Independent Wealth Management

Call us on 01276 517700 or email advice@professional-wealthcare.co.uk

The importance of tax relief

When discussing retirement planning with our clients, a great deal of attention is always given to fund choice and the corresponding past performance figures.

However, it is important to remember one of the fundamental reasons why pensions should be the investment of choice for retirement planning.

When you contribute to a pension, everyone can receive basic rate tax relief – currently 20%.  Yes everyone!  Even a non-taxpayer, as long as the contribution is £3600 per year or less.  So you could for instance invest £100 per month into a pension scheme and your investment would be immediately enhanced to £125 per month.  There really is no other investment quite like this.  There are other investments that also have tax efficiency, but the position with pension contributions is truly unique and should not be overlooked.

For a high rate tax payer, the situation is even better.  An additional 20% can be reclaimed.  Therefore it will cost just £75 per month to invest £125 per month.  All high rate tax payers should see this as an extremely attractive deal.

Some high earners are now paying 50% tax.  Clearly the advantages to those are greater still.

There are limits on how much you can contribute to a pension.  Some of our clients use pensions to recover as much of their high rate tax as possible.  After all, why pay so much tax when you don’t need to.

We all need to finance our retirement somehow and this inevitably necessitates tying some money up until retirement.  Why not speak to us about a strategy for your retirement.

Please note that this article is based on current taxation and legislation.  Please be aware that funds can fall as well as rise in value.

The above is for guidance only and should not be construed as advice, as financial planning takes into account your personal circumstances.

Tagged: , , , , ,

Blog Categories

Pensions

Planning for retirement, your options, review your plans...

More

Investments

Investing your capital for tax efficient growth or income...

More

Protection

Protect your family, life assurance, critical illness, income protection...

More

When my wife and I were looking for advice on retirement financial planning a few years ago, Barry was recommended to us by another IFA, who no longer provided that type of advice. Over the last few years, Barry has provided us with very good financial planning advice, tailored to our particular needs and attitudes to financial risk. He contacts us regularly to update us with the latest information and to see if our needs have changed but leaves the final decisions to us, i.e. he does not try to push a particular financial product or company. We have been very pleased with his advice to date and look forward to continuing our association with him.

Mr K.T.

This site uses cookies. Find out more about this site’s cookies.