Partners' Pensions - Planning For A Comfortable Retirement

Many professional firms make provisions for their partners' retirement, but it's important for individuals to consider whether this will provide them with a sufficient income, says Dani Glover.

Rarely a day goes by when pensions are not in the news. Yet many people pay little attention to their own financial affairs, especially with regard to saving for retirement. When asked why, they often say that pensions have become too complicated or that pension performance has been poor, so why bother? Even when they do plan for the future, left to their own devices, too few people set aside enough funds for their retirement.

Whose responsibility?

Interestingly, Smith & Williamson's Annual Survey of Law Firms 2011 shows that more and more professional firms are making provisions for their partners' retirement. For example, a firm might withhold a percentage of a partner's profit share to invest in a pension of the partner's choice. This enables partners to plan for a comfortable retirement, but can also help firms deal with issues such as succession planning, with partners no longer needing to stay on past retirement age. However, individuals will need to consider whether the amount invested will be sufficient for their retirement and if further action will need to be taken.

There are significant tax incentives to saving into a pension plan. This is especially the case for those whose earnings are between £100,000 and £116,210 as their effective tax rate can be up to 60%.

The average pension, in payment, for an individual who has been a member of a final salary scheme is significantly higher than for someone who has made voluntary payments. Therefore, it is essential to start a pension into which regular payments are made if one is to have any sort of reasonable pension income in retirement.

Smith & Williamson's survey found that 91% of respondents believe that it is the individual partner's responsibility to get advice on retirement planning and to pay for it themselves. While...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT