PENSION PLANNING – WHAT YOU NEED TO KNOW

Whilst the pension legislation landscape continues to alter, one principle remains constant: we all need to keep an eye on our pension plans to help ensure we’re making adequate provision  and pension planning for the future. See below the reasons why you should be on top of pension planning and ways to do so. If you have any questions about pension planning please contact our IFA’s based in Eastbourne, East Sussex. We serve clients in Lewes, Seaford, Newhaven, Hastings, Bexhill, Crowborough and Uckfield.

AUTO – ENROLMENT

Successive governments have, quite rightly, placed considerable emphasis on the need for us all to save more for retirement. There have been a number of steps in this direction, including the introduction of auto enrolment, which gives many more workers their first opportunity to accumulate savings for their future in a workplace scheme.

Employees who are not currently saving into a workplace pension will be automatically included in a scheme, although they have the right to opt out.

The Government is introducing the changes on a gradual basis. A contribution of 1% of salary from both employee and employer will be increased in stages to 4% in 2018 for an employee, 3% from the employer in most cases and 1% tax relief from the Government.

Some have argued that the 8% savings figure this gives won’t necessarily prove to be enough to fund a decent retirement, but it has to be viewed as a step in the right direction and contribution levels will be subject to review.

INCREASE IN THE STATE PENSION AGE

With the continued increase in life expectancy, the Government has to find a way to manage the overall pension bill. To that end, the equalised state pension age scheduled for 2018 is set to increase in stages from 65, eventually reaching 68 between 2044 and 2046.

MOVES TO ENGAGE MORE WORKERS 

The tax treatment of pension contributions has long been viewed as a major incentive to save for retirement. In a move designed to make the taxation of pensions simpler and more easily understood by all, the Chancellor has announced a Green Paper entitled ‘Strengthening the Incentive to Save: A Consultation on Pension Tax Relief’.

Pensions, he said, could be treated like Individual Savings Accounts (ISAs) for tax purposes. This review will consider whether the current system that sees pension contributions receiving tax relief, funds being exempt from tax while invested and taxed when paid out, could be overhauled.

This could be replaced by a system where contributions don’t receive tax relief but are tax exempt while invested and tax exempt when paid out. The Government’s consultation closed on 30th September and the outcome will no doubt make interesting reading.

TAKING THE RIGHT STEPS IN PENSION PLANNING

It makes sense to:

  • Speak to your adviser about arranging a regular review to help ensure you’re keeping your pension planning on track
  • Make pension saving a priority. Think about topping up your contributions whenever your financial circumstances permit, remember, within limits they attract valuable tax relief
  • Know your state pension age and get a forecast of how much you’ll receive.

It is important to take professional advice before making any decision relating to your personal finances and pension planning. Information within this blog is based on our current understanding of taxation and can be subject to change in future.

It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details.

We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation, are those currently applicable or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.

Please contact us for more information or for a free initial pension review. We serve clients across East Sussex in Eastbourne, Hastings, Lewes, Bexhill, Seaford, Newhaven, Crowborough and Uckfield. Read more about pension reviews and pension/retirement advice and planning.