Pension Advice
Wherever you are with your retirement provision, do not be swayed from taking action, it s not too late. There are however steps you can take to improve the income you’ll get when you finish working.
Pensions are a highly tax-efficient way to invest. If you already have a pension, now would be a good time to talk to us about making a single premium investment to improve it, particularly as the end of tax yr is rapidly nearing, or starting a self invested personal pension to improve your choices. You won’t have to draw all your pensions at the same time.
If you’re employed, you can contribute up to 100 per cent of the value of your applicable UK salary (salary and other earnings), up to a maximum of 245,000 for the 2009/10 tax year rising to 255,000 for the tax year 2010/11. Investments above this annual limit are granted but will be taxed. You can contribute into any no. of pension schemes (personal and/or company) each year.
You will obtain tax relief on your Investments, so if you are a forty % tax payer a 20,000 investment would cost just 12,000. Basic rate tax relief is added by the government to all contributions at a rate of twenty percent.
High rate tax payers can obtain up to a further twenty percent tax relief via self assessment. 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 percent for those earning more than 180,000. Wage Earners beneath 130,000 will not be affected.
There s a lifetime limit on the size of your pension savings, which is presently £1.75m in the tax yr 2009/10 but rises to £1.8m for the 2010/11 tax year. If your investment fund exceeds this, you’ll incur tax charges of 55 per cent if the surplus benefits are taken as a lump sum and 25 percent if taken as income. The income will then be subject to income tax at your highest rate.
From 6th April 2010, the age at which you can start drawing your pension increases to 55. If you need to, pension benefits can be postponed until you are up to 75 years old. You might 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.
