Whether you are starting your own personal pension or supplementing your current retirement pot, the reason for having a pension as the savings vehicle for your retirement income is that it has significant taxation advantages. Depending how much tax you pay your investment is increased with an incentive from the Government. Your investment grows free of tax and on retirement, under current HMRC rules and practice you can have 25% of the fund that has been built up tax free. The balance is taken as income and taxed as earned income. You can access the money when you are 55.
Like an ISA a Pension is another tax efficient vehicle. The money in your pension fund can generally be accessed at aged 55. This is a tax wrapper. The wrapper around your retirement money gives certain tax advantages. Think of the money saved as the sweet. The pension is the sweet wrapper. Once the sweet is coated in the wrapper then it benefits from tax advantages. Take the sweet out, the tax advantages are lost.
It is very hard to re-wrap a sweetie!
We can help you with many types of retirement planning, get in touch to find out more.
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