Chartered Accountants of Poynton, Cheshire

Pension Payments

There have been considerable changes to the pension contribution rules over the last couple of years.

In summary, these are as follows:

• Any individual can make payments of £3600 per annum gross of tax, whether they have an income or not.

• If an employer makes a contribution on behalf of an employee, this will be tax deductible in that employer's accounts as long as the payment is made 'wholly and exclusively1 for the purposes of the trade.

• The maximum any individual can pay in any pension payment period (which is usually the same as the tax year) is normally £21,5000 and any contributions over this will be subject to income tax of 40%. There are some exceptions to this rule.

• There is no longer a provision which allows excessive personal pension contributions to be carried back to the prior year. Some special rules remain in place for retirement annuity contributions.

Edward Appleton: "You can make huge tax savings which can transform your life, when you know how."

Ralph Ellerton: "Appletons live and breathe the paperwork so you don't have to!"

Tax Returns
If you submit your tax details to us, we can advise you of your exact tax liability.

Pension Planning

The basic state pension for a married couple is just over £6,800 per annum, which means that you will almost certainly need additional sources of income.

For most people, saving to provide for a comfortable and financially secure retirement includes tax efficient investment in an appropriate form of company pension scheme or private pension policy.

Your personal planning will be determined by a number of factors, including:

• Whether there is a company pension scheme
• Whether you are self-employed
• Your age
• How much you are able to invest for your retirement

 

Company pensions

This may take the form of a final salary scheme, which pays a retirement income related to the amount earned when you stopped working; or a money purchase scheme, which reflects the amount invested and the underlying investment performance.

Private Pensions

If you are not in a company scheme, you should make your own arrangements, since relying on the state pension is already unwise, and is likely to become increasingly so with every passing year.

Personal Pensions

Investment in personal pensions is limited to a percentage of earnings, up to £105,600.

Stakeholder pensions

These are subject to a minimum £20 investment, and a 1% per annum ceiling on charges. Premiums can be paid on behalf of another person - including, say, an infant grandchild.

SIPPs

Self Invested Personal Pension policies give the investor greater flexibility over how the funds are invested.

Retirement annuities

These are available only where a policy currently exists. Premiums paid under retirement annuity policies are not subject to a cap on earnings, although the maximum percentage is lower.

Please Note: New rules, effective from April 2006, may create more opportunity for higher earners to maximise tax-advantaged pension savings. We would also recommend that you consider a parallel savings strategy to build readily-accessible savings outside your 'pension pot'.

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Click below for more on:

Your family – you need to plan for the financial needs of your family, and also to take advantage of the tax saving opportunities available.

Savings and investments – good planning can help you to minimise the tax you have to pay on your savings, and maximise the returns.

Your estate – inheritance tax is a real concern for more and more people. Implement strategies now to minimise your liability.

 

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