March 10, 2010
Pension Advice
Wherever you are with your retirement savings, don t be swayed from considering action, it s not too late. There are however steps you can put into place to improve the pension you ll receive when you finish working.
Pensions are a very tax-efficient way to invest. If you already have a pension, now would be a good time to talk to us about making a single premium contribution to improve it, particularly as the final stage of tax year is rapidly drawing near, or starting a self invested personal pension to improve 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 yr rising to 255,000 for the tax yr 2010/11. Contributions above this yearly limit are allowed but will be taxed. You can invest into any number of pension schemes (personal and/or company) each year.
You will get tax relief on your contributions, so if you are a forty percent tax payer a 20,000 investment would cost just 12,000. Basic rate tax relief is added by the government to all contributions at a rate of 20%.
Higher rate tax payers can claim up to a further twenty percent 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 making more than 180,000. Wage Earners below 130,000 will not be affected.
There s a lifetime limit on the amount 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 pot tops this, you ll incur tax charges of 55 % if the extra gains are taken as a lump sum and 25 percent if taken as regular income. The income will then be subject to income tax at your highest rate.
From 6th April 2010, the age at which you can start drawing your pension increases to fifty five. 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.
Consilium Asset Management Limited supply pension advice and retirement planning advice.
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.
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