Your unique needs are in good hands with our pension planning experts
For everyone, there comes a point at which we wish to stop working and enjoy everything that later life has to offer. By considering pension planning sooner rather than later, you have the best platform on which to fulfil all your financial goals. An important part of this is developing a tailored retirement plan. This is where Saunderson House can help.
In an unstable economic environment, the tax rules and positions are constantly changing. It can have a huge impact on your contributions, fund growth and benefits withdrawal. So, what we do as pension planning experts is help you mitigate the risks and maximise your pension. And it all starts by establishing a robust pension plan – something that is more important than ever.
What is pension planning?
It is likely that, as a high earner, you are subject to the higher or additional of income tax. In England and Wales, that will be 40% of anything over £50,271 for higher-rate taxpayers. If you are an additional-rate taxpayer, that relief can be worth as much as 45%.
In Scotland, meanwhile, it’s slightly different. A higher rate of 41% is applied on incomes over £43,663 as of 2022-2023 , while the top rate taxpayers can claim 46% in pension tax relief.
Either way, contributing to a pension can often be an efficient way to save for your retirement – leveraging some generous tax reliefs in doing so.
A pension is a long-term investment later life. But the right advice and guidance are vital to ensure the wealth you accumulate in your working life will then work for you. Our private pension planning services provide clarity on your goals and certainty against a backdrop of ever-changing regulations. More importantly, we help you create the pension plan that’s right for you.
Planning your pension investments can also mitigate another pressing tax implication – that of inheritance tax (IHT). No matter your objectives, our pension financial advisers are here to help.
What are the tax benefits of pension planning?
It is important to understand the tax benefits of pension planning. That way, you will gain a much clearer perspective on why it can be so beneficial to consider starting the process now.
- Making contributions: As you pay in, you can qualify for on your pension contributions. You can claim up to 45% in income tax (or 46% if you are taxed in Scotland). Some of this is applied ‘at source‘, with the rest claimed via your tax return or directly from HMRC. This is one area your specialist advisers can support with.
- Investing in a pension now: Most pension fund investments are exempt from capital gains or other income-based tax. It applies whether it’s the employer or employee who makes the contributions towards your retirement.
- Withdrawing from pensions: Investing in a pension gives you the chance to take out some of your savings as a lump sum after you reach the age of 55. You can take out up to 25% of a pension pot without having to pay any. This can depend on the Lifetime Allowance, however, or if you have Personal Lifetime Allowance Protection. If the value of your pension exceeds this, you may incur a one-off charge of 25% when you buy an annuity or drawdown income from your pension. It’s worth noting this 25% relief applies to your pension pot, regardless of how you opt to withdraw. As part of our rigorous pension planning process, we will help you make the most of this relief and ensure it works as a lump sum or regular.
- After you pass away: If you die before the age of 75, your beneficiaries can receive your savings without paying any tax. A pension also sits outside your estate, so won’t count towards IHT. If a pension-holder dies after the age of 75, however, beneficiaries will then have to pay income tax on any payments received.
How Saunderson House can help with your pension plan
Are you contributing to your pension? Have you already started drawing on it? Or do you simply want to grow what you have? Whatever your needs, we apply our knowledge and experience of the complex regulations to shape your pension plan effectively. We consider all the lifetime and death benefits while keeping the context of your overall financial objectives in focus.
Your Saunderson House pension planning adviser can help you with:
- When and how much you should contribute
- Maximising tax relief on pension contributions for high earners
- Consolidating your existing arrangements
- Choosing appropriate pensions and investments
- What could happen to your pension should the unexpected occur
- Passing on your pension to your family
- Identifying opportunities to carry forward any unused pension allowances
- When and how you should draw benefits
Ultimately, we will provide you with an expert review of your existing pension arrangements. In doing so, we can then help you maximise the benefits by constructing a suitable pension plan tailored to your requirements. For more details on our pension planning services, please contact us and we will be happy to help.
Who can we help with our pension planning service?
Our pension planning expertise can benefit individuals who have a keen interest in their later life goals. But it’s not just for those coming up to retirement age – or who are already at that stage. We work with anyone with one eye on the future but often with little time to act upon it.
In particular, we have a wealth of experience in working with high net worth individuals. Maybe the demands of your job allow you precious little time to deal with your own affairs? Or perhaps you have specific, complex financial affairs that call for expert pension planning advice?
Saunderson House works with accountants, lawyers, doctors and people in other high-earning professions. Our role? To provide specialist advice, suggest effective strategies, and help make the best of the various tax reliefs and opportunities relating to your pension and investments.
Why choose Saunderson House?
Our client-centric focus means you can be sure of the highest standards of service when you choose us. All our pension planning advice is based on your specific needs; all our strategies and suggestions designed to fulfil them. Your pension financial adviser works closely with and for you to this end from the moment you first talk to us.
- We deliver specialist advice on broad pension and investment matters, but also in the context of ever-changing rules, reliefs and regulations.
- Our pension planning services can form part of a wider, more holistic financial planning approach; advising on the considerations you may have.
- We aim to uphold the highest standards of knowledge and ethical practice in everything we do. That is why we are proud to hold Corporate Chartered Financial Planner status.
