If you’re eligible for a Pension in 2016, it can seem daunting with all the on-going changes and regulations around it, it is hard to know fully what you are entitled to and how it all works. Maxim Wealth Management have put together a blog post with the latest news and on-goings from the state pension to reduce your confusion and help advise you on everything you need to know.
What benefit is there to you when you decide to take out a pension fund?
Pension premiums can seem high, especially if you’re in a lower income bracket, are they really worth it?
How pension funds work:
Once you sign on the dotted line, a monthly amount will be deducted from your salary or bank for your pension fund. When you retire, you can draw money from this fund. Since April 2014 changes in legislation make it possible to access this fund from the age of 55. You can elect to remove a small amount or larger amounts.
Investments, are they really worth it?
Investment growth within a Pension fund is tax-free.
How tax relief works:
If self-employed your contributions are paid net of 20% tax the scheme administrator claims back the 20% from the government and this is paid back into the fund. Employee’s contributions are deducted from earnings before tax is deducted, means you get 20% tax relief immediately from the government. Higher rate tax payers are allowed to claim an additional 20% via your tax return. Having help from a pension advisor on this topic would be highly beneficial so you know how much you are allowed to claim.
It’s often a good idea to contribute more than the minimum amount into a pension fund. As a general guide:
Divide the age you start paying into the fund and halve it. This is the percentage of your pre-tax salary that you need to accumulate annually until retirement.
Currently you can contribute as much as you earn in one year, up to £40 000 per annum and receive tax relief. You may use HMRC’s “carry forward” to use the last three year’s limits. Once you begin to draw from your fund, the annual limit is reduced to £10 000. In addition, lifetime limits have been reduced from £1.25m to £1m, a significant decrease.
The state pension:
Two-tier payments have been replaced with a new ‘flat rate’ payment. This has been altered to simplify state pension systems. This means that weekly payments of £155.65 a week are now the norm. If you reach state pension age after 6 April 2017, you are eligible for the new state pension. If you reach that age before April 2017 you qualify for the old pension plus additional state pension (S2P and SERPS) that you accumulated while working. People still within the old system can top up their state pension or defer it under changed terms.
Going forward it’s going to become important to balance your risk, age, and the remaining time you have left to pay into a retirement fund. You can download a free guide to retirement.
About Maxim Wealth Management:
This blog post was written by Maxim Wealth Management – A financial Advisory firm based in Glasgow, dedicated to help retirees to preserve and protect their wealth.
Making investments or retiring is amongst the most vital decisions you will ever make. That is the reason Maxim Wealth Management work to build your trust and confidence through every progression of life’s journey. Our main goal is to be your personal advisor for pensions, investments and financial solutions required for monetary and retirement security.
The main focus is helping those in or nearing retirement plan for their financial future. Offering guidance in developing strategies related to optimising security benefits, as well as tax planning, estate planning and income planning using insurance and investment products.
Why Choose Us?
The future is full of “uncertain events,” but who has time to sit around worrying? Let us help protect you and your family with quality of investment and retirement services so you can have peace-of-mind and get back to living. Everything we do, from our carefully selected investment options to our excellent customer and online service is designed to help our customers save for their futures. We offer the best pension plan and solutions on the best way to invest money.
Maxim Wealth Management offer pension advice from their offices in Glasgow and London. To request a FREE consultation please contact:
T: 0141 764 0040