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June 4, 2020

6 surprising things about your personal pension

This week we’re beginning a series aimed at inspiring you with more ways you can look after your financial health.

And believe it or not, there are a few things about personal pensions that may come as a surprise.

That’s why we’re kicking off our first list of ‘Did you know’ topics with pensions.

Did you know?

1. You can make annual personal pension contributions on behalf of your children and grandchildren – you can pay up to £2,880 net per person, per tax year into a child or grandchild’s Personal Pension, with a further 20% tax relief being reclaimed by the pension fund on their behalf. This could really help family members to meet the challenges of retirement planning in the future.

2. On death, your Personal Pension can bypass your estate – this means the pension fund can be excluded from any potential Inheritance Tax calculation and payable directly to your nominated beneficiaries.

3. Pensions aren’t just about annuities – since the introduction of ‘pension freedoms’ in 2015, you can access your pension fund by way of regular income payments, lump sum withdrawals or perhaps a combination of both.

4. You don’t have to be retired to access your Pension – you can access your Personal Pension savings from age 55. For example, you can take up to 25% of the fund value as tax-free cash. This doesn’t mean you have to stop working, and you can continue contributing to your pension afterwards. But this may help you with one-off costs such as supporting your children through university, paying off the mortgage, or replacing lost income from a business.

5. You can make pension contributions from your limited company – Personal Pension contributions are one of the few routes left to draw money out of the business and into your name, income tax-efficiently. There are also corporation tax benefits in doing so.

6. Your pension might include forgotten guarantees – some older-style pensions have potentially valuable contractual guarantees, which are not always immediately obvious, but might just be worth your while. It’s always best to check – just in case.

Personal pensions have evolved in recent years, and so too has their potential role in your financial planning. It’s now possible to look at your personal pensions much more as a flexible asset, rather than simply a source of regular income when you stop work.

However, these points don’t apply to all personal pensions, so if you’re at all unsure why not let us find out for you?

And if you’d like us to cover any topics in particular as part of our ‘Did you know?’ series, we’d love to hear your suggestions.

June 4, 2020