As the new tax year approaches, now is a perfect time to think about making your finances work for you, especially when it comes to planning your retirement. The concept of the financial year isn’t just limited to accountants or financial advisers. It affects us all, as savings such as ISAs and personal pensions have limits on how much you can invest per year. Other deadlines also depend on this calendar – which is why this is the busiest time of year, as many tax breaks cannot be carried forward to future years.
A perfect new year’s resolution would be to check your personal pension. There are many ways you can make your money work harder for you. A Financial Conduct Authority regulated pension adviser will be able to give financial advice on whether merging pension pots – also called pension consolidation – could be a good idea, for example to take advantage of better growth, to avoid hidden charges or manage your funds easier. You could also resolve to increase your pension contributions, particularly if you have a defined contribution pension. Remember, even a small increase can have a big long-term effect on your final pension fund.
While pensions are important, there are other ways of tax-efficient savings such as ISAs.
More generally, you could resolve to get into good saving money habits – for example, investing any bonuses or unexpected income, rather than spending it straight away. If you have just paid off a debt, like a mortgage or car loan, invest the excess funds instead of getting used to it.
Your tax-free allowances for the current year expire at the start of April. You can invest £20,000 a year into an ISA, so now’s the time to top it up if you have any allowance left. Other allowances are also useful. Inheritance tax is often in the news, but you are still able to give away a total of £3,000 a year to loved ones without having to pay tax. If you sell investments that are subject to capital gains tax, your first £11,700 profit is tax-free, but cannot be carried over to next year. It’s important to take advantage of these tax-free allowances in good time.
If you are given a bonus from your employer, investing it into your pension fund is a tax-efficient way of boosting your pension pot. Tax breaks are available for pension contributions, and you can normally contribute as much as you earn into your pension up to £40,000.
You can also claim any tax credits back. They can earn you thousands of pounds a year in addition to your household income. As the system is now being replaced by Universal Credit, it’s important to check that you are eligible, and you are receiving what you are entitled to.
The Money Advice Service gives full details of the new system:
If you are a family, look into the high-income child benefit tax charge:
Although we are predominately telephone-based financial advisers, if you live locally to our home in Knutsford, Cheshire, you are more than welcome to visit our offices and meet your adviser for face-to-face advice.
To get impartial advice on retirement planning, contact us today on 0808 164 2664.
This can be found on your payslip, P60 document or letters about tax, pensions or social benefits.
If you have (or have had) a pension that is described below then we can potentially carry-out a Pension HealthCheck.
Defined Contribution Pensions
These are ‘Pot of Money’ pensions where the benefits provided take into account the value of the fund at retirement. They can be personal pensions or Occupational Pensions. There are no guarantees as to what pension will be provided. This will be a reflection of contributions made and investment growth.
Defined Benefit Pensions
These offer the promise of a guaranteed pension at retirement which reflects the length of service with an employer. It will be based on either the Final Salary or Average Career Salary of the employee. Providing the company is still in existence, there is no investment risk for the pension receiver. This type of pension is becoming less frequent.
This is a generic term for pensions that are not workplace schemes.
Group Personal Pensions
Employer-sponsored schemes – each member has a personal pension plan, and their contract is with the pension provider. The employer’s role solely is to select the scheme provider, decide if there should be any restrictions on fund choices and take contributions from the employee’s pay and forward them with employer contributions to the pension provider.
A private pension arrangement or personal pension is taken out by a sole-trader or self-employed worker.
State Earnings Related Pension (formerly Graduated Pension and subsequently State 2nd Pension or S2P) was an additional element of State Pension for employees. The amount of pension was linked to the employee’s salary. SERPS was abolished in 2016 when the flat rate State Pension was introduced.
Private pensions are contracts between the pension member and an insurance company or another pension provider.
These are personal pensions where the member has a much wider choice of investments, including commercial property and single company shares.
Personal Pensions with a set of rules that impose amongst other things a maximum annual management charge (AMC), low minimum contribution levels (£20 per month) and an appropriate Default fund.
Private pension linked to an employer’s Defined Benefit Scheme but separate from the Scheme’s internal Additional Voluntary Contribution (AVC) arrangement – largely defunct since the rules were eased several years ago, allowing people to contribute to both personal and employment schemes as they wish.
Money Purchase Pensions
This is another name for Defined Contribution Pensions.
Unfortunately, we are unable to help clients who currently work for or have a pension from one of the following:
If you are unsure about the type of pension(s) you hold, please contact us on 0800 756 1288 or email firstname.lastname@example.org