Talking Pensions
Wherever you are with your retirement plan, don’t be put off from taking action, it s not too late. There are however steps you can take to increase the money you’ll get when you finish working.
Pensions are a very tax-efficient way to invest. If you already have a pension, now would be a very good time to talk to us about making a single premium contribution to improve it, especially as the close of tax yr is speedily emerging, or starting a SIPP to increase your choices. 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 % 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. Investments above this annual amount are allowed but will be taxed. You can contribute into any number of pension schemes (personal and/or company) each year.
You will receive tax relief on your Investment, 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 20%.
Higher rate tax payers can claim up to a further 20 per cent 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 % for those earning more than 180,000. Wage Earners below 130,000 will not be affected.
There s a lifetime limit on the amount of your pension pot, which is currently £1.75m in the tax year 2009/10 but rises to £1.8m for the 2010/11 tax yr. If your investment fund passes this, you ll incur tax charges of 55 per cent if the surplus gains are taken as a lump sum and 25 % if taken as regular income. The income will then be subject to income tax at your highest rate.
From 6/4/10, the age at which you can start taking your pension rises to 55. If you need to, pension benefits can be deferred until you are up to 75 years old. You may still be able to take your pension before age fifty five in certain circumstances, e.g if you retire through ill-health.
If you are looking at pension advice why not contact our South Gloucestershire office to discuss your own personal requirements.
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.
