Carl Howard, Commercial Director, TD Direct Investing says: “The recent changes to legislation have pushed pensions to the top of the news agenda and rightly so, these changes impact every member of the population – now or in the future. However, our recent pensions research identified that 46% of the population, aged over 30, do not feel they are informed enough to make the best decision. Addressing these concerns with the right investor education is one of the key personal finance challenges for us in the industry to tackle now and in the coming years.”
Our Top Five Pensions checklist will help customers get things started before the end of this tax year, and at the beginning of the next, once the pensions reforms go live.
1 – Make the Most of Your Pensions Allowance
The annual allowance for tax relievable pension contributions is up to 100% of your earnings or a max £40,000 (for the pension input period ending in this tax year). You get basic rate income tax relief at 20% on your contributions, added directly to your pension pot – higher or additional rate taxpayers can also claim extra tax relief through their tax returns.
2 – No Earnings
Even if you have no earnings, you can still pay up to £2,880 into your pension and receive tax relief of £720. For example if you have a spouse or partner who is not working, contributions can still be made on their behalf.
3- Carry Forward Unused Allowance
You are allowed to carry forward any unused annual allowance from the previous three tax years – 2011/12, 2012/13 and 2013/14. To benefit from this, you need to have been a member of a registered pension scheme in the tax year – speak to your provider if you are unsure.
4 – Only Fools Rush In
You don’t have to make any rash decisions on April 6 when the Pensions Reforms come in. Take your time and choose when and how to take your pension with the best result for you. Don’t rush for cash – only 25% of your pension is available tax free, the other 75% is taxable. Don’t forget the tax advantages for leaving money in your pension fund.
5 – Beware of Trojan Horses
Do your research properly and watch out for pensions scams. Any deal that seems too good to be true, probably is. Only deal with FCA regulated companies and never take or respond to cold calls, letters or email trying to lure you in to what seem like high value pension offers.
N.B. The tax treatment of these products does depend on your circumstances and might change
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