For many people, retirement can seem like an unreal event, something that might happen but not until a long time into the future. However, it is important to look ahead, think about what you would want retirement to look like, and plan accordingly. Rather than hoping there might be sufficient in the “pot”, start early and plan what income you’re going to need and how you might accumulate sufficient assets to provide that income.
Even putting a small amount away on a regular basis, if done long term, can make a difference. Both occupational and personal pensions are also tax-efficient. Your contributions to company pension schemes are deducted from pay before tax is calculated and for contributions to personal schemes, tax you have paid before you make your contribution is reclaimed for you by your provider. The maximum amount of relief any individual can claim equals 100% of their earnings for that particular tax year (to a maximum of £255,000, tax year 2010/11) and you can then use your personal income tax allowances before calculating the tax you pay when that pension finally pays out.
Don’t let any contributions be overlooked. If you worked for more than one employer, always check your previous company schemes and work out what you are entitled to.
Consider also individual savings accounts (ISAs) which are tax-efficient ‘wrappers’. All profits earned on investments held inside them are paid out free of further tax. The amount of money you can invest in an ISA is also subject to limits (£10,200, tax year 2010/2011, increasing to £10,680 in 2011/12), but it is worth getting into the habit early.
Levels, bases and reliefs from taxation may be subject to change and their value depends on the individual curcumstances of the investor.
Speak to us to find out what other options can help make retirement as stress free as possible.