Pensions - Articles - New Tax Year New You

Standard Life, part of Phoenix Group, shares tips to maximise pension savings now the new tax year has begun

 Dean Butler, Managing Director for Retail Direct at Standard Life comments: “With a new tax year beginning, it’s the perfect time to give your pension savings a refresh and put yourself in the best financial position possible for the future. Thinking about your private pension at the start of the new financial year can help you put good habits in place, as well as ensuring you maximise your benefits and allowances. It can be easy to leave it until tax year-end looms once again, but if you are in a position to act sooner, consider putting money away earlier in the financial year. The longer you are invested the greater potential for growth and with the potential benefits of compound investment growth, it all adds up, giving your savings a boost that can add real value to your pension and make a meaningful impact on your retirement.”
 Dean Butler’s top tips to help you give your pension plan a boost in a new tax year:
 1. Use your pension annual allowance – “Your pension annual allowance is the total amount your employer and any third party can pay into all your pension plans in a tax year before a tax charge could apply. As of last year, the current limit is £60,000 or 100% of your earnings in a tax year, whichever is lower, but it could be less if you’re a higher or non-earner, and if you’ve already started taking money from your pension savings you might be subject to the Money Purchase Annual Allowance, which reduces your personal allowance to £10,000.
 “If you can afford to do so, it’s worth paying more into your pension plan as early in the tax year as possible to make the most of the year’s allowance and offset your contribution against tax payable.
 2. Top up your pension payments with tax relief – “Tax relief makes your pension plan one of the most tax-efficient ways to save for your retirement. This means your payments get topped up by the government, making it cheaper to save more into your plan.
 “Not all pension schemes provide tax relief in the same way, although most UK taxpayers get tax relief on their own pension payments based on the rate of income tax they pay. This means most UK taxpayers will get a 20% top-up from the government on their pension payments, so it’ll only cost you £80 to have £100 paid into your pension. The benefits are usually even more for higher or additional-rate taxpayers - but you’ll need to claim anything above 20% back from the government using a self-assessment tax return, depending on how the payments are being made.
 “Some workplace pension schemes offer tax benefits in a different way (salary sacrifice or salary exchange schemes, for example), so do check with your employer how this works for you if you’re not sure.
 3. Take advantage of your workplace pension plan – “Workplace pension plans are a great way to save more for your future because your employer normally must pay in too. At least 8% of your qualifying earnings will be paid in, and a minimum of 3% of that will come from your employer.
 “Some employers will even match the percentage you’re paying into your plan up to a certain amount. So, it’s worth checking to see if upping your own payments could mean your employer will pay in more too.
 4. Consider bonus sacrifice – “If you get a work bonus, you might have the option to put some or all of it into your pension. Doing this could save on tax and National Insurance deductions, meaning you get to keep more of your bonus in the long run.
 5. Get your tax-free personal allowance – “Most people get a tax-free personal allowance, which is £12,570 for the 2024/25 tax year. When your taxable income reaches £100,000, your personal allowance is cut by £1 for every £2 of your income. Currently, you lose the personal allowance once your income reaches over £125,000.
 “You may be able to recover any loss to your personal allowance by reducing your income through paying into your pension plan. That way, your pension contributions will be benefiting from tax relief at a marginal rate of 60%, which is quite a significant pension perk.
 6. Get your child benefit back by paying more into your pension plan – “Child benefit can be worth thousands of pounds a year to some families, and changes made in the March budget mean that some households will benefit even further. The High-Income Child Benefit Charge threshold has now increased to £60,000, which means that once one parent earns more than this, the child benefit is clawed back. The Government has also increased the threshold at which the entire amount is cancelled out, to £80,000, meaning fewer parents will be impacted.
 If your earnings are in this range, however, there is a way you could get some or all of it back. Paying into your pension reduces what counts as your income, and it could allow you to keep your child benefit and boost your pension savings at the same time.
 “You can choose not to take child benefit payments if your earnings are over £60,000, but you should still consider filling in the child benefit claim form. This helps you get National Insurance credits, which go towards your State Pension later in life.
 “You don’t have to make all of these changes, but taking advantage of some of these benefits at the start of a new tax year can give your pensions a helpful boost and help you stay on track to meet your retirement expectations.”

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