Posted by tudor 30th January 2023

Pension Planning – Are you missing a trick

Pensions can often seem complicated, daunting and, we’re the first to admit it, not particularly exciting! It’s obvious to us all that making good financial decisions and preparations now will literally pay dividends in years to come, but what’s the best way to go about getting the perfect pension for you?
In this blog, Jonny Czopczyc, our Junior Wealth Specialist, shares some interesting insights into pension planning for both business owners and employees, which might be new and relevant to you.

Pension schemes

Businesses are required by law to offer pension schemes to employees over 22 and earning £10,000 a year or more through a process called auto-enrolment. This process ensures the employee and employer contribute a minimum of 8% of the employee’s salary per month, before tax. The cheapest and easiest route is often considered as the NEST scheme, which was set up by the Government and is free for employers. However, there are also other options such as Group Personal Pension schemes, offering employees a cost-effective, tailored and flexible pension scheme. Group Personal Pension schemes are considered advantageous as they can be offered as a company benefit, helping to retain current staff and attracting prospective staff to the business.

Pensions for profit

Something many business owners may not necessarily be aware of is that pension contributions are a tax-efficient way of taking profit from your business. Limited company owners can benefit from corporation tax relief (currently 19%) on pension contributions, as they are an allowable expense. If you’re busy running a business, these simple ways to make your pension work for you can often be overlooked in favour of more pressing day to day activities.

There are still benefits if you work for yourself but not through a limited company. But according to the Institute for Fiscal Studies, only 16% of self-employed individuals contribute to personal pensions, suggesting a significant knowledge gap and demonstrating the importance of seeking pension advice.

Pensions for tax relief

People often don’t realise that higher and additional rate taxpayers can claim back an extra tax relief 20% or 25% tax relief on pension contributions. This can be done by contacting HMRC, who will adapt your tax code to offset the value of the pension contributions you have made in a given tax year, with the amount of tax you will pay the following tax year.

Jonny says: “Pensions exist in an ever-changing landscape and what might have once been right for you could have been replaced with a stronger alternative.

“We’re here to keep you informed and up to date on the best ways to save for your retirement and ensure that your pension gives you the best possible financial outcome, both now and in the future.

“I’d love to work with you and help you get the most from your pension; feel free to book an appointment today.”

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Your personal circumstances will affect your choices about a pension. We recommend you get professional advice before making any investment decisions. This blog is not intended to be advice.

Get in touch to see how we can help you