Yes, there really is good news about pensions. That’s despite Brexit and the other issues that face the UK economy and its savers. There are tax breaks, an increased Lifetime Allowance and flexible options.
As we enter the new financial year many people who invest into pensions are happy that most of the rules surrounding pensions have stayed the same. In fact, the Chancellor’s Autumn Budget in late 2018 saw few changes.
The highlight of that budget for pension savers was probably the decision to increase the Lifetime Allowance in line with the Consumer Prices Index, to £1,055,000 for the 2019-20 tax year.
Put simply, that means when you reach retirement age you can draw up to that amount of pension benefits (as lump sums or as regular retirement income) without incurring extra tax charges.
Although not many retirees will enjoy such pension funds, it’s important to note – especially if you are close to that limit.
Who gets pension tax relief?
Saving into a pension makes sense. It provides for your future. It gives you options to enjoy the retirement you want, when you want.
It’s important to appreciate how pensions offer generous tax breaks. This is an incentive for us to save and provide adequately for later retirement years. The continued good news is that these tax breaks are still available.
When you contribute monies into a pension, or when your employer deducts your pension payments directly from your monthly salary, you get 20% tax relief. You get this automatically as an extra “bonus” deposit into your pension pot.
There’s more on offer depending on how much you earn. For higher-rate taxpayers, they can claim an extra 20% of tax relief. Anyone paying additional-rate tax can claim back an extra 25%. Make sure you are aware of the rules, and speak with an independent financial adviser if in doubt.
Flexible pensions to suit you
Pensions are a great way to save for the future. Ideally, everyone would start paying into a pension when they start work. However, the beauty of pensions is that you can still start a pension in later life.
Pension plans vary, but it’s important to know what’s out there. to self-invested personal pensions (SIPPs), personal or private pensions, and workplace pensions schemes, to name but a few.
And don’t forget the basic state pension. It’s a modest sum, but make sure you factor it into your longer-term wealth planning. That additional income (£164.35 per week in 2019) could mean the difference from having to carry on working – or not!
Whatever pension route you follow, start it soon. If you have spare income, consider putting it into your pension.
Whether you are an employee, a part-time worker, a self-employed tradesperson, you run a business or have built up pension pots during previous occupations, it is always worth seeking advice about how to monitor and maintain those investments.
Reap the benefits in retirement
The benefits of regular savings into a pension fund are considerable. Not only is it tax efficient, but the pot will also grow over time until you are ready to enjoy retirement.
From the age of 55, you can enjoy 25% of your pension savings as a tax-free lump sum. As with other aspects of pension investment, some good advice will help you to draw income to achieve your retirement goals without running down your pot too early.
Logic Wealth Planning’s MD appears in the 2019 Guide to the UK’s Top Rated financial advisers, published in The Times newspaper. We are trusted.
If you are looking for advice on pensions, the Logic Wealth Planning team is here to help. Call us on 0808 1234 321, or email email@example.com