Guides
Fast-tracking your retirement Those wishing to fast-track their retirement have been making the most of new annual allowances, which enable individuals to maximise their pensions with higher contributions. Changes to pension laws last year gave bigger financial incentives for higher earners to enjoy tax relief of up to 40 per cent by contributing cash into their self-invested personal pension (SIPP). Under the “A-Day” regime, individuals, up to the age of 75, can pay their gross salaries straight into their pension to a maximum of £225,000 per annum in 2007/08. Contributions can also be accepted from employees, employers, the self-employed, and (subject to a maximum of £3,600) those who have no relevant earnings. There is scope under the rules to make unlimited contributions; however, payments are only tax efficient at or below the annual allowance. Tax relief is also limited by a Lifetime Allowance of £1.6m in 2007/08 and £1.8m by 2010/11. Investors with substantial funds for pension savings are being attracted towards SIPPs, where an individual can have complete control over their retirement pot. Once in the SIPP, the member can invest in a wide range of assets or asset classes, from commercial property and shares to unquoted hedge funds. While maximising your SIPP allowance is tax efficient for higher-rate payers, you should seek professional advice before making any big investment decisions, particularly when doubling up contributions. |
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