Advice about Pensions
Wherever you are with your retirement plan, don’t be put off from considering action, it s not too late. There are still steps you can put into place to boost the income you’ll receive when you retire.
Pensions are a highly tax-efficient way to save. If you already have a pension, now would be a very good time to contact us about making a single premium contribution to improve it, particularly as the end of tax year is rapidly forthcoming, or starting a SIPP to improve your options. You won’t have to draw all your pensions at the same time.
If you’re employer or self employed, you can contribute up to 100 per cent of the value of your applicable UK earnings (salary and other earnings), up to a maximum of 245,000 for the 2009/10 tax year rising to 255,000 for the tax yr 2010/11. Contributions above this yearly limit are allowed but will be taxed. You can contribute into any no. of pension schemes (personal and/or company) each year.
You’ll get tax relief on your contributions, so if you are a 40% tax payer a 20,000 contribution would cost just 12,000. Basic rate tax relief is supplied by the government to all contributions at a rate of twenty percent.
Forty% tax payers can claim up to a further twenty percent tax relief via their tax return. If you earn more than 150,000 you will see the tax relief on your pensions cut from April 2011, tapering from 40 to 20 per cent for those earning more than 180,000. Earners beneath 130,000 will not be affected.
There s a lifetime limit on the size of your pension savings, which is currently £1.75m in the tax yr 2009/10 but rises to £1.8m for the 2010/11 tax yr. If your fund tops this, you’ll incur tax charges of 55 percent if the extra benefits are taken as a lump sum and 25 percent if taken as regular income. The income will then be subject to income tax at your highest rate.
From 6 April 2010, the age at which you can start taking your pension increases to 55. If you need to, pension benefits can be deferred until you are up to 75 yrs old. You may still be able to take your pension prior to age 55 in some circumstances, for example if you retire through ill-health.
The need for financial advice has never been greater.
The value of investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent finance acts.
