Retirement planning: let the taxman help

Retirement is a time that most people look forward to, and with a solid financial plan in place for retirement planning, you can too.

While many individuals have looked to parallel investments for retirement in the current climate – such as gold, second homes or buy-to-let – it is important to take advantage of tax reliefs and (tax-deductible) employer contributions to build a fund for your retirement, whatever retirement age you may have in mind. Personal contributions to pension schemes attract tax relief worth up to 60%, making them an ideal tax-free investment regime.

When are you entitled to State Pension?

You can check when you will become entitled to the State Pension and get an estimate of your entitlement by visiting this site.

Your scheme managers can provide pension forecasts to help you judge whether you are saving enough and, if not, what additional savings you might have to make in order to generate the income you will need in retirement. When you consider your retirement income, don’t forget to also assess your expenditure – many people underestimate the amount they will need to live comfortably when they stop working.

For pension contributions to be applied against 2013/14 income they must be paid by 5 April 2014. Tax relief is available on
annual contributions limited to the greater of £3,600 (gross) or the amount of the UK relevant earnings, but
also subject to the annual allowance.

The basic allowance and pension savings

The basic annual allowance is a straight £50,000 cap on pension savings. However, it is possible to adjust your annual allowance to reflect savings shortfalls in the last three tax years, against a notional cap of £50,000. This is largely to reflect the simple fact that for many self-employed people, earnings and available cash vary from one year to another.

The rules are complex, so please talk to us for advice. Also, be aware that from April 2014 the annual allowance is set to be reduced to £40,000, while the overall tax-advantaged pension savings lifetime allowance will fall to £1.25 million.

This advice provided by our sister company, ad+ financial, which is a trading name of Holyrood Asset Management Limited which is authorised and regulated by the Financial Services Authority.