Will Higher Rate Tax Relief on pensions be removed ?

Posted by: on Nov 11, 2011 | No Comments

There is increasing speculation that the government is considering removing higher rate tax relief on pensions.  We can’t be sure whether this will happen, but may it be announced in the 29th November 2011 Autumn Statement.   Last time the government changed pension tax relief, the changes took place with immediate effect, giving pension investors no time to act.

If you are a higher rate taxpayer you may want to consider doing so before 29 Nov 2011.  Personal Pensions are one of the most tax efficient ways to save for retirement. Tax relief is given at up to your highest rate. For taxpayer in the highest rate 50% tax band, £10,000 invested in a pension could cost as little as £5,000. For a 40% rate taxpayer £10,000 invested in a pension could cost as little as £6,000. Currently you to take up to 25% as a tax free lump sum from age 55.

Of course we can not be sure that the higher rate of tax relief will disappear on the 29th Nov, but if you were planning to make a pension contribution this tax year, and have the cash flow available, early action may be of benefit.

Taxpayers can contribute up to £50,000 per year, and there are special rules which allow you to invest more if you have not used up all of the prior year allowances.

Sir Tax Accountants Camberley continue to look for way to reduce clients tax liability. Please feel free to contact us if you require further information 01276 451465.

New Pension Rules Just Released

Posted by: on Nov 2, 2010 | One Comment

Earlier this year the coalition government announced it would review the complex set of pension rules introduced by the last government to restrict the level of tax relief for higher earners. The outcomes of its review were released on 14th October and are much better than most people expected with a new set of simplified contribution rules. Most changes come into effect next tax year (April 2011) and include:

• £50,000 – the new limit on how much you can contribute into pensions each tax year. From April 2011 you will be able to contribute 100% of your relevant UK earnings, capped at £50,000. Contributions greater than the annual allowance could trigger a tax charge. If you do not use your full allowance in one year you may be able to carry it forward up to three tax years.

Up to 50% – the tax relief your pension contributions could receive. Basic rate taxpayers will receive 20% tax relief, higher rate taxpayers up to 40% tax relief and 50% rate taxpayers up to 50% tax relief. This is good news for very high earners as many expected tax relief to be restricted to 40%.

£1.5 million – the total you can hold in pensions from April 2012 without a tax charge. Until 2012 the limit is £1.8 million. There will be provisions to protect pots already in excess of £1.5 million, otherwise anything above the limit when you take benefits is effectively taxed at 55%.

16 – the factor used to calculate the value of a final salary pension contribution will rise 60% from 10 to 16 in April 2011 to better represent their true value. Final salary contributions will therefore use up a far larger proportion of the new lowered annual allowance and for high earners may even exceed it triggering a potential tax charge

WHAT THIS MEANS

Pension contribution allowances have been simplified and will change from April next year. You will be able to contribute up to your earnings each tax year, capped at £50,000, and receive tax relief at your highest marginal rate (as much as 50%).

If you currently earn more than £50,000 and your total annual income has not reached £130,000 since April 2008, you have the opportunity to make a contribution in excess of £50,000 before April 2011 to boost your retirement savings.

Investors with pension pots nearing or above £1.5 million should take caution, and active members of a final salary pension should be aware of the change to how their annual contribution is calculated.

Please note this is our early understanding of these rule changes. Full details have not yet been confirmed and are subject to change. Furthermore the value and levels of relief will depend upon individual circumstances.

This article is taken from the SIPP Times by kind permission of Hargreaves Lansdown. You can find more information on their website (www.H-L.co.uk).

Long Term Tax Planning – Isa Trend Investing

Posted by: on Oct 22, 2010 | 2 Comments

Individual Savings Accounts (ISA) are vehicles for investments, usually in unit trusts or similar investments, which are free from income tax and capital gains tax.
ISA trend investing is intended to capitalise on the long term tax free growth of ISAs.
Top performing investments are selected based on a number of criteria such as long term fund / fund manager performance, in sectors that are predicted to have high growth. The objective is to select funds that will consistently outperform the World leading NASDAQ market.
The chosen funds are monitored based on the volume of professional investors buying or selling the fund. You follow the trend:
high volume of buyers early in a bull market suggests it is a good time to buy
high volume of sellers at the start of a bear market suggests it is time to sell.
This is where the majority of investors lose out – blindly staying invested for the long term hence losing the leverage of selling high in the market and buying back in when prices are low.
I know this through experience from the 2000-2003 bear market when I expreienced a big drop in my ISA fund value.

So on our 2009 summer holiday, when I read the book ‘Liquid Millionaire’ it did not take me long to make a decision to consolidate our investments and a large proportion of my pension under the guidance of Stephen Sutherland.
I have had quite a good track record of picking top performing funds but timing entry and exit from the market has always been a challenge.
Stephen Sutherland has got a fantastic track record of picking top performing funds as well as timing entry and exit from the market.
This has been verified in a challenging year since my initial investment, having achieved over 20% gain in less than one year and beating both the Nasdaq and FTSE100 markets by more than 10%.

A lump sum investment of £162k having 20% compound growth per year achieves millionaire status in 10 years. If you can also invest the maximum £10,200 per person ISA allowance each year, following the principal of ISA trend investing should put you on track for a comfortable retirement.
Please remember the value of investments can go down in value as well as up.