This year it’s my dreaded 50th – eeek!!!
As a result I’m sadly getting ever more conscious of what and how to retire (I hasten to add that with 3 beautiful daughters I’ll probably be 101 before I lay down my calculator).
The new pension rules that came into force from April 2015 have made pensions a worthwhile investment on numerous fronts – some of which are obvious, some a little surprising and some not immediately obvious.
The basic one is for every 80p that you pay in HMRC will kindly add another 20p – an effective return of 25% on your investment on day one.
As a high rate tax payer, the return is even better – pay in 80p and HMRC will again kindly add 20p – but you get a further 20p back off your income tax liability making the next cost to you 60p – an even higher effective return of just under 67%!!
The figures get even better if your income is in the no man’s land of losing your personal allowance – this starts where you earn £100,000 plus – if you make pension contributions here you can actually end up getting your Personal Allowance back!
The final one is with child benefit – if you or your spouse earn more than £50,000 you then have to start paying back some (or even all) of this benefit. However, if you make sufficient pension contribution you can actually retain the child benefit as well – how good is that!
So, if you mix all the elements together you can end up with the following scenario:
Every £1 into your pension pot has cost you 60p and you’ve got back some or even all of your valuable personal allowance and retained all of your child benefit too – how good a place to be is that!!
When interest rates on savings accounts are next to nothing it’s got to be worth at least a visit.
My advice – don’t dismiss pensions as something that’s not of interest – give us a shout and we’ll come and spend some time with you over a cuppa and go through it in more detail.
Rob (OAP nearly) Greaves