Planning for retirement
In many respects, planning for retirement should be viewed alongside any other form of long term investment. There are, however, special considerations due to the government's willingness to encourage personal pension planning by offering tax benefits.
Everyone in the UK can contribute £2,880 into a pension every year (to which the government will add £720 as tax relief) and then add up to their entire earnings from trade, profession or employment (subject to an overall annual allowance of £235,000 for 2008/9, rising to £255,000 by 2010/11) and receive tax relief at their highest marginal rate. So for a higher rate taxpayer the relief is currently up to 40%.
What is more, the money invested in a pension is totally free of UK income and capital taxes (other than the 10% withholding tax on dividends from UK companies).
When you come to retire, you can take up to a quarter of the entire pension pot as a lump sum (currently free of tax) with the balance used to provide a taxable income (please see Options at retirement) provided your entire fund is not higher than the lifetime allowance which is set at £1.65 million for 2008/9 and will rise to £1.8 million by 2010/11.
For many people, traditional insurance company pension plans are suitable. However, self invested personal pensions are becoming increasingly popular, particularly amongst those with funds in excess of £100,000, where the costs can be lower and the flexibility far greater.
Other forms of retirement planning are also available and we would be pleased to discuss these with you.
For more information about how Dawson Whyte (Life & Pensions) can help you, please click here.
THE BASIS FOR, AND LEVELS OF, TAX RELIEFS ARE BASED ON OUR CURRENT UNDERSTANDING OF HMRC PRACTICE AND ARE SUBJECT TO CHANGE WITHOUT NOTICE.
Financial planning
Building a better future
Buying your home
Protecting your family
Protecting your income
Planning for retirement
Pension transfers
Options at retirement
Medical care for the family
Later in life
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