Talking Pensions
Wherever you are with your retirement objectives, don’t be swayed from considering action, it s not too late. There are still steps you can take to increase the pension amount you’ll receive when you retire.
Pensions are a very tax-efficient way to save. If you already have a pension, now would be a good time to talk to us about making a single premium contribution to boost it, especially as the final stage of tax year is speedily forthcoming, or starting a self invested personal pension to increase your choices. You will not have to take 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 earnings (salary and other earnings), up to a maximum of 245,000 for the 2009/10 tax yr 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 ll receive tax relief on your contributions, so if you are a 40% tax payer a 20,000 investment would cost just 12,000. Basic rate tax relief is supplied by the government to all contributions at a rate of 20%.
Forty percent tax payers can claim up to a further twenty % 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 % for those earning more than 180,000. Earners beneath 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 exceeds this, you ll incur tax charges of 55 % if the extra 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 deferred until you are up to 75 years old. You may still be able to take your pension before age 55 in some circumstances, e.g if you retire through ill-health.
Consilium Asset Management Ltd offer 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.
