You usually pay tax if your pension pots are worth more than the lifetime allowance (LTA), which is currently £1,073,100 (Tax year 2020/2021) and which has increased annually by the Consumer Prices Index (CPI) since the 2018/19 tax year.
The Lifetime allowance is triggered when a member reaches age 75 or accesses their pension benefits.
Read moreApril 2015 saw the introduction of pension freedoms. So, what does this actually mean for people who are looking to access their pension pot?
Prior to April 2015 the options available for the majority of people were very limited and in most cases an annuity would be the only option, offering a lack of flexibility and a poor deal especially with interest rates being at rock bottom.
Read moreThis April, ISAs celebrate their 21st birthday. So, I thought it would be a good idea to remind you how good an investment vehicle they can be, just before the end of this tax year.
Statistics suggest ISAs have become a huge hit with savers. The value of adult ISAs stand at over £600 billion, shared between around 22 million account holders. They have also proved popular with successive Chancellors as a means of encouraging the saving habit with the annual subscription limit having almost trebled since launch.
Read moreWith so much uncertainty out there, people are quite rightly thinking about every decision made. Sometimes even holding back on non-essential expenditure in order to keep savings or build on savings just in case.
These decisions are all based on you weighing up the pros of buying that TV vs the risk that you may need the money soon. This simple decision has lots of moving parts to it and is affected by your past decisions and experiences, as well as other considerations. You are assessing risk.
Read moreThis month, The Office of Tax Simplification (OTS) launched their latest report. The topic this time was inheritance tax.
The OTS does not consider policy issues such as should a tax abolished – they instead look at the administrative side of taxation.
Read more
Did you know that there is over £400million sitting in pensions that people have lost? 1
1 https://www.thisismoney.co.uk/money/pensions/article-4644230/Is-worth-combining-pensions-one.html
On average people undertake 11 jobs during their lifetime which could mean 11 different pensions. This makes it very difficult to work out how much money you will actually have once you retire.
Read moreWith the help of a financial adviser and some simple financial planning ahead of the tax year-end (5th April 2019) you can make the most of the tax allowances available to you such as your ISA and pension Annual Allowance.
You have a £20,000 ISA allowance each tax year. This is a ‘use it or lose it’ allowance as it cannot be carried forward if it is not fully utilised. This allowance will remain at the same level in the 2019/2020 tax year.
There are 4 types of ISA and you can put money into one of each kind of ISA each tax year:
An ISA such as the Help to Buy ISA can be beneficial if you are saving to buy your first home. First time buyers get a 25% bonus from the Government on savings in a Help-to-buy ISA. The maximum bonus you can receive is £3,000 (if £12,000 has been saved). The deadline for opening a new Help to buy ISA is 30th November 2019.
With a Junior ISA,a UK child under 18 can currently save up to £4,260 in one tax year.
A financial adviser will be able to help you find the type of ISA most suitable for you and your investment goals.
UK individuals can ‘normally’ contribute up to £40,000 gross, or up to their annual gross income, per tax year into a pension scheme. This allowance will remain at the same level in the 2019/2020 tax year.
Funds are tax efficient within a pension although the Lifetime Allowance (currently £1,030,000) limits the total amount you can accrue in a pension pot without an additional tax charge.
You can take a look at our previous blog to find out if you are making enough pension contributions.
The Annual Allowance can be carried forward, subject to a few rules. If you have been a member of a pension scheme but have not fully utilised your Annual Allowance for the previous three tax years, you could be able to carry this forward to make a larger contribution in the current tax year.
Tapered Annual Allowance – this is when the Annual Allowance is reduced by £1 for every £2 of ‘adjusted income’ over £150,000. It can affect you if your income from all sources is over £110,000.
The Inheritance Tax (IHT) nil rate band is currently frozen at £325,000 until 5th April 2021.
Inheritance tax planning can enable you to utilise the available exemptions including:
The annual exemption for the current tax year is £11,700. This is also an allowance that cannot be carried forward if it is not fully utilised. Unused losses are carried forward and can be offset against future gains.
After 6th April 2019, the minimum wage for 18-20 year olds will increase from £5.90 to £6.15 per hour. For 21-24 year olds it will increase from £7.38 to £7.70 and for anyone aged 25+ it will increase from £7.83 to £8.21 per hour.
