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This blog was written by our sister firm Aquila Financial Services, a leading provider of financial planning and wealth management solutions. Aquila helps clients achieve their financial goals and secure their future with personalised advice and tailored strategies. Whether you're seeking advice on investments, pension planning, or wealth management, Aquila has the expertise and experience to guide you.
Upcoming Government Budget
The first Budget from a Labour Government in over 14 years is due on the 30th of October.
Speculation is rife regarding how the Chancellor; Rachel Reeves intends to address the black hole in the Public Finances and some attention has been focussed on the rules regarding Personal Pensions.
Potential Changes for Financial Planning Under Labour
Some of the current theories doing the rounds are that Labour could consider the following measures:
Limiting tax relief on contributions by introducing a flat rate of relief
Removing inheritance tax benefits of pension funds
Reintroducing the Lifetime Allowance
Restricting the Pension Commencement Lump Sum (Tax-Free Cash)
It is important to note that these are all conjecture at the current time – there have been no official announcements or leaks (yet) to suggest that any of these steps will be implemented in the Budget.
Benefits of Current Pension Rules
Even if some, or all, of these changes were to actually happen, pensions would remain an extremely attractive and tax-efficient way of saving for your future. It seems sensible to take advantage of the current generous rules, especially in case future changes impact these benefits; definitely a case of making hay whilst the sun is shining!
Research by the Pensions and Lifetime Savings Association, published earlier this year, suggests a single person needed an income of £43,100 a year for a comfortable retirement and a couple £59,000 a year.
Pension income needed to retire jumps as family costs rise - BBC News
Here are some of the ways pension funding can benefit you:
Tax-Free Growth
Pension funds grow in a tax-free environment, allowing your investments to accumulate without being reduced by taxes.
Inheritance Tax Benefits
Under current rules, pension funds do not form part of your estate for inheritance tax purposes and can be accessed before probate is granted.
Personal Allowance and Child Benefit
Personal contributions to your pension can restore your personal allowance and/or child benefit, providing additional financial advantages.
Business Owners
For business owners, pensions can be a fantastic way of extracting profits from your business into your own name. Additionally, it is possible to own commercial property (including farmland) within some types of pension schemes, which can be very tax efficient. For example, owning your business premises personally can help build up additional funds in your name.
Auto-Enrolment Schemes
For auto-enrolment schemes, using salary exchange allows the company to pay the personal contributions, resulting in significant National Insurance savings for both the employee and employer.
Given the potential for future changes in pension regulations, now is the time to optimise your pension strategy and secure your financial future.
If you would like to discuss any of these aspects in more detail or have any questions, don't hesitate to contact us. Let's secure your financial future together.