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After a lifetime\u2019s hard work, and years of getting up at the crack of dawn ahead of a long commute, the thought of a well-earned, long and happy retirement is certainly an appealing prospect to men and women of a certain age. However, to ensure the finance side of life is as stress-free as possible, getting your affairs in order, and avoiding tax traps, is essential.<\/p>\n
There is an excellent article in the Financial Times this week, which details five common pitfalls ahead of retirement \u2013 and as chartered financial\u00a0planners\u00a0with more than 25 years\u2019 experience in helping our clients prepare for an exciting next phase of life \u2013 The Financial Planning Group are here to help ensure you don\u2019t trip up when making key decisions. Here are five key considerations:<\/p>\n
Being hit by the pensions lifetime allowance Paying tax on pension contributions Look beyond your pension for alternative investments Minimise inheritance tax on your estate
\n<\/strong>If you are fortunate enough to have a large pension pot of \u00a31m or more, the pensions lifetime allowance (LTA) should be a consideration which may trigger excess tax charges when you come to take your pension benefits. Protection options can often be implemented to lock in higher LTA benefits, so it is important to seek advice on what is best for your circumstances.<\/p>\n
\n<\/strong>Tapered annual allowance rules were introduced in April 2016, which affect those on higher incomes, and although the tax deductible amount an individual can set aside each year for a pension remains at \u00a340,000, those considering retirement need to guarantee they have considered all options available to them in terms of carrying forward unused allowances from previous years.<\/p>\n
\n<\/strong>There are many alternatives to placing all your eggs in one pension basket and, if you haven\u2019t already diversified your investment strategy, a chartered financial\u00a0planner\u00a0will be able to advise you on the pros and cons of ISAs, Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs). Having the opportunity to sit and talk through these topics with an expert will ensure you have at least considered all the options before you retire.<\/p>\n
\n<\/strong>The FT article rightly states that; \u201cIf a pension is set up correctly to make use of recent rule changes, then if you die before age 75, pension assets can be received entirely tax free by whoever they are left to. If you die from 75 onwards the beneficiary will pay tax on these at their marginal rate as and when they draw on them.\u201d Why would anyone want to overpay tax on their investments, or ensure their family fully benefits from any inheritance windfall available if you were to die early. Again, we are here to talk you through your options and lock in protection for your loved ones.<\/p>\n