Pensions are a fantastic way to plan for retirement. They are tax friendly, widely available and provide access to thousands of investments. You can save regularly or as and when you can afford to. They are actively encouraged by the Government and the tax relief through HMRC is very generous.

Tax relief is in effect getting your tax back, hence the name. A basic rate tax payer currently gets 20% tax relief on all contributions (from normal earnings) going in as you save for retirement, but then once you retire you only pay the same tax (or less if you have your personal allowance still available) on only 75% of your pension as pensions come with 25% tax free cash. A lot of people take this money as a lump sum but it can be taken monthly too.

They key to good planning with pensions is to understand the basics and seek advice on the detail and planning. Its important to get advice on taxation as well.

High rate tax payers gain even more if they intend to be basic rate tax payers in retirement, which in my experience is often the case. As you get the full 40% relief while working but only have to pay 20% when you retire and only on three quarters of your pension (due to tax free cash).

You can access pensions in many ways, like Drawdown or buying an Annuity. The concern is the complex nature and mass of jargon you come across as well as the rules that do need to be followed from the Pension Regulator and HMRC.

It’s important to understand when pensions are not the right way to save too, for example if your objectives are more short term.

If you would like to arrange a pension consultation please Call 01908 062680 or get in touch via our enquiry form.