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Plan for the future

Paystream News

David McManus

Wednesday 21st Feb, 2018

Since 6 April 2016, the amount that savers can pay into a pension and still benefit from tax relief is reduced by £1 for every £2 that their annual income exceeds £150,000. The pension annual allowance is restricted to just £10,000 for anyone on an annual income of more than £210,000.

The ability to carry forward any unused annual allowance continues, but the amount available will be based on the unused tapered annual allowance. It is therefore important to correctly calculate income as far in advance as possible to check whether tapering of the annual allowance may apply.

Don't forget that a net contribution can be made for each child into a stakeholder pension of up to £2,880, even where they do not have any income. The sooner a pension is started, the greater will be the final pension fund at retirement.

If you are a limited company director taking only a modest salary and you want to top up your personally held pension fund, there is a restriction on the tax allowable contributions to the level of your gross earnings (salary) if paying the contribution personally. Directors can pay larger amounts into a personal pension if it is an employer contribution.

And if you are 55 or over, you may be able to start drawing down pension benefits now from a personal pension such as a SIPP, even if you are still working. You may take up to 25% tax-free with the rest taxed at your marginal rate.

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