Pensions are the Key to Tax Planning and Savings

06.04.2016.

As expected, George Osborne’s March 2016 budget speech has been very much in the spotlight from the moment he commended it to the House.  Focus has been on disability benefits more than anything and it is easy to lose sight of other changes made, or not made.  In general the Chancellor sought to help out younger people with a series of savings and income tax tweaks at the lower earnings levels.  After a period of consultation and a lot of pre-budget speculation Mr Osborne elected to leave pension tax breaks unchanged.  For older savers and higher earners it is still very true that pensions are key to tax planning and retirement saving. 

At Meyado we believe that everyone should make the most of the tax breaks available to them especially as these were left untouched in this budget but it cannot be guaranteed they will be left this way in future budgets or by future governments.  Adam Corlett, economic analyst at the Resolution Foundation was quoted in CityAM as saying “The current political climate may have postponed the chancellor’s plans to overhaul pension saving. But with the reforms having the potential to significantly improve the retirement prospects of the majority of workers it’s an issue that he should return to.”

Meyado’s Stuart Rodrigues-Pereira has more than two decades of experience advising executives in this area and he is firmly committed to pensions as a fantastic savings vehicle.  He feels that a Self Invested Personal Pension (SIPP) can often offer a great solution to someone looking to maximise their retirement income in the future but take advantage of available tax breaks now.  Investors can be intimidated by the range of legislation affecting pensions but, with clear professional advice, they can find the perfect solution for their needs.  Below Stuart summarises the main advantages of setting up a SIPP: –

Tax Benefits – SIPPs are set up under trust, separating pension funds from other assets for inheritance tax and capital gains tax purposes.

Contributions – If you are a UK resident, you will be able to receive tax relief on contributions up to 100% of your earnings or up to £3,600 if you have no earnings. There is no limit on contributions but if your contributions in respect of a tax year exceed the annual allowance (£40,000 for 2016/17 tax year), you may be subject to a personal tax charge called the annual allowance charge.

Lifetime allowance £1,000,000 (2016/2017 tax year)

Commercial property – One of the great advantages of a SIPP is that it allows direct investment in commercial property, allowing any business premises and the rental income to be put into retirement savings.

Consolidation – Modern working culture often means individuals accumulate more than one pension. A SIPP is a great way of getting past pension funds in one place so they can be managed in a more efficient and considered way.

Taking income drawdown – Drawdown pension can normally be taken from the age of 55, subject to certain exceptions. SIPPs provide a great deal of flexibility on taking benefits, including flexi-access drawdown.

With more freedom comes more choice and many people may want professional financial advice to help them decide what to do with their pot, so if you have never taken advice before, this is the time to do it.  Clients choosing to invest their pensions via Meyado will not only receive great advice but can also take advantage of our cutting-edge technology.  We use the latest software to allow clients access to every fund that is available in the market and can select these based on their personal preferences and attitude to risk.  And once they become a client they can access further advice at any time via their tablet, phone or pc from anywhere around the world, allowing busy executives to receive fund updates or react to changes in their personal/ business circumstances without delay.

As with everything we do at Meyado, our goal is to help you create your Financial Freedom.

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