End of tax year financial planning 2009/2010 - pensions
As the end of the tax year approaches there are many issues to consider when it comes to pension planning. It is important to remember that although the end of the tax year may be 5 April, some providers will have deadlines prior to this. Therefore I would encourage you to complete your planning and contributions by the 31 March 2010.
Pensions – paying in
The key points to note are as follows:
- For those with earnings over £130,000 (don’t forget this includes everything – dividends, bank interest, rental income etc) ensure your special annual allowance contribution of £20,000 is paid (this is £30,000 in some cases – check with your adviser if unsure).
- If pension payments of up to £20,000 bring relevant income below the £130,000 threshold, consider higher pension contributions.
- If gift aid payments can be combined with pension contributions to bring relevant income below the £130,000 threshold, consider a higher pension contribution.
- If you pay a pension contribution of £3,600 gross (£2,880 net) for any non working spouses/civil partners, children, grandchildren. They will receive 20% tax relief. The following link can give you an estimate of the value of such a contribution.
- If you have earned under £130,000 you can pay personal pension contributions of up to 100% of earned income. If you can benefit from an employer contribution, this could be up to £245,000. For example, I am currently dealing with a client who is contributing c£200,000 into a SIPP via their company. If you are interested in pursing this I would be happy to assist. This reduces the company’s liability to corporation tax as the employer would receive corporation tax relief on pensions contributions provided that payments are made ‘wholly and exclusively’ for the purposes of trade.
- If you have an investment bond that you have chargeable gains on, you can offset it with a pension contribution.
- Consider using a salary sacrifice where employee and employer national insurance savings can be applied to pension contributions (check with your employer if offered) – particularly applicable for those earning above £40,040 in the current tax year.
Pensions – drawing benefits
It is worth considering the following points:
- If you are aged between 50 - 55 and wish to take benefits before the changes to the minimum pension age from April 6 2010, you need to make sure you’ve processed your decisions before the end of the tax year.
- Recycle excess income as a pension contribution. You can make further pension contributions and this will build a further tax free fund.
- Look at withdrawal levels before the end of the tax year to take stock .
Anne McClean is a senior Financial Adviser at Nightingale Associates. The views given in this blog are personal to the author. If you would like to discuss the contents of this post with Anne you can call her on 020 7353 1597.
M&H LLP trading as Nightingale Associates is authorised and regulated by the Financial Services Authority.
Date: 10th February, 2010
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