Pension Planning with the aim of a comfortable retirement is considered one of the most important elements of financial planning in the UK, a fact that is echoed by the amount of coverage this area gets in both the financial and regular press.
The sheer volume of products available along with all the options and tax implications can make it very difficult for the average person to make decisions as to what type of pension plan to use.
All these considerations are vital to help build the best possible fund, which in turn will provide the best income and lump sum at retirement.
Pension Planning with a qualified adviser will allow you to understand what is available to you and how best to utilise your options. Some of the main considerations that will be reviewed will be as follows:
Personal Pensions can receive contributions from anyone including your employer if they are willing to do so. Any personal contributions made to your pension will also qualify for tax relief at the relevant rate you pay.
Depending upon your age, employment status and income level you can contribute from any amount up to your earnings level, subject to a maximum of £50,000 per annum.
If your employer is not currently making contributions into a pension plan for you, whether personal or provided by them, this will have to change over the coming years with the introduction of NEST Pensions by the government.
Whether personally, or through your employer Pension Planning with an adviser will allow you to ensure you get the best from whatever scheme or plan is selected.
Retirement Income Levels
At Connect Financial Services we specialise in Pension Planning and have Target Funding systems in place that allow us to review not only the underlying investments of your pensions, but also what levels of savings and pension contributions are required to provide you with the income level you wish in retirement.
Pension Investment Funds
At Connect Financial Services we have systems and experience in ensuring that the investments within your pensions are the most suitable to provide the income you require and follow your risk profile.
We can utilise our systems to arrange that as you approach retirement your monies are gradually moved out of investments and into cash, which allows us to ensure any short term market changes don’t overly affect the value of your pensions.
To discuss your current situation and the choices you have as you seek to retire, or continue to work and take value from some of your pensions, please contact us to ensure the most suitable pension planning route is selected.
Carry Back Allowance
Careful Pension Planning can identify unused allowances from previous years and can allow one-off contributions of above the annual limit, where available.
If you have not used your full allowance (up to £50,000 if you had relevant UK earnings) in each of the last 3 years and you wish to contribute more than £50,000 this tax year, it is possible that you can arrange to use the carry back facility to utilise the remaining unused allowance from the last 3 years.
If this is not done properly and in the appropriate timescales, you could lose the additional tax relief and the additional contributions could be taxed at your highest rate (up to 50%).
Self Employed and Directors
Those individuals who are Self Employed or Directors and give consideration to Pension Planning have options as to how much salary to pay themselves, or if preferred how much to take out of their company as dividends.
This enables them to have more control over their income and possible pension contributions, however care must be taken as though it may seem preferable to many to take dividends over salary for tax purposes, the tax relief of pension contributions is not available on dividends and can therefore strongly affect the decision as to which is most beneficial. Please note care must also be taken where contributions approach the annual allowance (£50,000).