Maximising Pension Contributions to Ensure A Comfortable Retirement.

If you want to ensure you can afford to live the lifestyle you wish to in retirement it is imperative that you starting building a retirement fund as soon as possible. A pension is a very effective means of doing this for a number of reasons:

• You can obtain tax relief on contributions made in the tax year up to the the highest rate of income tax you pay (i.e. 20%, 40% or 50%).
• Your pension fund grows free of capital gains tax and income tax (with the exception of a non reclaimable 10% tax credit on UK dividends).
• The fund can be passed down to anyone on death free of tax if benefits have not yet been taken.
• 25% of the value of the fund is available tax free from age 55.
• The fund can be used to buy a guaranteed income for life in retirement or can be used to draw an income whilst remaining invested.
• It is now no longer a requirement to purchase an annuity at age 75 and it may be possible (subject to certain rules) to receive the whole fund as capital.  

The maximum that can be put into a pension fund in a single year is the lower of £50,000 or 100% of salary (employer contributions can be greater). However, if you have not been able to use your full allowance in the previous three years this can be carried forward to the current year so that more can be contributed in a single year.

This can be useful if:

• You have previously been restricted by the special annual allowance rules that limited the amount high earners could contribute in a single year.
• You have received a capital sum, from a redundancy or an inheritance for example, that you would like to minimise tax on and have working as hard as possible for you.
• You have a sudden increase in earnings which you would like to use efficiently.

If you would like to know more about how you can contribute as much as possible to a pension fund (or other investment options) to ensure you can live the lifestyle you wish to in retirement please do contact me:

Telephone: 01483 274 566

Email: andrew@icl-ifa.co.uk

Linked in: Andrew Neligan

Twitter: @andrewneligan