The Magic of Pensions

Here’s my take on why pensions are the best investment vehicle around…

→ Tax-Efficient Growth: Investments within pension funds experience growth over a long time-period without exposure to income or capital gains tax.

→ Tax Relief: Contributions of up to ￡60,000 annually benefit from tax relief. As a basic rate taxpayer, a ￡100 contribution in effect costs you ￡80. As a higher rate or additional rate taxpayer, you can claim back further relief resulting in a ￡100 contribution costing you ￡60, or ￡55 respectively.

→ Tax Planning for Higher Earners: Pensions become a valuable tool for individuals earning over ￡100,000, assisting in the reclaiming of Personal Allowance & avoiding the 60% tax trap.

→ Diversified Investment Opportunities: Pensions give investors the flexibility to diversify their portfolio across various assets, enhancing the overall investment strategy.

→ Structured Tax Planning at 55: Upon reaching the age of 55 (57 from 2028), you may have various options for how you access including Tax-Free Lump Sums, Flexi-Access Drawdown, uncrystallised funds pension lump sum (UFPLS) and Annuity purchase. Planned properly, these options allow you to minimise tax paid on the way out. Not all pensions allow all these options, so it is important to review your pensions prior to making any decisions.?

→ Property Investment: With certain types of pensions, multiple funds can collaboratively invest in commercial properties for a business.

→ Estate Planning Benefits: By falling outside of your estate on death, pensions can be an effective way to mitigate inheritance tax.

→ Corporation Tax Reduction: Employer contributions to your & your employees pensions is a tax deductible expense & can reduce your taxable profits.

So, in skilled hands, pensions can be an exceptionally useful tool to build & preserve your wealth.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Approved by the Openwork Partnership 29/04/2024