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Pensions – An article from Letts Wealth Management

A pension is a long-term investment that aims to build a fund for retirement in a tax-efficient way. This can be used in retirement in a variety of ways depending on the type of pension scheme the fund is from.

Pensions take many different forms – workplace pensions, stakeholder, personal pensions, group schemes, final salary, SIPPs, the list continues.

Pensions offer some of the most generous tax breaks around. Thanks to tax relief, your contribution is boosted by 25% immediately. If you pay more than the basic rate of Income Tax, you may be able to claim even more tax relief through your self-assessment tax return.

Money you invest today has longer to potentially benefit from the miracle of compounding returns. This ‘magic’ ingredient can potentially turn a small savings pot into a significant one and allow you to enjoy a higher income when you stop work.

Major changes for pension benefits were introduced from 6 April 2015. The changes were designed to make pensions more flexible, giving individuals more choice in how to use their pension fund in retirement.

Whatever your employment status, there is a good chance that there is some form of pension scheme established for your benefit. While these are primarily designed to provide a pension in retirement, they can also provide valuable benefits for your dependent’s should you die before taking retirement benefits. 

For obvious practical reasons, it is important to choose for such benefits to be paid to your spouse, civil partner, partner or other chosen loved one. However, the resulting proceeds would then form part of their estate.

By expressing a wish to have death benefits made payable into trust you can ensure that the benefits were not treated as assets of your beneficiary’s estate, yet they still have access to the monies. This will help limit the potential Inheritance Tax payable on death.

There is a lot to consider with pensions and therefore seeking advice is key.

Adam Letts – Letts Wealth Management Ltd

*Article submitted by Adam from Letts Wealth Management Ltd

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