Talk to us about the new pension opportunities
One way of looking at planning for retirement is to think about the number of paydays you have before you retire, and the number you hope to have afterwards. Imagine you start your pension planning when youíre age 20, and you plan to retire when youíre age 65. You have 540 paydays between starting your pension plan and retiring to achieve financial independence.
Take action to fund for your retirement
In the 2013/14 tax year the additional rate of tax on earnings over £150,000p.a. has been reduced from 50 per cent and replaced by a new lower rate of 45 per cent. While this means that the highest rate of tax relief available on pension contributions has reduced, it is still important to take action to fund for your retirement.
Carry Forward of unused reliefs
You may be able to contribute in excess of the Annual Allowance of £50,000 for the 2013/14 tax year (this will reduce to £40,000 from April 2014) and receive tax relief at up to 45 per cent using Carry Forward if you have contributed less than £50,000 in any of the previous three tax years. As this is a potentially complex area, particularly where Defined Benefit schemes are concerned, professional advice should be sought.
Annual and Lifetime Allowance reducing
As of 6 April 2014, the Annual Allowance for retirement funding is reducing to £40,000, while the Lifetime Allowance is reducing from its current £1.5m ceiling to £1.25m. The Annual Allowance reduction represents a significant opportunity to fund a higher level of pension contributions prior to this reduction. The reduction in the Lifetime Allowance means that professional advice is even more important to ensure that you are optimising your retirement planning and are benefiting from the latest Lifetime Allowance protection opportunities.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax reliefs depends on individual circumstances. The value of a pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.