The new ISA addition was designed to help younger people save for both a house and their retirement.

So for anyone between the ages of 18-to-40, you can basically save up to £4,000 a year and receive a government bonus of 25%, up to £1,000 a year, until age 50. This means that for every £4 saved, the government gives you £1. Great news!

The money can be accessed tax-free to either buy a property worth up to £450,000, or at age 60 for retirement. If the money is accessed before age 60 and not used to buy a home the government bonus will be removed and a 5% charge will be levied.

Lifetime ISAs are being heralded as an alternative to saving into a pension but of course pensions still remain available and dedicated savers can save into both if they wish, receiving the tax relief on their pension contributions which they would have done previously.

If you save your money into a lifetime ISA until age 60, up to the limits allowed, and then transfer the fund into a pension, you will get the top-up into the lifetime ISA, and the 25% tax-free lump sum available through the pension.

The ISA fund transferred into a pension would then receive tax relief at your highest marginal rate of 20%, 40% or 45%.

You can then access the pension fund including the tax relief – with the first 25% taken from the fund being a tax-free lump sum.

Investors are currently able to save £40,000 Gross each year into a pension, known as the annual allowance. They can also utilise any unused allowance from the previous three years, known as ‘carry-forward’

However ‘money recycling rules’, stop you from making large pension contributions, getting tax relief, and then taking out the 25% tax-free cash right away.

Please bear in mind the tax relief available to savers could change in the future, and also the annual allowance contribution level could change.

For bespoke advice on your Pension’s and Investment’s contact Credencis.

We are situated between Derby and Nottingham, but visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

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From 6 April 2016, the annual allowance will be tapered from £40,000 for those with earnings of £150,000 or more down to £10,000 for those with income of £210,000 or more.

Income will no longer just be comprised of someone’s salary. It will be “adjusted” to include employer pension contributions or any other income, including savings, bonuses or even buy to let property rental – taking many more people into a higher earnings bracket. The annual allowance will reduce by £1 for each £2 of adjusted earnings above £150,000 until it reaches £10,000.

If employees earning £150,000 or more don’t reduce their pension contributions from 6 April,
they will be taxed at 45% on any excess and face a surprise tax bill.

If people act now, they can reduce the possibility of their tax liability. They can either carry forward any leftover pension allowance from previous years or take advantage of the transitional pension input period (PIP) which will provide the opportunity of making a total payment of up to £80,000 into their pension pot this year.

The lifetime allowance is also reducing from £1.25m to £1m. After April 2016, anyone who breaks through the £1m threshold may be liable to 55% tax on any amount over the limit, if the excess is taken as a lump sum. If any of the excess is instead taken as income, the tax charge is 25%, although the income itself will still be subject to income tax at the recipient’s marginal rate.

Taking into account an annual growth rate of 5%, any individual with a fund currently worth £358,000 with 20 years to go until retirement is likely to hit the £1m ceiling. An unintended consequence is that most “death in service” benefits paid out will also count toward the £1m.

Source: Pensions World

For bespoke pension advice contact Credencis.

We are situated between Derby and Nottingham and visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

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A full state pension from April 2016 will pay £155.65 a week. That is based on you having made a maximum 35 years of qualifying National Insurance contributions.

Only people living in Chile and Mexico live on less in retirement.

If you have saved for your retirement into a personal pension the report says you will retire on 67% of your former salary.

If you are relying on the state pension your retirement could be bleak.

To find out how much you need to start paying into a private pension please visit our calculator.

Source: OECD

For bespoke pension advice on your retirement contact Credencis.

We are situated between Derby and Nottingham and visit clients nationwide.

Credencis

“Live for today, Invest for tomorrow”

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Research from Brewin Dolphin show that for a target net pension of £20,000 at age 68 – excluding the state pension currently set at £115.95 per week for a single person – 25-year-olds would need to find £790 per month, including their employer’s contribution.

However if the employee waited until they were 35, the monthly payments would be £1,145, and ten years later it would cost £685 more per month.

Starting a pension savings plan may not be top of your priorities, but you may be surprised how much of a difference starting earlier could make to your future – and you should consider the risks of delaying your pension contributions.

Please use our Pension Calculator to get an estimate of what contributions you need to pay to achieve your goal in retirement.

Source: Brewin Dolphin

For bespoke pension advice contact Credencis.

“Live for today, Invest for tomorrow”

The post Start your Pension now or lose thousands in Retirement – Pension Advice Derby appeared first on Pension Adviser Nottingham.