{"id":1708,"date":"2017-01-30T12:41:36","date_gmt":"2017-01-30T12:41:36","guid":{"rendered":"http:\/\/www.fpgonline.co.uk\/?p=1708"},"modified":"2017-02-21T12:35:54","modified_gmt":"2017-02-21T12:35:54","slug":"ten-reasons","status":"publish","type":"post","link":"https:\/\/www.fpgonline.co.uk\/index.php\/ten-reasons\/","title":{"rendered":"Ten Reasons To Pay Into Your Pension Before April"},"content":{"rendered":"<p>Pensions remain the most tax efficient way to save for retirement. And the new freedoms have removed any lingering barriers to accessing funds and passing on unused funds on death.<\/p>\n<p>To ensure our\u00a0clients don&#8217;t miss an opportunity for a top up, we&#8217;ve put together 10 reasons to fund their pension before April.<\/p>\n<p><strong>1. Tax relief at highest rates<\/strong><\/p>\n<ul>\n<li>Successive Chancellors have decided against cutting the rate of tax relief on pension saving. But with the\u00a0spotlight constantly falling on pension saving incentives at each Budget, relief at the highest rates may not be around forever.<\/li>\n<li>Additional and higher rate taxpayers may wish to contribute an amount to maximise tax relief at 45%, 40% or even 60% while they have the opportunity. Carry forward can allow contributions\u00a0in excess of the current annual allowance without any annual allowance tax charge.<\/li>\n<\/ul>\n<p><strong>2. Avoid the annual allowance cut for higher earners by using carry forward<\/strong><\/p>\n<ul>\n<li>Some high income clients will face a cut in the amount of tax-efficient pension saving they can enjoy this tax year. The standard \u00a340,000 AA will be reduced by \u00a31 for every \u00a32 of &#8216;income&#8217; clients have over \u00a3150,000 in a tax year, until their allowance drops to \u00a310,000.<\/li>\n<li>But it&#8217;s possible that some of these clients may be able to reinstate their full \u00a340k allowance by making use of carry forward. The tapering of the annual allowance won&#8217;t normally apply if income less personal contributions is\u00a0\u00a3110k or less. A large personal contribution using unused allowance from the previous 3 tax years can bring income below \u00a3110k and restore the full \u00a340k allowance for 2016\/17. And some of it may attract 60% tax relief too.<\/li>\n<\/ul>\n<p><strong>3. Last chance for a \u00a350k carry forward<\/strong><\/p>\n<ul>\n<li>This tax year is the last opportunity to carry forward unused annual allowance from\u00a02013\/14 when it was still \u00a350k. If it isn\u2019t used, the additional allowance will be lost and future carry forward limited to a maximum of \u00a340k per year.<\/li>\n<li>The maximum carry forward of unused allowances for the current year is \u00a3130,000, being \u00a350,000 for 2013\/14 plus \u00a340,000 from 2014\/15 and 2015\/16.<\/li>\n<li>Next tax year this will settle at \u00a3120,000, as all carry forward years will have a maximum allowance of \u00a340,000.<\/li>\n<\/ul>\n<p><strong>4. Boost SIPP funds now before accessing flexibility<\/strong><\/p>\n<ul>\n<li>Anyone looking to take advantage of the new income flexibility for the first time may want to consider boosting their fund before April, potentially sweeping up the full \u00a340,000 from this year plus any unused allowance carried forward from the last three years.<\/li>\n<li>The Money Purchase Annual Allowance (MPAA) will mean the opportunity to continue funding will be restricted. The MPAA is currently \u00a310k but is set to fall to \u00a34k a year in April &#8211; with no carry forward.<\/li>\n<li>Remember too that you may be able to help your clients avoid this allowance cut completely. Anyone already in\u00a0capped drawdown, or who only takes their tax free cash, can access their pension pot and retain their full\u00a0\u00a340,000\u00a0allowance.<\/li>\n<\/ul>\n<p><strong>5. Recover personal allowances<\/strong><\/p>\n<ul>\n<li>Pension contributions reduce an individual&#8217;s taxable income. So they&#8217;re a great way to reinstate the personal allowance.<\/li>\n<li>For a higher rate taxpayer with taxable income of between \u00a3100,000 and \u00a3122,000, a personal contribution that reduces taxable income to \u00a3100,000 would achieve an effective rate of tax relief at 60%. For higher incomes, or larger contributions, the effective rate will fall somewhere between 40% and 60%.<\/li>\n<\/ul>\n<p><strong>6. Avoid the child benefit tax charge<\/strong><\/p>\n<ul>\n<li>A personal contribution can also ensure that the value of child benefit is preserved for the family, rather than being lost to the child benefit tax charge. And it might be as simple as redirecting existing pension saving from the lower earning partner to the other.