From April 2015, over 55’s will have far more flexibility in access to their pension pots. The Taxation of Pensions Bill has been published, and will soon be on the statute books.
This reform is the most significant of all the pension reforms over the last ten years. In addition to the 25% tax free lump sum, any amount can be withdrawn from a pension pot and this will be taxed at the individual’s marginal rate.
Since the Chancellor announced this proposal in the Spring Budget, we have had enquiries from a number of clients, many of whom were not previously interested in pension planning. We see the new flexibility as a very welcome proposal, and it is treating taxpayers as mature adults, rather than the State deciding what is best of the individual. Of course that responsibility is not to be taken lightly, and our sister company, Concerva is well placed to advise on investment strategies, and pension drawdown.
Given the new flexible regime you might wish to take advantage of the generous pension tax reliefs. Ordinarily you can contribute up to £40,000 per annum into a pension scheme. However if you have not made previous pension contributions, the maximum contribution you can make is £190,000 this tax year. The contribution can come from a company, in which case the company receives corporation tax relief, or from you and you would receive the tax relief. If you are a higher rate (40%) or additional rate (45%) taxpayer, the pension tax reliefs are especially generous.
In order to gain the tax relief, the pension payment needs to be made in the accounting year. And so if your business year end is 31st December, you should consider making a pension payment to gain the tax relief in this financial year.
As always, if you want to know more, drop us a line, or give us a call on 0161 832 4451.