Pension tax allowances,options to maximise.

The best place for independent financial pension advice is from our advisers, but here are the key areas for consideration:

• Make full use of your annual tax-free pension allowance of normally £40,000.
• Use any unused annual pension allowances available to carry forward from previous tax years.
• Make sure you’re getting tax relief at the appropriate rate if you’re a higher or additional rate
• taxpayer.
• Consider how to efficiently pass death benefits to your beneficiaries. For example, pension holders can nominate who they wish to receive the benefits in the event of their death by completing an “expression of wish” form. Trustees will usually, but aren’t obliged to, take this into account. After recent court case this may soon be changing.

Information that you might find helpful.

Personal pensions are often known a defined contrition or “money purchase” schemes. Your employer may offer you one in the form of a workplace pension and add to or match your regular contributions. Whether you invest in a workplace or personal pension, your money will usually be invested in a mixture of assets including shares and bonds.

Different types of personal pension.

Stakeholder pensions are a type of defined contribution personal pension with capped charges and low minimum contributions.

Self-invested personal pensions (SIPPs) offer greater flexibility about where you can invest.

Tax advantages.

The most that can be paid into a pension and receive tax relief is the greater of £3,600 or 100% of your earnings. There is also an annual pension tax-free allowance of normally £40,000. So any contributions over that amount will not attract income tax relief, unless you have any unused annual allowance to carry forward for the past three tax years.

The tax relief means that as a higher rate tax payer looking to invest £8,000 in your personal pension, you would only effectively invest £4,800 of your own money as £3,200 would be added by HMRC as tax relief. Your initial payment would be £6,400 with 20% added by tax relief and the other 20% claimed back through the HMRC self-assessment process.

Taking your benefits.

The money you receive will depend on a number of factors including the level of contributions over the years and how its investments have performed. When you reach the minimum pension age which is currently 55. You may be able to take up to 25% of the money as a tax-free lump sum. The remaining 75% can be taken in several ways. The options include:

• Take it as cash (which is liable to income tax).
• Buy an annuity the gives a guaranteed income for life (which is also taxable).
• Leave your fund invested in a drawdown contact with the potential to take income when you choose.

Each provider will have different rules around taking your pension, so contact us to get a clear picture and find out more.

How Anstee & Co can help you.

Our of team of independent financial advisers (IFA’s) can help you with your retirement planning. They provide financial advice at our offices in Kettering, Stamford and London. We also meet you at your home or place of work. Our financial advisers cover Northamptonshire, Bedfordshire, Lincolnshire and Warwickshire. They also make use of meeting rooms in Towcester, Wellingborough, Bedford, Northampton and Warwick.. Why not contact us today to see how we can help you.