Pensions

Making provisions now so that reliance on any state pension in later life is reduced is a vital part of financial planning.

A pension is one of the most tax efficient ways to save for your retirement. Contributions can benefit from up to a 45% tax relief from the government , but this depends on your personal tax circumstances.

An example of tax relief would be, lets assume you are a basic rate tax payer (20%) and you contribute £8,000 into your pension, the government adds a further £2,000 to make a total of £10,000. Higher rate tax payers can claim more when they fill in their tax return. For a 40% tax rate payer to invest £10,000 they only need to contribute £6,000 as they government will make up the £4,000 and for a 45% tax payer they would need to invest £5,500 and the government would pay £4,500 to make a £10,000 investment.

  • The annual pensionable allowance is £40,000, this is the most you can pay in each year into your pension. Your lifetime allowance is currently set at £1.25mln. The government have said in the 2015 budget that this will be reduced to £1mln in 2016/17.
  • Pension freedoms means that from 6th April 2015, if you are over 55, you can cash in your entire pension pot if you wish. The first 25% is tax free, then the remaining will be charged at your marginal rate of income tax.

Please look for further specific information with regard to pension products:

  • Start a pension – it’s never too early to start.
  • Cash release – if you haven’t bought an annuity for your pension pot and you are over 55 you can cash in part or all of your entire pension pot.
  • Drawdown – income drawdown allows anyone over 55 to take sums out of your pension pot as and when you require while the rest remains invested.
  • SIPP (Self-Invested Personal Pension) – SIPPs are a type of pension plan for people happy to make their own investment decisions.
  • Buy an annuity – an annuity is a secure, regular income for life which you purchase from an insurance company using your pension fund when you choose to retire.
  • Retirement planning – talking with a pensions specialist for guidance where you can plan out your financial future and retirement.
  • Pension transfer – consolidate your different pensions together
    • Defined benefit – Sometimes called final salary or career pension schemes.  It’s based on a number of things ie. your salary and how long you’ve worked for your employer.
    • Defined contribution – They can be workplace pensions arranged by your employer or private pensions arranged by you.  Sometimes called ‘money purchase’ pension schemes.

Each of the products below will provide further information.