- We are award-winning providers of private pension planning It further highlights our capabilities as a skilled, knowledgeable partner in supporting your later life goals.
Can we provide you with further details about our services? Would you like a complimentary, no-obligation consultation to discuss your needs? Get in touch today and see how we can help you.
Pension planning: Frequently asked questions
When is the best time to start thinking about your pension plan?
Now is as good a time as any – no matter what stage of your working life you’re at. The sooner you start, the sooner you can benefit from things such as tax relief on pension contributions for high earners. It can also give you a much clearer picture of what you need to do to realise your financial goals for later life are met.
Can pension planning affect inheritance tax?
Your pension plan can help you pass on your wealth to loved ones after you pass away in a tax-efficient way. In terms of IHT, however, your pension doesn’t form part of your estate. As such, it won’t count towards your IHT obligations.
Can I claim the higher-rate tax relief on pension contributions?
The aim of creating a robust pension plan is to see how best you can claim higher-rate tax relief on your contributions. It is, of course, possible that you can claim up to 40% relief on whatever is paid into your pension. If you are self-employed, this can be claimed via your self-assessment tax return. If you’re employed and pay into a workplace pension scheme via PAYE, that relief is applied at source. So, you don’t need to actively make a claim.
If you’re unsure about claiming higher-rate tax relief on your pension contributions, this is one area in which we can advise you in due course.
What are the different types of pensions?
Your pension financial adviser can support you in determining which type of pension can be the most beneficial should it apply to your circumstances:
- Defined Benefit: Not as common as it once was, a defined benefit pension is also called a ‘final salary’ pension. It is a workplace scheme and bases your retirement income on a) your salary and b) the length of service. It typically offers a tax-free cash lump sum and starts paying your income at a certain age.
- Defined Contribution: This can either be a private pension or a scheme operated by an employer. The money that either you or your employer contributes will be put into pension investments by your provider. As such, the value of your pension can go up or down. It is also possible that lower-risk investments may be favoured as you near retirement age.
- Self-Invested Personal Pension (SIPP): Unlike a defined contribution scheme, a SIPP is much more hands-on. It is called a ‘wrapper’, which contains investments that you will choose and hold until you retire. While first introduced in 1989, SIPPs are an option that became more popular through the ‘freedoms’ included in the Pensions Scheme Act 2015.
How much can, and should, I contribute to a pension?
The amount you ‘should’ contribute to a pension can depend on many factors – most notably the goals you have in later life. But there is a maximum amount you can save in a single tax year. In the 2022-23 tax year, this amount was £40,000. Anything paid above this amount is taxable.
It is also possible that, as a higher earner, you may face a lower (or ‘tapered’) annual allowance. This will apply if your ‘threshold income’ exceeds £200,000 – or if your ‘adjusted income’ is more than £240,000. The minimum tapered allowance in the 2022-23 tax year is £4,000.
What is the tapered annual?
The tapered annual allowance is a reduced tax-free amount that higher earners can invest into a pension each tax year. If your adjusted income exceeds £240,000, your allowance will reduce by £1 for every £2 you are over that amount. Our pension planning specialists will make sure you’re fully aware of where you stand – and what you can do to save effectively for retirement.
What does ‘carrying forward’ mean?
In a single tax year, your annual allowance caps how much you invest into a pension without the need to pay tax. But you still may be able to contribute more if you didn’t use your full allowance during the previous three tax years. This is called ‘carrying forward’ and it could be an option for higher earners affected by the tapered allowance. Our pension experts will be able to advise you if this is the case in your situation.
What is the lifetime allowance?
Just as there is an annual allowance on pension contributions, there is also a maximum amount you can hold in a pension at any one time. For the 2022-23 tax year, this amount is £1,073,100. Anything above this in your pension pot is liable for tax.
How do I draw an income in retirement?
Your pension planning expert can advise you on the different – and most tax-efficient – ways to draw your income in retirement. Typically, there are three common options:
- Cash lump sum: The first thing you can do with your pension is take 25% of the amount saved as a tax-free cash lump from the age of 57 in defined contribution schemes. If it’s a defined benefit or employer-sponsored scheme, the age you can take that lump sum will be specified. You can also take smaller sums as and when you wish up to the value of that 25%.
- Regular income: You can choose to receive a regular income from your pension through an income drawdown, where your pension is invested and provides a variable income.
- Annuities: An annuity is a product you purchase that gives you a guaranteed income for life. This can depend on the provider and your personal .
- Phased drawdown: As you reach your scheme’s applicable retirement age, you can take a share of a tax-free lump sum along with taxable income to fund your later life spending. By combining income in this way, it can offer a flexible way to plan around income tax and pension allowances – and provide a tax-efficient income in your retirement.
Your tax-free allowance can be applied in a combination of ways too. We’ll work with you to find out what the options are for you in later life and how best to access your savings.
What happens to my pension when I pass away?
In the case of a defined benefit pension, this usually stops paying when you (or your dependant) pass away. A defined contribution pension can be passed on to beneficiaries, however. If you die before the age of 75, this pension is passed on free from tax. After 75, any beneficiaries will pay their rate of income tax on that amount.
Looking for further information about our pension planning services? Would you like to arrange a complimentary, obligation-free telephone conversation or meeting to discuss your needs? Please contact us.
What our clients say
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