Pension Investments for the End of the Tax Year
8 March 2010Wherever you are with your retirement provision, do not be swayed from taking action, it s not too late. There are however steps you can put into place to boost the money you ll receive when you retire.
Pensions are a very tax-efficient way to invest. If you already have a pension, now would be a very good time to talk to us about making a lump sum investment to improve it, particularly as the end of tax yr is quickly nearing, or starting a self invested personal pension to increase your choices. You will not have to take all your pensions at the same time.
If you are employed, you can contribute up to 100 per cent of the value of your relevant 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 will receive tax relief on your contributions, so if you are a forty % 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 twenty percent.
Forty% tax payers can obtain up to a further twenty % tax relief via their tax return. 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. Wage 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 passes this, you ll incur tax charges of 55 % if the excess gains are taken as a lump sum and 25 percent if taken as regular 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 taking your pension rises to 55. If you need to, pension benefits can be postponed until you are up to 75 yrs old. You may still be able to take your pension prior to age fifty five in certain circumstances, for example if you retire through ill-health.
Consilium Asset Management Limited supply pension advice and retirement planning advice.
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.
top