Pensions are not investments in themselves, but a tax efficient wrapper which can hold certain permitted investments. They have tax advantages over investing personally, but as a result, are governed by a set of rules which control how much can be paid in, how and when you take benefits and what you can invest in.
There are significant tax advantages in making pension contributions and we believe that pensions are likely to continue to be a very important and efficient way of providing income for your retirement.
Our expertise is in helping our clients make the most of pension legislation both while they are saving, but also crucially at the time that they need to create income and or capital from their pension.
Typically, we assist with the following:
- Final salary transfer advice
- Lifetime and annual allowance planning
- Setting up new pension arrangements, consolidating existing legacy arrangements and beginning the income process
- Helping clients to take loans from their pensions to fund their business
- Identifying opportunities and creating syndicates to help purchase larger commercial properties which would be beyond the means of an individual investor
- Considering appropriate investments that will provide an index-linked income
- Identifying and implementing strategies that maximise the tax efficiency of withdrawals to supplement income
- Arranging pensions for other family members, for example grandchildren
- Utilising pension funds to purchase assets directly from the client, thus releasing cash from the pension to the individual
All of these options are still available and new opportunities continue to arise as the legislation on pension changes.
Income tax relief is now only available on contributions up to the lesser of the Annual Allowance (£40,000 for 2016/17) or 100% of earned income. Whilst there is the ability to carry forward relief from previous tax years, this option needs to be considered alongside the implications of the Lifetime Allowance, particularly for those with larger pension funds.
With the change in tax rules for earners over £150,000 in regard to pensions, Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) have become far more attractive.
Individuals will need to plan more effectively in the future to take advantage of the rules. Pensions however will continue to be important in personal planning in the future, particularly for those liable to higher rate income tax and where there is the risk that any personal allowance will be removed.
As a last point we would remind potential clients that it is important when considering pension saving that they start the process in good time prior to any decision needing to be made, because the practicalities of making changes can take some time and the legislation does not allow for poor or slow pension administration.