<\/li>\n<li>The child benefit, worth over \u00a32,500 to a family with three kids, is cancelled out by the tax charge if the taxable income of the highest earner exceeds \u00a360,000. There&#8217;s no tax charge if the highest earner has income of \u00a350,000 or less. As a pension contribution reduces \u2018income\u2019 for this purpose, the tax charge can be avoided. The combination of higher rate tax relief on the contribution plus the child benefit tax charge saved, can lead to effective rates of tax relief as high as 65% for a family with three children.<\/li>\n<\/ul>\n<p><strong>7. Sacrifice bonus for an employer pension contribution<\/strong><\/p>\n<ul>\n<li>March and April is typically the time of year when many companies pay annual bonuses. Sacrificing a bonus for an employer pension contribution before the tax year end can bring several positive outcomes.<\/li>\n<li>The employer and employee NI savings made could be used to boost pension funding, giving more in the pension pot for every \u00a31 lost from take-home pay. And the reduction in the client&#8217;s taxable income potentially means that lost personal allowance may be recovered, or the child benefit tax charge avoided.<\/li>\n<\/ul>\n<p><strong>8. Providing for loved ones<\/strong><\/p>\n<ul>\n<li>The new death benefit rules will make pensions an extremely tax efficient way of passing on wealth to family members &#8211; there&#8217;s typically no IHT payable and there&#8217;s also the possibility of passing on funds to any family members free of tax for deaths before age 75.<\/li>\n<\/ul>\n<ul>\n<li>Clients may want to consider moving savings which would otherwise be subject to IHT into their pension to shelter them from IHT and benefit from tax free investment returns. And provided they&#8217;re not in serious ill-health at the time, any savings will be immediately outside the estate.\u00a0<b><br \/>\n<\/b><\/li>\n<\/ul>\n<p><strong>9. Dividend changes and business owners\u00a0<\/strong><\/p>\n<ul>\n<li>Many directors of small and medium sized companies may be facing an increased tax bill following changes to the taxation of dividends. A pension contribution could be the best way of cutting their overall tax bill, while still receiving the same level of income.<\/li>\n<li>And, of course, if the director is over 55 they now have full unrestricted access to their pension savings.<\/li>\n<li>There&#8217;s no NI on an employer pension contribution or dividend payment, but dividends are paid from profits after corporation tax AND may also be taxable in the director\u2019s hands too. By making an employer pension contribution, this ensures that the tax that would have otherwise gone to HMRC boosts the director\u2019s retirement savings instead.<\/li>\n<\/ul>\n<p><strong>\u00a010. Pay employer contributions before corporation tax relief drops\u00a0<\/strong><\/p>\n<ul>\n<li>Corporation tax rates are set to fall from 20% to 19% from the financial year starting April 2017 with a further planned cut to 17% to effect from April 2020.<\/li>\n<li>Companies may want to consider bringing forward pension funding plans to benefit from tax relief at the higher rate. Payments should be made before the end of the current business year, while rates are at their highest.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><b class=\"\">If you would like to talk to us about your investment and our financial strategy please call 0800 731 7614\u00a0and we will be happy to arrange a meeting in our offices in the heart of Teddington.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Pensions remain the most tax efficient way to save for retirement. And the new freedoms have removed any lingering barriers to accessing funds and passing on unused funds on death. To ensure our\u00a0clients don&#8217;t miss an opportunity for a top up, we&#8217;ve put together 10 reasons to fund their pension before April. 1. Tax relief [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-1708","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Ten Reasons To Pay Into Your Pension Before April - The Financial Planning Group<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fpgonline.co.uk\/index.php\/ten-reasons\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ten Reasons To Pay Into Your Pension Before April - The Financial Planning Group\" \/>\n<meta property=\"og:description\" content=\"Pensions remain the most tax efficient way to save for retirement. 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