On top of tax relief on contributions, money saved in a pension will largely accrue tax-free until you draw on it as income then you has to pay income tax on the income generated, unless of course it does not exceed your personal allowance. In 2014/15 the personal allowance for somebody born before 6 April 1938 is £10,660 or £10,500 for those born between 6 April 1938 and 6 April 1948. If you die before drawing any money from your pension it will also normally be passed on to your beneficiaries free of inheritance tax.
In addition to the annual allowance, which governs how much you can pay in each year, there is also a lifetime allowance. If the total value of your pensions exceeds this limit a tax charge will apply.
This allowance has been reducing over the years. In 2011 it stood at £1.8 million but fell to £1.5 million at the start of the 2012 tax year before falling again to £1.25 million at the start of the 2014 tax year. It has now been reduced further to £1 million.
Although the reductions have been made to target the wealthiest of individuals, experts have expressed concern that it’s not just extreme earners that will be caught out. If you want to make sure you are not caught out Enable’s IFAs are happy to look at where you are with your pension.
Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE
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