Year-End Pension Planning

One in seven UK adults have never checked their pension; and more than a fifth of pension savers admit they don’t check their pensions annually because they don’t know what they should be doing. While it’s not essential to monitor your pension as frequently as your bank account, it’s advisable to periodically assess how much is in your pot, and what this could mean for your financial future.

With the end of the financial year close, now is an excellent time for pension planning. Here, with help from our friends at Harmonic Financial Planning, are ten things to look out for with your pension schemes: 

1. Pensions are very flexible these days, and you can either select your investments or use an advisor to assist. Unfortunately, it’s widespread to find that people have not reviewed their investment strategy in many years. This can cause significant problems, especially as you start to think about drawing benefits.
2. Through their pensions, most people in the UK are investors. Many people now feel strongly that they’d prefer not to invest in businesses that are doing irreparable damage to the natural environment (such as significant fossil fuel businesses), leading to a boom in sustainable investment strategies. Do you feel your pension investments are aligned with your values? 
3. Making the most of tax reliefs available. If you run your own business, you can make pension payments on a “gross” basis, i.e. before National Insurance or income tax; many small business owners don’t do this, and so miss out on a very smart way to build their retirement pot. 
4. Fewer than one-in-five self-employed workers are saving in a pension. This is particularly concerning given that and this trend is most pronounced among those who have been self-employed for an extended period. For employees, it’s essential you are using pensions to get the most tax relief on earned income. Especially if your earnings are over £100k because the Personal Allowance starts to be withdrawn at this level and can find yourself paying a marginal tax rate of 60%. 
5. The Annual Allowance for pension payments (£60,000 in the 2023/2024 tax year) has been made rather too complex by a series of measures intended to limit tax relief for high earners- for many people this leads to penalties for over payments. If your earnings exceed £260,000 (Adjusted Income Limit), you will start to lose part of the Annual Allowance. 
6. Pensions for estate planning. A pension scheme can be passed on to your family without any inheritance tax, so many families now view schemes as a way to pass assets on through families. It’s important that you review the list of beneficiaries on your scheme.
7. The new rules around Lifetime Allowance can be complex, but they do mean there’s no cap on the amount you can now build up within a pension pot. Are you making full use of this? 
8. Over the years, we’ve helped a number of business owners buy property within their pension schemes. This can be a very tax efficient way to own and rent out commercial property. 
9. The costs associated with pension schemes have fallen very sharply since the introduction of workplace schemes- it’s always worth getting a review of the charges and fees you are paying. 
10. A third of UK adults rank pension admin last on their to-do list. Make time each year to review the amount you are saving and check that you are on target to have sufficient income in retirement. 

Visit the HfM website to use the Harmonic FP individual or corporate pension review service.