Putting your pension first
By Kirsten Hastings, 15 Feb 16
Pensions are a tax efficient and flexible way to save towards retirement but time is running out in the UK to use this year’s allowance, says Sarah Lord, managing director of Killik Chartered Financial Planners.
The amount that can be saved tax free in a pension is being reduced to £1m from £1.25m in the new tax year meaning that more people than ever will be subject to an LTA charge of up to 55% on lump sum withdrawals above this threshold.
With this in mind, you need to assess whether you’re better off applying for fixed or individual LTA protection going forward.
You can’t apply for fixed protection until July but it is important that there are no further pension contributions beyond 5th April.
Many people are likely to be caught by the lifetime allowance reduction – particularly if they remain an ‘active member’ in a company pension scheme.
Do the sums on whether it makes more sense to remain in the pension and keep receiving employer contributions or whether to opt out and secure fixed protection.
“There is no one size fits all solution here and much depends on your circumstances and financial position so make sure you carry out any review of your pension provision before the end of the tax year,” Lord says.
Tags: Killik & Co | Pension | Sarah Lord
