Pensions are not investments in themselves, but a tax efficient wrapper with which to 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.
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 our clients who are looking to:
- set up new pension arrangements, restructure existing legacy arrangements and begin the income process
- help client's looking to take loans from their pensions to help fund their business
- identify opportunities and create syndicates to help purchase larger commercial properties which would be beyond the means of an individual investor
- consider appropriate investments that will provide an indexed linked income
- identify and implement strategies that maximises the tax efficiency of withdrawals to supplement income
- arrange pensions for other family members, for example grandchildren
- arranging in specie contributions of shares in addition to more traditional cash contributions from either the individual, the employer or a third party
- 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.
As many of our clients will be aware, rules governing pensions changed again in April 2011, where income tax relief is now only available on contributions up to the lesser of the Annual Allowance of £50,000 or 100% of earned income. From 2014, this will reduce further to £40,000 and where you are looking to maximise your pension, you should consider using the allowance now.
Whilst there is now an ability to carry forward relief from previous tax years, these changes need to be considered carefully when making contributions, particularly for those with larger pension funds, who may also need to consider the implications of the Lifetime Allowance.
With the change in tax rules for earners over £150,000 in regard to pensions, Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) have become far more attractive. Find out more about VCTs and EIS
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.