How can retirement planning help your money go further?

Give your pension savings a boost

Pension contributions provide many tax benefits

If you are saving for retirement, making pension contributions can offer attractive tax benefits as the contributions will receive tax relief. If you are a member of a company pension plan, through auto-enrolment, you may also benefit from employer contributions.

You can get tax relief on private pension contributions worth up to 100% of your annual earnings, but you must adhere to the Annual Allowance rules.

You get tax relief automatically if your:

·        employer takes workplace pension contributions out of your pay before deducting Income Tax

·        pension provider claims tax relief for you at a rate of 20% and adds it to your pension pot (‘relief at source’) so a contribution of £80 will be boosted to £100, and if you are a higher or additional rate taxpayer you can reclaim further tax relief on your annual tax return

You get relief at source in all personal and stakeholder pensions, and some workplace pensions.

How much can be paid into a pension?

Generally, everyone has a maximum Annual Allowance for each tax year for pension contributions of 100% of relevant UK earnings up to a maximum of £40,000, but this allowance also includes any increase in value for any defined benefit workplace pensions, which are based on salary and service. You should also remember that there is  maximum amount that can be accumulated in pension funds, this Lifetime Allowance is currently set at £1million for the 2016/2017 tax year and if you exceed this you may incur additional tax charges. Please note that the tax relief you will receive each year on personal pension contributions is limited to the greater of £3,600 or 100% of your earned income. 

Your annual allowance will be reduced if;

·        you have already started to take flexible benefits from your pension fund, then your pension contributions allowance may be reduced to £10,000 in each tax year (Money Purchase Annual Allowance). From 6th April 2017, the Money Purchase Annual Allowance will be reduced further to £4,000.

·        you earn £150,000 or more, then your allowance will be reduced at the rate of £1 for every £2 over the £150,000. For example, if you earn £180,000 then your annual allowance will be £25,000 as you will lose £15,000 from the standard annual allowance. 

If you want to discuss how best to plan your pension contributions or if you are in any doubt about exceeding your Annual Allowance or Lifetime Allowance we can help. There are further ways to make additional contributions,  for example using unused allowance from previous years (Carry Forward) or making contributions for others such as partners/spouses or children.

Accessing your benefits

When it comes to taking your pension benefits, we can help to review the options available and also consider how you can structure your retirement income tax efficiently. Careful planning can help you to get more out of your pension fund – helping you towards the retirement you aim to achieve.

Let Origen help you

Retirement planning is complex, but careful planning can provide long term benefits and careful management can help get more income from your fund in retirement – our Consultants can help you to plan for retirement and then manage your retirement income.

Call us on 0344 209 3925

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This article is for information only, based on our understanding of legislation and HM Revenue & Customs practice as at January 2017 and is not to be taken as Financial Advice. CA1203 Exp 04/04/18

[ Date Posted: 19/01/2017 10:23:06 ]