By Howard Pearce, FPFS, Chartered Financial Planner.
Pensions are now truly exciting – not a phrase I usually find myself saying. However the new pension rules, which took effect on 6th April 2015 were arguably one of the biggest changes to tax efficient savings in 28 years. For those of you who can remember 1987 that was the introduction of Personal Equity Plans.
The ability to access all of your Pension savings if you so wish, once you are aged 55 or older, means that Pensions should now feature highly for anyone considering their options.
But just what is a Pension?
A Pension is simply a savings plan identified to provide you with an income in retirement. So it can easily be said, that your buy-to-let property, is part of your Pension planning.
Often people confuse a Pension with an Annuity. An Annuity is a contract providing a set or rising income for a fixed term normally your lifetime. Annuity rates have fallen dramatically since 1990 and for the majority of people, they do not appear to provide a good value.
I believe Annuities have contributed to the General Public’s disinterest in Pensions. The new rules introduced in April now allow you to decide how to utilise your pension savings, without being forced down the “poor value” Annuity route.
The tax efficiencies for Pensions are superb. At the moment tax relief is available on Pension contributions at your highest marginal rate – 20%, 40%, 45%, or in certain circumstances 60%. But hurry – higher rate reliefs are likely to be cut soon!
Everyone’s individual circumstances are different, and I do not believe that giving numerical examples here would provide you with any additional value.
However it is more important than ever to seek professional advice, as the benefits to you of timely, specialist guidance can be extremely rewarding, both in immediate tax savings and a more comfortable retirement.
In the words of Albert Einstein, “The important thing is not to stop questioning.”
Howard is the Director of Inspire Financial Services, and works alongside Inspire Professional Services to provide an integrated tax and financial planning solution to ensure clients receive the comprehensive advice they need. IFS services include pension planning, life assurance, shareholder and key person protection planning, succession planning and investment planning. For more information on how Howard could help you, call 01202 717867 or email [email protected].
Inspire Financial Services is authorised and regulated by the Financial Conduct Authority.