Ask Your Question Direct To One Of The UK's Leading IFA Firms For Advice On Pensions A pension is best described as a tax efficient savings wrapper designed to hold investments to provide an income for individuals in retirement. A pension can be held by anyone in the UK with tax relief being provided on the contributions they make to the pension up to the higher of 100% of their earnings or £3,600. These contributions to the pension will then receive tax relief from the Government up to the relevant tax threshold amount that they pay. This would mean for example that if you are a lower rate taxpayer and wish to pay a total contribution into a Advice on Pension of £100 you need only contribute £80 gross to the pension as the Government will then provide 20% tax relief on the amount bringing it up to £100. However, limits do apply on the tax relief contributions will receive such as for higher rate and upper rate earners who can receive up to 30% extra tax relief on the amount they contribute to a pension on a sliding scale basis depending on how much they earn. Additionally there is an annual allowance of £50,000 that applies to contributions into a pension, any contributions over this amount will result you in paying your standard rate of tax on the excess. Limits also apply to the total amount that may be held in a pension without tax implications known as your lifetime allowance. Currently this stands at £1,800,000 but is expected to be reduced to to £1,500,000 in the near future. If you held your pension prior to A-day then you may be entitled to primary or enhanced protection on your pension funds (if your pension funds met certain requirements) that could result in you being entitled to more than this amount. When you make contributions to your pension they may be either lump sum or regular contributions which you may pay into your pension for as long as you wish. The fund will then continue to grow throughout your life based on the investments that you chose. Pension benefits are usually designed to be taken only in retirement to provide you with an income when you are no longer working. However, you may should you wish, take benefits from your pension upon reaching 55. At such a time you may then take up to 25% of your pension fund as a tax free cash lump sum with the residual either used to take an income (by purchasing an annuity for example) or be reinvested to continue to grow. Note: Releasing your Advice on Pension benefits early could reduce your income at retirement and therefore is only suitable for a limited number of people and circumstances. The above is based on our understanding of current legislation and tax rules and are subject to change by the government. Tax reliefs referred to are those currently applying. Please note the value of investments can go down in value as well as up and you may get back less than you invest.
Advice on Pension
Published on Oct 16, 2012
Published on Oct 16, 2012
A pension is best described as a tax efficient savings wrapper designed to hold investments to