Due to greater simplicity, choice and flexibility, pensions are a more attractive option for retirement savers than ever before. Moreover, the incentives available to pension savers are hard to beat.
For every 80p you pay into a pension plan, the government adds 20p, boosting it to a total contribution of £1. However, higher and additional rate taxpayers could be eligible to claim extra tax relief through their annual tax return, meaning that a £1 pension contribution can effectively cost them just 60p and 55p respectively.
These tax breaks are so advantageous that they will inevitably remain under government scrutiny; and for this reason, change cannot be ruled out in the future. You should therefore consider taking advantage of the existing reliefs by making full use of your annual allowance.
The annual allowance is the amount you can contribute in order to benefit from tax relief, that you can make in a tax year. By maximising this year’s allowance and carrying forward any unclaimed allowances from the three previous tax years, you could benefit from current rates of tax relief and potentially enjoy a higher income when you stop work.
Please note that although 25% of the pension value can be taken without a tax charge, the remaining income drawn at the individual's marginal rate of tax.
Knowing you’ll be all set to meet your basic needs – with enough left over to let you comfortably do the things you look forward to in retirement – is something well worth striving for. Nevertheless, roughly a third of UK workers either aren’t saving at all for their retirement, or they aren’t saving nearly enough to give them the standard of living they hope for. ¹ If you fall into either of these categories you have three choices: adjust your income expectations, start saving more, or retire later.
Use our retirement planning calculator to see if you are on track to meet your goals.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.
Please get in touch to review your retirement plans and ensure you don’t miss out on the valuable tax reliefs and allowances available.
¹ Money Advice Service, 2018