It’s never too early to start planning and saving for the lifestyle you want to enjoy when you leave work through retirement. Saving earlier allows more time for your pension contributions to work harder for you, increasing the likelihood that you’ll achieve a higher return on your investment to help you achieve your retirement goals and aspirations.
Along your journey to retirement, there will be many important aspects about your pension for you to consider, such as the amount you contribute, making the most of tax benefits, consolidating multiple pensions into one and how you will access your pension benefits when the time comes.
Your personal situation, depending on if you have a pension through an employer, if you are self-employed or an owner of a limited company, can also impact your pension and the advice you may need.
Whether you are about to start a pension for the first time, you’re considering the best course of action for your existing pension or you have already started planning for your retirement and need additional advice, our highly qualified, Independent Financial Advisers will help you find the best retirement solution for your situation.
A personal pension is a way of saving for your future retirement. The minimum age for drawing a personal pension in the UK is currently 55 years old. The government is increasing this age to 57 in 2028.
There is no minimum or maximum age to start a personal pension, however the basic advice is to contribute as much as you can afford as early as possible, as delaying can have a big impact on the compounding effect of investment returns and make a massive difference to the amount of money you’ll have saved for a comfortable retirement.
Whilst the majority of people are eligible for a state pension, many would find it incredibly difficult to rely on this as their only income to fund their retirement. In addition, the state pension cannot be claimed until you reach the state pension age, which is currently 66 however is set rise to 67 between 2026 and 2028. A third increase is speculated to see the age set as 68 between 2037 and 2039, although the revised timetable hasn't been confirmed.
If you are employed, you’ll also likely have the option of taking part in an employer pension scheme. As you change jobs you could end up with a variety of employer pensions with different amounts and different investment strategies for each. Plus you are also likely to qualify for some or all of the state pension which you gain entitlement through having sufficient national insurance contributions and credits.
There are a number of benefits of saving using a personal pension:
Tax benefits – paying contributions into a pension plan provides basic rate (20%) tax relief. This effectively tops up the amount being paid into your pension. For example, a contribution of £80 will attract £20 tax relief, meaning £100 will be invested into your pension. Higher and additional rate taxpayers will be able to claim additional tax relief through submission of a tax return making the tax efficiency even higher. For a higher rate taxpayer, a £10,000 contribution costs just £6,000 when taking into account the additional tax relief and in some cases the saving is even bigger due to the complexities surrounding the withdrawal of the personal allowance as taxable income exceeds £100,000. The pension funds will grow almost entirely tax free and at retirement there will be the option to take part of the pension fund as a tax-free lump sum.
Contributions – there is no maximum limit on the amount you can contribute to a personal pension plan however there are tax implications of contributing above certain amounts. Most people who are working can invest up to £40,000 per annum in a tax year. However, this allowance can vary depending on:
To receive tax relief on personal contributions, your relevant earnings need to be the same or exceed the total contributions made to your pension plan, in the tax year it is paid. For example if you have current plus unused annual allowance from previous tax years of £160,000 and your earnings in the current tax year are £50,000, you will only be entitled to a personal tax relief on £50,000 and therefore restricted to a personal contribution of £50,000.
Your income, if it exceeds £200,000 the allowance may be reduced. A similar calculation needs to be done for each year where you are using brought forward allowances.
If your employer has made contributions for you then these will use part of your allowance
If you haven’t used your whole allowance in the previous three tax years, there is often the possibility of bringing it forward and potentially investing up to £160,000 in one lump taking into account the current year allowance of £40,000
If you have already withdrawn money from a pension then this may cause your allowance to be reduced.
Our Independent Financial Advisers will help you to maximise these benefits to ensure your pension contributions work as hard as possible for your situation and future plans.
Limited company director pension contributions
If you are a director of a limited company there can be tax benefits from making pension contributions through your limited company, assuming that the company makes a profit.
If your pension contribution is made through your limited company, this saves the company corporation tax at 19%. As this would then reduce the company’s profits and less dividends would be taken, saving the director personal tax depending on the director’s total income and the tax bracket that falls within. The additional saving could be 8.75% (Basic rate), 33.75% (Higher rate) or 39.35% (Additional rate).
Our team of advisers specialise in working with business owners and can recommend the best solution to ensure you maximise tax savings through your pension contributions.
How TaxAssist Financial Services can help you
A dedicated adviser will have a free initial meeting with you to discuss your current situation, your future goals and aspirations and any existing pensions you have in place. There are then several ways they could support you depending on your needs:
Set up your personal pension - if you haven’t got a pension in place or you are looking to set up an additional pension to supplement existing arrangements, we can recommend a pension solution suitable for your situation. We will consider your personal circumstances and take into account your current income and whether you are employed, self-employed or trade through your own limited company.
Reviewing your existing pension - our friendly independent advisers are happy to review any existing pensions you may have to determine if they are invested well based on your circumstances, plans, investment preferences including ethical considerations and your attitude to risk. We will advise you what options you have at retirement, what you can do before retirement and how much you may receive.
Transfer and consolidation of existing pensions - it’s a common situation for people to have multiple pension pots under different pension providers which have been accumulated over a number of years and for them to have no insight on how well they are invested or performing.
We can review your existing pensions to recommend if consolidating them all into one plan would benefit you. This would involve either consolidating all of your pensions into one of your existing plans or starting a brand new pension if it would provide a better return on your investment or reduce risk. We would remove any time or hassle in this process by managing any transfers on your behalf.
Retirement planning as you approach retirement - as you approach this key date, you are probably wondering what you should do with your pensions. How much you can spend? What are the tax implications of taking different options? Advice is essential and even if you don’t need the money you may need to consider how it can be passed to your loved ones including your children when you die. We will provide advice tailored to your situation, to ensure your pension investments are suitable to enable you to enjoy the financial freedom you hope for during your retirement.
- Withdrawing from your pension - there are several methods of accessing your pension funds. 25% of your pension can be accessed tax free as a lump sum or a series of lump sum payments. There are however multiple tax implications and benefits depending on which extraction method you choose. Careful planning and consideration is required to ensure you do not run out of money in years to come.
If we are providing you with full retirement planning advice, the most effective withdrawal method will have already been considered within this service. If you are looking for standalone advice on the best withdrawal options, our advisers will be happy to meet with you to review your situation and provide their independent recommendations.
Affordable pensions advice - our friendly, highly qualified and independent advisers offer a personal and tailored pension service and are by your side to advice on all aspects of pensions and retirement planning.
How we work
We offer a free initial meeting with no obligations, to understand your needs and discuss how we may be able to support you.
If you like what you hear and wish to progress, your dedicated adviser will arrange a fact find meeting where we will allow sufficient time to fully understand your situation in enough detail so we can provide you with formal advice. From there we research the market for a financial solution and produce a recommendation to discuss in detail with you to gain your feedback and on agreement, the pension solution would be implemented on your behalf.
Depending on the service you take out, we will provide an ongoing going retirement planning service to ensure your pension provides the investment and cash you require for your future plans.
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