Pensions & Investment Update

By Richard Dawes - Managing Director, HW Financial Services.
To watch Richard's video click here.

“As a principle, we believe tax policy should be about raising the most money with the least possible distortion to economic activity – and this budget simply fails to achieve this.

Let’s look at pensions. In 2006 the Government finally agreed to simplify the pension rules - but this budget reintroduces much of that complexity and adds further complications.

• To start with, there’s the removal of higher-rate tax relief on pension contributions for those earning over £150,000.

• Then that higher-rate tax is tapered if you earn between £150,000 and £180,000. If you earn over £180,000 then you receive basic rate relief only.

• But then you need to look at how earnings are defined.

• Earnings includes your total income chargeable to income tax before personal allowances; employment & partnership income; dividends; savings interest; as well as pension, rental and trust income.

• And all pension contributions, whether made personally, by an employer or a 3 rd party will be taken into account.

If that doesn’t sound complicated enough, there are transitional arrangements that apply between now and 2011 when the new rules are introduced.

Of course, pensions remain a very attractive way of saving for your retirement and once your money is invested, the tax benefits are still very good.

What I would say is that if you’re earning over £150,000 or if you’re planning to draw benefits from your pension funds now is the time to take advice.

For example… there are some excellent products available that provide 100% capital guarantees and that enable you to benefit from market growth… and that’s an important combination in a recovering but still volatile market.”

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There are some excellent alternative investment opportunities for those people looking to diversify their investment portfolios in the form of structured products. These offer the potential for better returns than cash deposits, without direct exposure to equity investment. To find out how structured products could enhance your investment portfolio, click here.