News and Views

Retirement may feel like a long way off or it may feel like it is too late to make a difference if retirement is pending, however it is never too late or too early to save for your retirement goals.

Here are 5 benefits to investing in your pension:

  • Up to 45% tax relief – depending on your personal circumstances a £10,000 contribution could cost you as little as £5,500. For example, if an additional rate tax payer paid £8,000 net into their pension, the pension provider would reclaim basic rate tax relief to increase the contribution to £10,000.  Additional rate tax relief of £2,500 can then be reclaimed on your tax return.
  • If it’s an employee sponsored scheme even better – As well as getting tax relief at your highest marginal rate of tax your employer will also be contributing to your pension – make sure you maximise pension contributions to get the maximum from your employer – consider it an added benefit! For example if your employer had a 5% matched contribution scheme and you earned £60,000.  A net monthly contribution payment from you of £200 would be grossed up to £250.  Your employer would also contribution £250 and you would be able to reclaim £50 higher rate tax relief on your tax return.  Annualised, that provides a benefit to you and your pension plan of £6,600 and it’s only cost you £2,400.
  • Tax Free Growth – any investments within your pension will grow free of capital gains tax and income tax.
  • 25% tax free – Generally, up to 25% of your pension pot can be withdrawn tax free; with the remainder taxed as income. There is no longer any withdrawal limits so pension assets can be withdrawn flexibly from the age of 55 (57 from 2028).
  • Inheritance Tax Free – pension assets are outside of your estate, therefore no inheritance tax will be payable. If you die before the age of 75 any withdrawals by your beneficiaries will normally be tax free; after the age of 75, withdrawals will be taxed as income at your beneficiaries marginal rate of tax.

The exact tax benefits available to you will depend on your individual circumstances and may change in the future – speak to a Wealth Planner to see how you can maximise your pension today.