Pension planning opportunities Example:


The current tax year could well see the last opportunity for some very significant pensions planning.


Steve Woodham, Pensions Manager


In recent years it has been possible to gain significant tax relief by putting a large proportion of profits into a pension pot – an economic way of giving long term personal financial security, and with the case of Self Invested Pensions opening up some exciting opportunities including property. The opportunity will be significantly reduced and it is very important to speak to your accountant and financial planner well before the end of the financial year on 5 April 2011.


Change to Pension Annual Allowance It has been announced by the new Government that the annual allowance will decrease from £255,000 to £50,000 in April 2011.


The opportunity for those of you with anticipated earnings of less than £130,000 in this tax year, as well as tax years 2008/09 and 2009/10, and the means to pay substantial pension contributions either personally or via company contributions in the tax year 2010/11.


It will be possible for you to make substantial pension contributions of up to 100% of earnings, and for companies to make contributions of up to £255,000. Total contributions from all sources should not exceed £255,000 to avoid 40% tax charges on the excess.


A client and their company are intending to maximise pension contributions in the current tax year. The client has taken a salary of £100,000 from the company for the last three years. The client can make a tax relieved pension contribution of £100,000 personally and the company could then make a contribution of up to £155,000. Alternatively the company could fund the entire contribution themselves.


Other issues


The ‘input period’ for a pension will determine in which tax year a contribution is treated for Annual Allowance purposes. Most insurance company schemes will have a default input period from 6th April to 5th April. However many of the clients that this will affect will have self invested schemes and the input period may be different.


It is important that a large pension contribution made in this tax year is not made to a scheme with an input period ending after 5th April 2011. The contribution would then be treated for annual allowance purposes in the 2011/12 tax year and therefore the much lower allowances of £50,000 rather than £255,000. Contributions in excess of the annual allowance are currently taxed at 40%.


The above assumes that the contributions will not mean that your pension fund will exceed the lifetime allowance of £1.8m.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12