The more the Chancellor spoke during his recent budget, the more likely it looked as if the attractive tax reliefs available on pensions would be cut back.
In the lead up to the budget Mr Hammond had described as “eye wateringly expensive” the annual cost of pension tax relief to the government, so surely now was the ideal opportunity for the Chancellor to reduce the tax benefits on pensions.
All of a sudden, however, he’d commended his budget to the house, sat down, and the only major announcement he’d made with reference to pensions, was that the Lifetime Allowance would be increasing to £1,055,000 with effect from April next year.
Tax relief on personal contributions of up to 60%
Corporation Tax relief for employer pension contributions
Tax efficient growth on the pension fund
Personal pension funds can still pass to beneficiaries free of Inheritance Tax
Salary Sacrifice, offering the ability to reduce National Insurance contributions and increase pension contributions (at no extra cost to the employer or the employee)
Carry Forward - The ability to make up for missed contributions by carrying forward any unused annual allowance from the previous three tax years
Fund pensions to the maximum where possible. The current annual allowance is £40,000 (but this tapers down for those with total income of more than £150,000 p.a.)
Utilise Carry Forward - up to £160,000 can be invested utilising this
Whilst pension funds can pass down the generations IHT free, it’s important to ensure the correct beneficiaries are nominated by completing an up to date ‘Expression of Wish’
With potential investment market turmoil over the next few years, we’re recommending clients review the investments held in their pension funds to ensure they match their current ‘attitude to risk’ and investment objectives
Fees may apply for a professional review on the last point, however it’s important to remember that the wrong investment holding in your portfolio could fall in value by more than the fee payable for peace of mind and an up to date professional review of your portfolio.
While it’s important to maximise these tax reliefs whilst they available, it’s also important to seek professional advice.
The Tilney team are working closely with Haines Watts in the South East Midlands to provide a holistic Wealth Planning service to clients.