This will increase from £11,850 to £12,500 in the 2019/2020 tax year.
This will increase from £1,030,000 to £1,055,000 in the 2019/2020 tax year.
This will increase from £11,700 to £12,000 in the 2019/2020 tax year.
One of our independent financial advisers at Temple Wealth Management can advise you on how best to plan for the end of the tax year, as well as how to fully utilise your available allowances in the new tax year.
To discuss your end of tax year planning needs, contact one of our advisers on 01329 282882 or use our website contact form.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Tax Advice.
Could you afford to live on an income of £155 per week in retirement? How about £8,060 per year?
You may be surprised to be told that these figures are one and the same. This is the Flat Rate State pension which a UK citizen with 30 years of National Insurance contributions will be eligible for from age 66 (as at January 2019).
The national living wage in the UK is currently £16,009 per annum. With this in mind, are you saving enough now to ensure that you can enjoy retirement without worrying about your finances?
If you wish to receive a guaranteed income for life in retirement of the remaining £7,949 with no investment risk to your capital, you would need a pension pot of around £142,750* for a level income or a pension pot of £245,000* if you wish for your pension to increase in line with inflation.
In order to achieve these fund values in today’s terms (i.e. after the effects of inflation) this would mean making monthly pension contributions of at least £185.60 net or £317.60 net respectively from the age of 30 into a cost effect personal pension plan – assuming growth is 5% per annum, with an ongoing advice charge of 0.50% per annum paid monthly.
Of course, everyone’s situation is different. However, the Financial Times Adviser have calculated that clients who have an appointed financial adviser accumulate, on average, 21% more in their pensions than those who self-invest**. With this in mind, can you afford not to review your retirement planning? After all, a goal without a plan is just a wish, and you do not want to wish you did it on the day that you retire.
Contact one of our Independent Financial Advisers at Temple Wealth Management to find out how we can help you with your retirement planning and review your pension contribution levels.
You can contact us by calling our office on 01329 282882, send an email to Fareham@templewealth.co.uk or send us a message on our Facebook or Contact Us Page.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
*Figures based on AssureWeb research completed on 08/02/2019 and are based on a single life, 5 year guaranteed annuity paid monthly in arrears for a healthy 66 year old, not taking into account advice charges.
**Source: https://www.ftadviser.com/your-industry/2017/07/13/financial-advice-leaves-people-40k- better-off/
Setting goals for your personal finances is crucial to success and achieving your financial objectives.
From your first job until your 30s, these are known as “the vulnerable years” as you are trying to build up your personal finances to secure your future, protecting your income and saving for the future. You may have a specific financial objective such as buying your first car, saving a deposit for your first house or for even retirement. This means being aware that, however small, the earlier you start the better the result.
Then you move to your 40s, when you may own your own home, have a family. Your objectives will change towards protecting a higher level of income, whilst also protecting your family and lifestyle. Retirement starts to be foremost in your planning in order to ensure financial security. It is important to consider making the most of your tax allowances for the future.
In the years up until retirement, which could be any age from 55 upwards to around 70 you will begin to see the benefit of planning your personal finances from an early age. You will be looking at making retirement work for you. These are the years that you will start to think about your children and grandchildren and their financial security, maybe preparing the “bank of Mum and Dad”. Health will start to play a part in your future financial planning. An Independent Financial Adviser can help you assess if your personal finances are on track to achieve your goals.
From your 70s and through retirement, your personal finances may mean that long term care becomes more of a consideration. This can also include succession planning in terms of inheritance tax, Power of Attorney and ensuring your will is up to date.
There will be other areas of planning that will be unique to your situation and therefore the earlier you engage with planning your personal finances the better. It does not matter if you think you have no money to consider these things; if you start planning early and engaging the easier it will be in the future. An Independent Financial Adviser can help at any stage of planning.
We believe that professional financial advice can add significant value to individuals at any stage of life whether this be ensuring you have a competitive mortgage rate; reviewing your protection needs in case the worst were to happen.
Temple Wealth Management can help find the right solution to make your savings work better for you and guide you through retirement planning.
Contact TWM on 01329 282882 or fareham@templewealth.co.uk to find out how one of our advisers can help you
