Pension Investments for the End of the Tax Year
17 March 2010Wherever you are with your retirement plans, don’t be put off from taking action, it s not too late. There are still steps you can take to boost the money 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 contact us about making a lump sum contribution to boost it, particularly as the final stage of tax year is speedily approaching, or starting a SIPP to improve your options. You won’t have to take all your pensions at the same time.
If you are employed, you can contribute up to 100 % of the value of your applicable UK earnings (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. Investments above this yearly limit are granted but will be taxed. You can invest into any no. of pension schemes (personal and/or company) each year.
You ll receive tax relief on your Investments, so if you are a forty percent tax payer a 20,000 contribution would cost just 12,000. Basic rate tax relief is added by the government to all contributions at a rate of 20%.
High rate tax payers can obtain up to a further 20 per cent 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 making more than 180,000. Earners beneath 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 yr 2009/10 but rises to £1.8m for the 2010/11 tax yr. If your pot surpasses this, you ll incur tax charges of 55 per cent if the surplus benefits are taken as a lump sum and 25 per cent if taken as regular income. The income will then be subject to income tax at your highest rate.
From 6th April 10, the age at which you can start drawing your pension rises to 55. If you need to, pension benefits can be deferred until you are up to 75 years old. You may still be able to take your pension prior to age fifty five in some circumstances, for example if you retire through ill-health.
Consilium Asset Management Limited supply advice on self invested personal pensions /sipps in Bristol.
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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