Pension Investments for the End of the Tax Year
Wherever you are with your retirement provision, don’t be swayed from taking action, it s not too late. There are still steps you can put into place to increase the money you’ll get when you retire.
Pensions are a highly tax-efficient way to save. If you already have a pension, now would be a very good time to talk to us about making a lump sum contribution to boost it, particularly as the close of tax year is speedily emerging, or starting a self invested personal pension to widen your options. You won’t have to draw all your pensions at the same time.
If you are 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. Investments above this yearly amount are granted but will be taxed. You can invest into any no. of pension schemes (personal and/or company) each year.
You will obtain tax relief on your contributions, so if you are a forty % tax payer a 20,000 contribution would cost just 12,000. Basic rate tax relief is supplied by the government to all contributions at a rate of twenty percent.
High rate tax payers can obtain up to a further twenty % 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 per cent 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 presently £1.75m in the tax year 2009/10 but rises to £1.8m for the 2010/11 tax year. If your fund tops this, you’ll incur tax charges of 55 percent if the surplus 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 yrs old. You might still be able to take your pension prior to age fifty five in certain circumstances, e.g. if you retire through ill-health.
The need for Financial Advisers has never been greater.
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.
