The availability of tax relief on pension contributions is well known but very much under appreciated.
If it was not valuable why would the Government have reduced the maximum annual contribution on which tax relief is available from £255,000 in 2010/11 to £40,000 in 2013/14?!!! A massive reduction!
But there are some income ranges where the extent of the tax relief changes from worthwhile to truly MAGICAL!
Lets start with the high earners:
Earnings Range: Tax Relief:
£150,000 + 50%
£116,251 – £149,999 40%
£100,000 – £116,250 60%
£42,475 – £100,000 40%
And how about families with children with earnings between £50,000 and £60,000? If they can get their taxable earnings below £50,000 by way of a pension contribution then for a family with three children the net effect of being able to retain Child Benefit and getting pension tax relief equates to a MAGICAL saving of 67%!!!
If you are close to or above age 55 and earning £42,475 plus and expecting to have total earnings of less than that in retirement you really should be maximising your contributions. 40% tax relief now, 25% of the pension fund withdrawn tax free and pension income only taxed at 20% is a truly MAGICAL combination.
- Be very careful about topping up an employment scheme. You could lose access to your money for 10 years longer than if you put it into a personal plan.
- Shop around. If you are quoted a fee for making this arrangement firstly negotiate and then shop around. You shouldn’t have to pay large fees.
- If you prefer to deal online email me and I will give you some good tips on which are the best sites to use.
- If your current plan is more than 5 years old chances are it is too expensive and has little flexibility. Email me for more guidance.
IF YOU WANT TAX RELIEF IN THIS TAX YEAR CONTRIBUTIONS HAVE TO BE PAID BY 5 APRIL 2013!
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