Nowadays people are living longer so how you plan for your retirement is becoming more important.
This article will introduce you to six ways you can make the most from pension planning to build as large a pension pot as possible to enjoy in retirement.
1. Even after retiring you can still pay into a pension pot
After you stop working you can still pay into your pension pot. In fact, you can keep making contributions until you are 75 and receive up to 45% tax relief. Many people who retire still do part time or consulting work and these earnings can be paid into your pension if you wish. *Note: tax rules and the amount you receive in tax relief is subject to change and can differ depending on your individual circumstances.
2. If you switch job you don’t need to lose your pension
Many people think that if they move job they will lose their pension post. When you start a new job you will be asked if you wish to join the pension scheme – you should always take this option, even if it is only a small percentage of your income as the company will match your savings; effectively giving you more money. In order to manage moving jobs you should look to consolidate your pension savings into one pot. For more information about this you should speak to a financial adviser so you do not lose any benefits.
3. Pensions are free from inheritance tax
When you pass away your pension can be passed onto beneficiaries. As it typically sites outside your estate there is no inheritance tax to pay.
If you pass away under the age of 75, your beneficiaries can withdraw what they like from your pension and pay no tax. If you die after 75 your beneficiaries will need to be tax on any withdrawals made.
However, if you have converted your pension pot into an annuity then these rules may be different.
4. Make contributions as and when you like
Another common myth about pensions is that you must make regular contributions. Nowadays pensions are far more flexible and you are able to contribute when you like. You must however avoid gaps in paying National Insurance.
5. Start as early as you can
It is possible to start saving into a child’s pension using a SIPP which allows you to save up to £3600 a year.
6. You can delay your pension
It is not compulsory to take your pension from the day you retire. Instead you can delay your pension to leave to your children, or in some circumstances can take your pension early. Depending on your circumstances you may take your pension earlier or later. It is important that you have enough income to last the duration of your retirement so when and how you take your pension is an important decision. You should thoroughly review your options and seek advice and guidance where possible.