Posts Tagged ‘retirement options’

5 Tips to Help You Save for Retirement

Wednesday, January 6th, 2016

5 Tips for Saving for RetirementAdjusting to retirement is a big change. Not having a job to go to every day after doing so for many years requires a complete lifestyle change, which you may or may not be prepared for, both mentally and emotionally.

The financial implications can be also seem daunting however with good planning, your sunset years can be comfortable and enjoyable.

By following the right preparation and advice you can make saving for your retirement easier. Here’s five areas you should consider to help you make the right plans in regard to saving for life after your working years.

1) Understand the new pension rules

If you have invested in a pension scheme, you have the freedom to decide how to take your pension. However, there are tax implications which many people do not understand. Typically, up to 25% of personal pension can be taken out without paying any taxes for those aged 55 years and above. The rest of it is taxable. Because pension income is put together with other income in the tax year the income is received and the total is taxed accordingly. This means that taking out a large sum could come with an equally large tax bill.

If your income is above a given bracket this could also cause personal allowance to be lost. To counter this you may benefit from spreading withdrawals over more than one tax year to benefit from tax allowances.

2) Pass on your tax benefits efficiently

The law enables you to pass on your pension upon your passing. This used to be subject to taxes of up to 55% if you had started withdrawing and the balance had been paid out as a lump sum. The rules changed and made it possible to pass on more of your pension upon your passing and in some cases, tax free.

For those who pass away before the age of 75, no income tax is paid when beneficiaries make withdrawals. After this age, withdrawals are taxed as income. Typically, pensions are exempt from inheritance tax. However, the rules vary depending on personal circumstances.

3) Two is better than one when it comes to tax allowances

Spouses as well as registered civil partners can transfer assets to each other without paying taxes. If one of you pays more taxes, it makes financial sense to spread or even them as a couple by transferring investments to save taxes on the one who pays less taxes. Also, a new Marriage Allowance has been introduced where it is possible to transfer 10% of personal allowance between partners to bring down the joint tax bill.

4) Taking all the shelter you can will also make a difference

There are a number of tax shelters available. The best known is the Individual Savings Account (ISA) that does not attract Capital Gains Tax or any other tax on income. Income from ISAs does not need to be declared making them ideal for generating additional, tax-free income for retirement. It is important to understand that an ISA is not in itself an investment but a way to shelter your savings and investments from tax.

You can withdraw from you ISA when you need to and they have no upper age limit. Individuals can put a maximum of £15,240 in an ISA for the current tax year (2015/16) and allowances can now be divided between different ISAs such as Stock and Shares ISAs and Cash ISAs as per an investor’s choosing.

5) Maximize on tax allowances

There are other changes that have been made that will be implemented this year where there will be added tax-free allowances for cash interest and income from shares or dividends. Some retirees may be paying thousands of pounds in taxes that they perhaps shouldn’t be. The changes have been confusing for some and unfortunately this has led to some not being able to take advantage of all the tax-free allowances they can get.

Speak to a Financial Adviser About Your Retirement Today

Sitting down with a professional financial adviser could have a major impact on your tax bill and improve the quality of your life in retirement. A pension adviser will be able to look at every aspect of your pension and help you understand how to make the most of these changes.

Maxim Wealth Management offers independent financial advice on pensions, retirement, equity release and other aspects of personal finance management. Contact us today to discuss your pension and let us help create the best possible retirement plan.

Retirement Planning

Thursday, September 15th, 2011

When it comes to retirement planning, time is one of the most important assets you have to save for retirement.

It takes a long time to build up the investments needed to provide a comfortable retirement income and the sooner you start retirement planning and saving, the better.  Even putting a small amount away on a regular basis, if done long term, can make a difference.  Both occupational or company pension schemes and personal pensions are tax-efficient.

Your contributions to company pension schemes are deducted from pay before tax is calculated and for contributions to personal schemes, tax you have paid before you make your contribution is reclaimed for you by your provider.  In to each type of plan you can contribute up to £3,600, 100% of your net relevant earnings or £50,000 (for tax year 2011/12), whichever is the greater and you can then use your personal income tax allowances before calculating the tax you pay when that pension finally pays out.

If you work for more than one employer, a financial adviser can help you check your previous company schemes and work out what you are entitled to.  Your retirement planning might also include individual savings accounts (ISAs) which are tax-efficient ‘wrappers’ all profits earned on investments held inside them are paid out to you free of further tax.  The amount of money you can invest in an ISA is also subject to limits (£10,680, tax year 2011/12), but it is worth getting into the habit early.

If you think you could benefit from retirement planning we’d be happy to offer our services.  But don’t delay because the longer you put off planning for your retirement the less retirement income you’ll have.  Call us now on 0141 764 0040 and let’s see if you can help.  Contact Us.

A pension or an ISA?

Thursday, September 15th, 2011

Our financial advisor explains that while a pension is one of the most common ways to save for retirement, it may not be your only option for retirement income and that an individual savings account (ISA) may provide an alternative.

Difference between a pension and an ISA

One of the main differences between a pension and an ISA is in the way they are taxed. Your pension payments will qualify for tax rebates up front, at your highest rate of income tax, but then the retirement income you receive later on will be taxed. With an ISA, the money you contribute will have already been subject to tax, but any withdrawals you make will be tax free. It’s also useful to be aware that your pension income counts towards your personal tax-free allowance, while your ISA withdrawals do not.

You might think that, thanks to the tax relief, a typical higher rate taxpayer saving the same annual amount into both an ISA and a pension plan over their working life will find that by the time they reach retirement age the pension fund is larger. This is obviously fully dependent on their investment choices and tax regulations remaining consistent but the tax rebates are important as they add to the value up front and therefore influence the size of annuity that can be bought. However, the retirement income from your annuity is likely to be taxable, unlike ISA withdrawals. But, your annuity payments are guaranteed for life and withdrawing the equivalent from an ISA may eat into your capital. It is therefore possible that the ISA capital eventually runs out.

Other pension benefits include the fact that employers can pay into a company or stakeholder pension scheme, and the annual contribution limits for pensions are much higher than for ISAs. Nevertheless, an ISA is much more flexible. With a pension, you have to wait until you are aged 55 to make withdrawals, whereas an ISA can be accessed pretty much whenever you like.

With longer life expectancies, as well as some high profile issues concerning the way in which a minority of pension funds have been managed, many investors’ funds will not provide quite as much retirement income as expected. As a result, some people are now looking to boost their pension funds by topping up their company pension, or by using additional investment vehicles. One other solution however, could be to use the ISA option and help ensure your retirement income is as healthy as possible.

Your options for retirement can be complex and will depend entirely on your own personal circumstances. If you’d like to speak to one of our financial advisors about pensions or ISAs they would be more than happy to take your call on 0141 764 0040.

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