Wherever you are with your retirement provision, do not be swayed from taking action, it s not too late. There are still steps you can take to increase the pension amount you’ll receive when you finish working.
Pensions are a highly tax-efficient way to save. If you already have a pension, now would be a very good time to contact us about making a lump sum contribution to improve it, especially as the end of tax yr is rapidly forthcoming, or starting a SIPP to increase your choices. You won’t 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 relevant 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 yr 2010/11. Investments above this yearly amount are granted but will be taxed. You can contribute into any number of pension schemes (personal and/or company) each year.
You will obtain 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 twenty%.
High rate tax payers can obtain up to a further 20% 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 earning more than 180,000. Earners beneath 130,000 will not be impacted.
There s a lifetime limit on the size of your pension pot, which is currently £1.75m in the tax yr 2009/10 but rises to £1.8m for the 2010/11 tax year. If your pot passes this, you ll incur tax charges of 55 percent if the extra gains 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 10, the age at which you can start taking your pension rises 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 fifty five in some circumstances, for example if you retire through ill-health.
If you are looking at retirement planning why not contact our Bristol Office to discuss your own personal requirements.
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.