Saving in a tax efficient manner towards your retirement is always desirable and pensions make this possible, along with the added benefit of additional flexibility.
When it comes to your retirement, you want the reassurance that you’ll be able to live comfortably and enjoy the things you want to do in later life. Despite the ever-changing pensions landscape, saving for your retirement and planning ahead is still as vital as ever. Even if you already have a private pension scheme, it’s important to review your plan to make sure it’s on track to give you the lifestyle you want in later life.
Pensions remain highly tax efficient, offering relief at the highest rate of income tax on your contributions (subject to the annual allowance), with anything over basic rate tax relief reclaimed via your tax return.
At McMillan Wealth Consultants, we can advise on the following:
Tapered Annual Allowance
The full annual allowance for a year is £40,000, restricted from 6 April 2020 by £1 for every £2 adjusted income exceeds £240,000. From 6 April 2020, the fully restricted annual allowance will be £4,000, reduced from £10,000.
Broadly, where adjusted income is less than £240,000 an individual is likely to be eligible for the full £40,000 annual allowance gross (£32,000 net). If adjusted income is between £250,000 and £300,000 the annual allowance will be restricted, but less so than under the previous rules. It is only if adjusted income exceeds £300,000 that the annual allowance will fall below the current level potentially to a new minimum allowance of £4,000 gross (£3,200 net). Where applicable, individuals should therefore consider existing pension arrangements and potentially amending the direct payments being made to the scheme.
Carry Forward of Unused Annual Allowance
You may be able to contribute in excess of the current tax year’s Annual Allowance of £40,000, or your tapered annual allowance and receive tax relief at up to 45% using ‘Carry Forward’. For example, if you have unused Annual Allowance in the previous three tax years, then this can be carried forward to the current tax year to be used.
The Lifetime Allowance is a limit as to how much can be paid into an individual’s UK registered pensions during their lifetime. The changes in recent years in the Lifetime Allowance mean that advice is more important than ever to ensure that you are optimising your retirement planning while staying within your Lifetime Allowance (as any excess will incur a tax charge). Our team of wealth consultants will ensure you are fully up to speed with the latest Lifetime Allowance protection opportunities and how they might potentially be of benefit to you.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.