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Based on an article which appeared in Newsletter Issue 61.
'A' Day to remember
‘A’ Day has come and gone. The day when on 6th April 2006 Pension simplification officially came in to our lives to make planning for that comfortable retirement so much easier for us all.
Unfortunately, like many good intentions the devil can be in the detail and in fact some of the detail will not be fully implemented until HM Customs and Revenue have consulted following the Finance Act 2006.
That said we know enough that sensible retirement plans can now be made.
Here are 10 positive Pension Tips that can help you secure a comfortable future.
- You can now contribute up to 100% of your earnings per annum or £215,000 whichever is the lower, and get tax relief on your contributions. This means you can use money from other sources eg investments, inheritances, sale of property, gifts etc to make larger contributions and catch up on years when you did not contribute enough.
- Even if you do not have earned income or you do not pay income tax, you can contribute up to £3,600 gross per year and still get tax relief. This even applies to children.
- Life insurance will be available in a pension wrapper which will mean that you can obtain tax relief on the premiums. It will be interesting to see how this market develops but it may well be worth reviewing your cover to see what savings can be made.
- If you have a reasonably sized older style pension contract you may benefit significantly by transferring to a modern low charging contract.
- Your employer can contribute to your pension as part of your remuneration and by this method contributions in excess of 100% of earnings can be made, with an upper limit of £215,000 per year before punitive tax is applied. Employer's contributions may not attract tax relief if the HMRC (Her Majesty's Revenue and Customs) considers them inappropriate or excessive.
- Members of Final Salary schemes can now make significant additional contributions to Personal Pensions.
- If you have contributed to AVCs (Additional Voluntary Contributions) it may now be possible to obtain Tax Free Cash (now known as the Pension commencemnt lump sum), from the fund at retirement, in some cases up to 100%*.
- You will also be able to get Tax Free Cash (now known as the Pension commencemnt lump sum) from your Contracted Out benefits, SERPS and S2P pension funds.
- Clients who prefer to choose their own investments can do this with their pension fund by use of a SIPP (Self Invested Personal Pension).
- If you are employed and in an occupational pension scheme you can now take pension benefits without stopping work or retiring. This adds significant opportunities for you particularly in respect of the tax free cash (now known as the Pension commencemnt lump sum) available at the point you crystallise your pension benefits.
As with all plans you should regularly review your situation and the current rules that apply and utilise the rules to your best advantage. We are specialists in helping clients with their retirement plans and under the new rules there are many opportunities to make your retirement more comfortable and therefore more enjoyable. If you want to have a more comfortable retirement contact your usual adviser here or Phil Blease on 01326 377990, email Phil Blease
