Wherever you are with your retirement savings, do not be put off from taking action, it s not too late. There are still steps you can put into place to improve the pension amount 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 lump sum contribution to boost it, particularly as the final stage of tax year is speedily drawing near, or starting a SIPP to increase your choices. You will not 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 applicable 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 granted but will be taxed. You can contribute into any no. of pension schemes (personal and/or company) each year.
You will get tax relief on your Investment, so if you are a higher rate 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 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 % for those earning more than 180,000. Earners below 130,000 will not be affected.
There s a lifetime limit on the amount of your pension savings, which is presently £1.75m in the tax yr 2009/10 but rises to £1.8m for the 2010/11 tax year. If your investment fund passes this, you ll incur tax charges of 55 percent if the excess gains are taken as a lump sum and 25 per cent if taken as income. The income will then be subject to income tax at your highest rate.
From 6 April 2010, the age at which you can start drawing your pension increases 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 before age 55 in certain circumstances, e.g if you retire through ill-health.
Consilium Asset Management Limited supply advice on self invested personal pensions /sipps in South Gloucestershire.
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.
