Pensions and the tax implications: what you need to know
Whether you're a Generation Z embarking on your first-ever job, an early member of Generation Y or a late Baby Boomer with retirement scarily close, your pension should be firmly in your sights.
Most employers now offer workplace pensions and those yet to join the scheme must do so by November 2017. 'Auto Enrolment' means that automatic deductions from your salary will make saving for a pension easier (and you will also benefit from contributions made by your employer), though it's always wise to seek advice and compare pension options. The income tax implications need consideration too as there are different allowances and limits which may affect you.
Pension changes and tax planning
Changes of government, legislation and even the Brexit vote all affect pension provision, so it's important to stay up to date, especially with regard to tax matters.
Tax relief is available on contributions up to 100% of your annual earnings or £40,000 (the annual allowance), whichever is the lower of these two figures. However, you can carry forward unused allowances from the previous three years as long as you were a member of a pension scheme during those years.
Anyone with a total income, pension contributions and employer pension contributions of £150,000 per year will get a reduced annual allowance. The annual allowance will reduce by £1 for every £2 that your income exceeds £150,000 up to a maximum reduction of £30,000.
There is also a separate rule, which limits the maximum value that can be built up as pension savings without incurring a tax charge when you draw your pension. This is known as the lifetime allowance and is currently £1 million.
Tax Planning Advice
No one ever wants to pay more tax than they need to and at Perrys our expertise is available with a dedicated consultant for every client. Whether you're an individual, a small company or a larger business, our practical and jargon-free approach will ensure that not only are tax efficiencies achieved, but that everyone can stay abreast of constantly changing pension and tax legislation.
State pension provision and the State Pension Age
Taking responsibility for your own pension provision is crucial at any age, however it's important to also consider the impact of changes to the State Pension Age. With the official retirement age gradually being increased, it's more important than ever to take charge of financial planning for your retirement.
The Gov.UK website has a pension calculator to help with checking when you will be eligible and how much you may expect to receive (based on today's rates).
It's never too early to consider your financial future in retirement, but Perrys can help to achieve tax efficiencies that could make all the difference.
To find out more about how we can help you please contact us.