The majority of solutions for a stress-free retirement usually involve a degree of financial security, but are pensions the answer?
They’ve been the subject of much press debate in recent years, yet despite the increased exposure, many people are still confused about the choices available.
Pensions still remain one of the best methods of planning for retirement.
You no longer have to save in old insurance company schemes with often high charges and poor choice – we now have far more flexibility to use the ‘pension rules’ to your advantage. We can now use a ‘pension wrapper’ to hold a portfolio of investments which is then sheltered from tax allowing these funds to grow extremely efficiently.
The main benefits include:
- Tax relief on contributions set at the highest rate you pay, albeit subject to newly introduced rules for people earning over £130,000
- The money you invest grows free of income or capital gains tax
- A huge range of investment options – 1000′s of funds are available
It’s now also possible for you to slot 100% of your salary into a pension plan (subject to a ceiling of £255k each year and other new regulations) building up a tax-free pot worth up to £1.80m. And since 6 April 2006 (A-Day) 25% of this ‘pot’ can be taken as a tax-free lump sum, with the rest available to give you an income for life.
The rules for pensions may have changed – they have become simpler and easier to understand – but fundamentally the choices remain the same.
Given that all of us are living longer the need to plan for retirement is paramount. Pensions are a tax efficient, structured way to build up significant savings.
Click HERE for a case study showing how simply moving your old personal pension can increase the money you have to spend in retirement