doubt as to the suitability of an investment for your
circumstances you should contact our Financial Practitioners for individual advice.
Any tax reliefs referred to are those currently applying, but levels and the basis of, as well as
reliefs from, taxation are subject to change. Their value depends on your individual
circumstances.
The information in this guide is based on our current understanding of existing and proposed
legislation as at 27 March 2013 which may be subject to change. Unless otherwise stated, tax rates
are those applicable to the 2013/14 tax year.
Important Investment Notes
Hargreaves Lansdown Asset Management Ltd, One College Square South, Anchor Road, Bristol, BS1 5HL.
Authorised and regulated by the Financial Services Authority
Enquiries: 0117 980 9926
Best SIPP Provider - Hargreaves Lansdown
2007, 2008, 2009, 2010, 2011, 2012
10TipsImprovingPension.03.13_Brochure Final 03/04/2013 12:22 Page 16