Pensions : Maximising your benefits

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested. 

Tax treatment varies according to individual circumstances and is subject to change.

For high earners, there are plenty of opportunities to fund pensions, especially with the abolition of the Lifetime Allowance from 6 April 2024.

  • The lifetime allowance is the maximum value of benefits that can be taken from a registered pension scheme before income tax is due on the excess.
    • Benefits are only tested against the lifetime allowance when a benefit crystallisation event happens.
    • It may be possible to protect benefits in excess of the lifetime allowance.
    • The lifetime allowance is currently £1,073,100.
    • The lifetime allowance charge has been removed from 6 April 2023 and the lifetime allowance will be removed completely from 6 April 2024.
    • From 6 April 2024 tax-free cash will be restricted to £268,275, unless an individual has tax-free cash protection.

Pension Opportunities

  • Pensions remain a highly effective and tax efficient method of retirement planning, but it is a complex area, with a myriad of pitfalls and upsides. Rumours of the removal of higher rate tax relief have increased over the last few years and each budget is met with nervous anticipation.
  • The Tapered Annual Allowance With effect from 6 April 2016, the annual allowance (currently £60,000 per annum) was reduced for high earners. For the 2023/24 tax year, if you have total adjusted income in excess of £260,000 per annum, you will see your annual allowance reduced by £1 for each £2 this is exceeded, to a minimum of £10,000. This is a very complex area and so it is vital that appropriate advice is sought.
  • Carry Forward.  Despite increasing restrictions, you may be able to make a contribution in excess of the Annual Allowance of £60,000, or your reduced annual allowance, and still receive tax relief at up to 45% using Carry Forward. if you have contributed less than the Annual Allowance in the previous three tax years. This is a potentially complex area, with pension input periods and particularly Defined Benefit schemes are concerned driving a requirement for professional advice.
  • Upon Death. For many a pension is the greatest liquid financial asset. Planning for what might happen upon your death is a vitally important part of your planning. Frankly the effect of a well thought through strategy can have enormous benefits to your beneficiaries.

Contact us today to discuss maximising your pension