Pension poser
Mon, 17/03/2008 - 13:27
You are correct in thinking that from next tax year the tax relief will be less and so if you are going to make this investment then there is an incentive to do it this tax year. Be careful to get the contribution in in time as some pension providers require the funds to clear before the 5th April.
Be careful that the lump sum does not exceed 100% of your earnings or £3,600 gross if this figure is higher than your income.
To be clear, making this investment will mean that you can only access 25% of the resulting fund as a lump sum and the rest will have to purchase an income.
If you have access to a company occupational pension scheme then check out the internal AVC option as this may be free to be drawn as a 100% lump sum.
Matt Pitcher is a wealth adviser at Towry Law Group and a Moneywise Ask The Professionals columnist
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As a standard rate taxpayer who will be retiring within 12 months at age 62, and who is anxious to boost his income in retirment, I'm about to commit a lump sum from easy-access savings to a pension plan. If I do so before April 5th, it will be instantly enhanced by 28%. Afterwards it will be 25%, due to the reduction of tax rates from 22% to 20%. Is this the no-brainer I believe it to be?