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| Savvier Spending |
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Put £4,246 more in your pocket every year when you retire
The thought of retirement may fill you with financial anxiety. Or it may represent the light at the end of the tunnel - a chance to really fulfil all your lifetime goals. Either way, getting your pension right is key to making the most of your retirement. The government's new stakeholder pension is about to hit the streets but - whether it's for you or not - there are some changes being introduced that you need to understand. It could mean a substantial tax saving over your lifetime! Here's what to watch out for: |
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- Understand how a stakeholder pension will benefit you
The stakeholder scheme is aimed at people on low-to-middle incomes with no private pension arrangements. Basically, annual costs must be less than 1% of your pension fund, and there must be no charges for transfers. Even if offered through your workplace - it is YOUR pension and you can take it with you when you leave. Stakeholder pensions may not offer you any huge benefit - but there has never been a better time to look at pensions. With all the competition that stakeholder pensions will bring into the market, personal pensions are rapidly becoming more flexible and transparent and user-friendly.Save on tax now
don't contribute more than £300 a month. The government will give tax relief on monthly contributions up to £300 at 22% automatically. This makes your £300 contribution cost you just £234. If you pay income tax at 40% you'll get an additional 18% tax relief on pension contributions - meaning your £300 contribution will cost you £180 a month. This extra £54 comes in the form of tax relief claimed on your tax return. There is a remuneration limit - so check you have not earned more than £30,000 per year (excluding benefits such as health insurance, interest-free travel loan, luncheon vouchers or gym membership) since April 1999 Give you family financial security
start putting money aside for your spouse and children. Anyone can contribute up to £300 per month into a personal or stakeholder pension - even those already in an occupational scheme, the retired, children or non-working parents. All non-taxpayers (non-working partners or children) get the basic 22% tax relief - so any contributions made on their behalf will net you tax benefits now. This is a good way to protect your children's financial future - and the longer someone has a pension the larger it will grow. Your children will thank you when they retire as millionaires at the age of 50! By setting up a pension for your non-working partner, you can claim more tax benefits now. Have a more tax-efficient pension when you retire
split your pension contributions now between you and your partner. Saving for your partner's future now incurs tax benefits for you when you retire. A future pension in your name only of £50,000 per annum would incur higher rate tax and would offer your partner less security. By splitting your contributions now and saving for two pensions of £25,000 per annum you could save, as a couple, £4,246 per annum of income tax. This is approximately equivalent to having a pension fund some £100,000 bigger! Ensuring each family member has their own pension arrangements not only saves you taxes then you pay in - you'll save money from the taxman when it's time to use your pension too.Maximise your cash
get the right advice. Ask the following questions of your adviser to get a feel for how independent their advice might be: What qualifications do you hold? Can you sell me pensions from any company in the market? |
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The Bottom Line:
The new stakeholder pension scheme has put pressure on pension providers to give you a competitive choice. This means fewer charges, more flexibility and greater security for you. So take advantage of it! |
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