Nicholls Stevens Financial Services

A PENSION CONTRIBUTION OR A VCT PAYMENT

High Earners

If your total income( Note the word income – it is not just earnings) exceeds £150,000 then you will cease to be eligible for the full 40% tax relief on pension contributions from the tax year 2011/12 and by the time your earnings have exceeded £180,000 you will only be eligable for 20% tax relief. A Venture Capital Trust investment (VCT) may be more advantageous – you will receive relief of 30% on contributions up to £200,000 so long as the shares are retained for five years. Capital Gains made within such a trust are tax free and can bs distributed as tax free dividends. The investment risk of such a scheme is high, but if you need details of schemes currently available please contact us.

Earning less than £150,000?

If your income is less than £150,000 and has been so for the previous two tax years, you have little to fear from the recent changes in the pension’s legislation and if you have not yet built up a sizeable pension fund I would strongly recommend that you make a pension contribution before the end of the tax year. If you are a higher rate tax payer then making such a contribution is particularly advantageous as you should receive 40% tax relief depending upon the size of the contribution.

If you are in the earnings bracket £50,000 - £100,000 I would strongly recommend investing as much as possible and obtaining the relief. The Government has already started to chip away at the higher rate of tax relief for those earning over £150,000 and these changes in legislation have a tendency to spread to others over time.

Lower Earners

State retirement age is increasing to age 68 by 2046 and because the age change will be phased in gradually this will affect all those born since 1959 and longevity appears to be on the increase, so the need for your own pension provision has never been more relevant. For every £80 you contribute, the Government adds £20 so this still has to be a sensible investment for most people to make

Paying a pension contribution for someone else

At this time of year, some clients consider using the £3,000 gift allowance for IHT purposes. Such a donation could be given to the beneficiary as a pension contribution. Gross contributions of up to £3,600 (£2,280 net) can be made for anyone irrespective of their tax status. Such a contribution could be made for a son or daughter or even grandchildren

October 2009  November 2009 January 2010  February 2010

Authorised and Regulated by the Financial Services Authority