Five retirement planning fundamentals
By Kirsten Hastings, 29 Feb 16
With the tempo of pension reforms unlikely to slow, there are sure to be new pitfalls to avoid. But according to St James’s Place there are five retirement planning fundamentals that will remain. Use the arrows on the images below to find out what they are.
Experts believe that tax relief for higher and additional rate taxpayers will be cut in an effort to tilt pension system benefits more towards basic rate taxpayers.
Pension tax relief means that, for every £1,000 ($1,387, €1,268) paid into a pension, a basic rate taxpayer has to contribute £800, a higher rate taxpayer only needs to pay £600, and an additional rate taxpayer just £550.
At a time when the chancellor needs to make deeper cuts to public spending and to improve lower earners’ incentive to save, pension tax relief is a natural target for reform.
If reports prove correct, the chancellor could be about to break the link between tax relief and marginal rates of income tax by introducing one flat rate of pension tax relief, instead of the tiered system in use today.
The flat rate could be anywhere between 20% and 33% but, crucially, it could be put in place immediately after an announcement is made in the budget on 16 March.
Higher and additional rate taxpayers, who can get up to 40% or 45% tax relief returned to their pension pot, may want to take the opportunity to accelerate pension saving while the existing – some would say ‘generous’ – system remains.
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