Talking Pensions
March 14th, 2010
Wherever you are with your retirement objectives, do not be swayed from taking action, it s not too late. There are still steps you can put into place to increase the pension amount you’ll get when you retire.
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 lump sum contribution to improve it, particularly as the close of tax yr is quickly nearing, or starting a self invested personal pension to widen your options. You will not have to draw all your pensions at the same time.
If you’re self employed, you can contribute up to 100 per cent of the value of your relevant 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 yr 2010/11. Contributions above this annual limit are granted but will be taxed. You can invest into any number of pension schemes (personal and/or company) each year.
You ll receive 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 supplied by the government to all contributions at a rate of twenty percent.
Higher rate tax payers can claim 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 making more than 180,000. Earners beneath 130,000 will not be affected.
There s a lifetime limit on the size of your pension savings, which is currently £1.75m in the tax yr 2009/10 but rises to £1.8m for the 2010/11 tax yr. If your pot exceeds this, you ll incur tax charges of 55 percent if the excess benefits are taken as a lump sum and 25 % 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 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 before age fifty five in some 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.
