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If you've
not already
set up a
pension or
don't
currently
make full
use of the
allowances
available,
you could be
paying
substantial
amounts of
tax
unnecessarily.
Pensions are
big news
post MSC and
income
sharing ,
whether
inside or
outside of
IR35 as they
represent
one of the
few
remaining
tax breaks
available to
contractors.
You can
invest money
personally
from your
own funds or
direct from
your company
bank
account. If
caught by
IR35, you
save not
only the
income tax
that would
ordinarily
be payable
but you also
avoid the
employers
and
employees
national
insurance
contributions.
The amount
of tax
relief can
be as much
as 48%
meaning that
for each
£100
invested you
pay £52 and
the tax man
pays the
rest.
For those
outside of
IR35 you
could pay
personally
into a
pension but
many prefer
to load the
company up
with a
legitimate
business
expense.
Pensions
Simplification
opens up
massive
possibilities
'A' Day
(Appointed
day) arrived
on 6th April
2006 and
brought with
it sweeping
and radical
changes for
contractors
looking to
invest in a
pension
either via a
one-man
limited
company or
personally.
After this
date the
complex web
of eight
current
pension
regimes has
been updated
to just one
set of tax
rules for
all types of
pension,
with an
individual
Lifetime
Allowance
(£1.65
million
2007/2008).
This
lifetime
limit will
rise by
preset
amounts for
the next 4
years and
look likely
to be
increased
beyond this
date.
Unlike the
previous
restrictive
rules that
limited
pension
investment
to a set
percentage
of salary,
contractors
will
personally
be able to
place up to
100% of
their salary
into a
pension. In
addition the
rules
regarding
funding a
pension
scheme
direct from
your limited
company
could allow
a massive
investment
of up to
£225k pa
irrespective
of salary
and it has
become clear
that HMRC
will view
the split
between
salary,
dividends
and pension
as the
Contractors
concern.
Where they
will be less
than happy
is where a
pension
contribution
is made for
a spouse.
The 'A' Day
rules have
certainly
made
pensions
much simpler
for most of
investors
and there
are a number
of key
advantages
for
Contractors
in the new
regime:
-
Many
contractors
could have
greater
flexibility
in the size
and timing
of their
contributions.
-
In many
cases, there
will be no
need to make
contribution
checks on
personal
investments.
-
There will
be greater
investment
flexibility
i.e.
collective
investments
into
property
(although
sadly not
directly
into
residential
bricks and
mortar as
originally
planned)
-
Up to 25%
Tax Free
Cash will be
available on
many schemes
which did
not allow
tax free
elements
i.e. funds
from
contracting
out of the
State
Second
Pension and
SERPS
-
Being able
to take
smaller
pension
funds up to
£15k as a
one off lump
sum as
opposed to
having to
draw a
regular
income
(known as
triviality
rules)
-
New and more
flexible
options at
retirement
including
the freedom
to defer
purchasing
an annuity-
indefinitely
if required
-
No need to
'secure'
benefits
with a rigid
annuity by
age 75 as at
present
although
funds are
subject to a
substantial
tax charge
-
Full
concurrency
i.e. being
able to pay
into any
array of
plans you
wish
(currently
many
occupational
pension
holders are
unable to
enhance
benefits
with a
personal/stakeholder
pensions)
It does seem
fair to
state that
pension
investment
now allows
far more
freedom than
in the past,
with greater
possibilities
for tax
savings,
enabling
contractors
to build a
better nest
egg towards
a prosperous
retirement.
Please read our Private Client Agreement which outlines the standard of service and procedures you can expect from us. Please also read our Key Facts about our services and Key Facts about the cost of our services documents, which reconfirm our regulatory status and whether our services meet your needs.
As
independent
advisers we
are pleased
to confirm
we can
advise you
on and
arrange a
suitable
product from
across the
whole market
and from all
of their
product
range.
We are happy
to point out
that we do
not charge
you a fee
for our
services.
Instead we
rely solely
on
introducers
commissions
received
from the
providers to
cover the
cost of
advice and
administration
of any
products
that we
arrange on
your behalf.
As part of
new
Financial
Services
Authority
regulation
however, we
do offer you
the option
of being
charged a
fee instead
and I will
assume that
you are
happy to
proceed on
the basis
that our
costs are
covered via
the contract
unless you
request
otherwise.
If you would like to discuss your pension options further please complete our pension finder below.
As independent advisers we are pleased to confirm we can advise you on and arrange a suitable product from across the whole market and from all of their product range.
We are happy to point out that we do not charge you a fee for our services. Instead we rely solely on introducers commissions received from the providers to cover the cost of advice and administration of any products that we arrange on your behalf. As part of new Financial Services Authority regulation however, we do offer you the option of being charged a fee instead and I will assume that you are happy to proceed on the basis that our costs are covered via the contract unless you request otherwise. .
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