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Pension planning at a glance

What is a pension?

A pension is a long-term investment that aims to help you build a pot of money for your retirement. It’s a tax-efficient way to invest for your retirement, because HMRC adds basic rate tax relief to the payments you make into your plan. For example, if the basic tax rate is 20% and you make a payment of £160, HMRC will add £40 – so the total invested into your plan is £200. This is known as basic rate tax relief. If you pay tax at more than the basic rate, you can claim even more tax relief when you complete your annual self-assessment tax return, but this won’t be paid into your plan, it will reduce the tax you normally pay.

Why is it important to review your pension arrangements?

Here are some reasons why you should regularly check your pension plans:

  • Performance: to make sure your pension is performing well and is invested in the right mix of assets
  • Charges: to ensure that your pension contract is competitively priced, as the charges over the long-term can make an appreciable difference to the value of your funds
  • Risk: this is one of the most important factors when it comes to investing your money for the future. The key is to find the right balance between the amount of risk you’re willing to take and the potential return you’re likely to get over your investment period
  • Check your arrangements are on track: regular reviews will help you to understand how much your current pension will provide when you retire. This could allow you to retire earlier than planned, or create a strategy that lets you gradually work less
  • Contributions: consider whether you’re maximising the amount that you can pay, and check whether it’s possible to carry forward any unused allowances, to make a significant contribution that could benefit from tax relief
  • Death benefits: your pension should be structured to maximise the benefits available for your family
  • Regulations: keep an eye on regulation changes within the pension industry, as they could affect your retirement planning.

Use our pension planning calculator to find out if you’ll have enough money in retirement.

Calculate if you'll have enough money in retirement

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Assumes an inflation rate of 1.5% p.a. and investment performance return of 5% p.a.

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We hope that your report provides motivation to keep building confidence in your financial future. We know it can be a daunting task so if you have any questions, please call one of our wealth planning experts.

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested.

The tax treatment of all investments depends upon individual circumstances and the levels and basis of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.

 

Photo of David Goodfellow

David Goodfellow

Head of UK Financial Planning

David specialises in financial planning and tax driven investment planning. He has over 15 years experience in advising on and investing in VCTs, EISs and tax driven property structures, and is part of the CGWM Advice and Solutions Committee. He is a member of the Personal Finance Society and The Chartered Insurance Institute.


44 (0)20 7523 4738
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IMPORTANT: Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

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