Advice about Pensions
Wherever you are with your retirement plans, don’t be swayed from considering action, it s not too late. There are however steps you can take to boost the pension amount you’ll get when you finish working.
Pensions are a very tax-efficient way to save. If you already have a pension, now would be a good time to contact us about making a lump sum investment to improve it, especially as the final stage of tax year is rapidly emerging, or starting a SIPP to increase your options. You will not have to draw all your pensions at the same time.
If you are 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 year 2010/11. Contributions above this yearly amount are granted but will be taxed. You can invest into any no. of pension schemes (personal and/or company) each year.
You will obtain tax relief on your contributions, so if you are a forty % tax payer a 20,000 contribution would cost just 12,000. Basic rate tax relief is added by the government to all contributions at a rate of twenty%.
Forty percent 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 per cent for those making more than 180,000. Earners beneath 130,000 will not be impacted.
There s a lifetime limit on the size of your pension savings, which is currently £1.75m in the tax year 2009/10 but rises to £1.8m for the 2010/11 tax yr. If your fund passes this, you ll incur tax charges of 55 % if the excess gains are taken as a lump sum and 25 per cent 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 postponed until you are up to 75 years old. You may still be able to take your pension prior to age 55 in certain circumstances, e.g if you retire through ill-health.
Consilium Asset Management Ltd supply advice on self invested personal pensions /sipps in South Gloucestershire.
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.
