Understand the benefits of saving into a pension

Understand the benefits of saving into a pension

The benefits of pension planning

Tuesday 31 October, 2023

Why save into a pension?

Saving for your retirement should be a key priority whatever your age. Pensions are one of the best ways to save for your retirement because they offer tax benefits.  When you make a pension contribution the government (and your employer if you invest into a workplace pension scheme) will contribute to your defined contribution pension scheme.  

How much tax relief will I receive?

If you are a higher rate taxpayer, you receive 40p for every 60p you invest in your pension.    For example, if you invest £6,000 in your pension plan the government will also contribute £4,000 into your pension pot.

Top earners receive 45p for every 55p they invest, and basic rate taxpayers get 20p for every 80p invested.  These contributions once invested will be free of capital gains tax and dividend tax.

Why take pension advice from an independent financial adviser

Our financial advisers will review your financial goals and then model personalised cashflow planning based on your current and predicted future income and expenditure. Our voyant cashflow model will also take into account any investments, pensions, and savings you have, so you know how much you need to save for the future. 

Read more about pension planning and why it’s important to start saving as early as possible.  

If you want to know how much you need to save for your retirement contact your local Lonsdale Wealth Management independent financial adviser now or complete our booking consultation form.  

How much can I save into my pension while I am working?

Your annual pension allowance is the maximum amount you can invest into a private pension scheme every tax year and still receive tax relief.  In April 2023 the pension allowance increased from £40,000 to £60,000.  This is in addition to any unused allowances for the previous three tax years.  You can still invest more than £60,000 into your pension, but you won’t receive tax relief on the excess amount over £60,000.

Higher earners will also benefit from changes to the tapered annual allowance.  Before April 2023 if your earnings exceeded £240,000 the amount you could pay into your pension and receive tax relief was only £4,000 a year.  Since April 6th this has increased to £10,000.  The earnings threshold at which these changes apply has also increased to £260,000.

Can I save into my pension pot once I have started accessing my pension?

Above we discuss how much you can save into a pension and the available tax relief while you are working, but what happens if you have already started taking money from your pension scheme? 

Once you have started to take a pension your annual allowance is replaced by the money purchase annual allowance (MPAA). The limit you could invest in your pension was previously £4,000 but since April 6th it has increased to £10,000.  This will benefit anyone who had to access their pension during the pandemic as it allows them to build up their pension pot again.

Jacob West, financial adviser in St Albans, Hertfordshire said:

‘It doesn’t matter what your age our financial advisers can always assist you to save tax efficiently for your retirement.  Having detailed cashflow modelling allows us to provide you with personalised pension advice. For example, we can review whether you should join your company’s workplace pension scheme.  If you are self-employed, we can discuss your pension saving options.  We can compare the advantages of saving into an ISA or into a pension, so you always save in the most tax efficient way.   If you are close to retirement and you have several pensions, we can review their flexibility and charges. For example, how well diversified are your pension investments, do your pension schemes offer flexi-access drawdown and what is the charging structure on each pension pot.  Having all this information allows us to offer personalised pension advice.’

Why use Lonsdale Wealth Management?

In 2018 Lonsdale Services won the Best Individual Pension Advice award for the Southeast and Anglia region at the Retirement Planner Awards. Our financial advisers offer pension planning advice in BarnetWareChippenhamRingwoodHarpendenStaffordLeeds, St Albans and Wimbledon.

In Summary

Contact your local Lonsdale Wealth Management financial adviser for advice on pension planning so you make the most of your tax allowances, and achieve your retirement goals.  

For more information read:
How will changes to the Lifetime Allowance affect you?
Understanding investments - hoping to retire in the next 5 to 10 years?
Simon Prestcote, IFA Barnet - how much is your state pension worth?
Lonsdale Services voted in the Top 100 IFA's in the UK



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