In last month’s newsletter we reminded you to review your National Insurance Contributions (NIC) in readiness for drawing your state pension. You can find that article here (link to news story here).
On the 6 April this year, the annual allowance for pensions in the UK was raised from £40,000 to £60,000. This means that both you and your employer can now contribute significantly more to your pension funds each year. Additionally, any unused allowance can be carried forward for up to three years.
This change also applies to those with large pension savings who have fixed protection on their pension pots to avoid lifetime allowance charges. With the lifetime allowance charge removed, fixed protection is no longer relevant, and these individuals can now choose to contribute more to their pension pots.
For those who own their own company, it’s crucial to consider the tax relief the company receives for the pension contributions it makes to its employees.
Given that the corporation tax rate for companies with profits above £250,000 increased to 25% on 1 April 2023, and a marginal rate of 26.5% now applies to profits between £50,000 and £250,000, pension contributions can help bring corporate profits down to the desired level. If your company’s accounting period straddles 1 April 2023, we can help you crunch the numbers.
If you’re nearing retirement age, you may want to start considering taking your pension by either annuitizing some pension pots or taking a draw-down. Although annuity rates are currently high, it’s advisable to seek independent pensions advice on when to convert your pension savings into an annuity.
Furthermore, the money purchase annual allowance (MPAA) has been increased to £10,000, making it easier to continue making pension contributions even after starting to take taxable pension benefits.
To discuss any of your retirement planning please contact the team at CB Reid.