Pensions – The Great Escape!

Did you know: good pension planning is the single most effective way of reducing the amount of tax you pay and can double your retained income?

Of course, being self-employed or working as a freelance contractor, you won't have access to an occupational pension, so putting one in place yourself is one of the basics you need to sort out.

You’ve done well, you deserve to put some money aside, so you can kick back in later life and enjoy the fruits of your skills and hard work, as well as reduce your tax bill now.

One of the things we are good at, at Orange and Gold, is using every sensible and legitimate method we can to reduce your tax bill, legally - pensions are a key tool in achieving this objective.

If you’re a high rate tax payer (earning above £41,450 in 2013/14), even with a limited company structure, for every extra £1 of income you make will incur nearly 50% in taxes before it reaches your pocket. If you’re earning above £150,000 per year, this increases to nearer 60%.

You can invest up to £50,000 every year in a pension, via your limited company. This reduces your profit for corporation tax purposes and also incurs zero income tax.

So, as higher rate tax payer – £5,000 a year invested in a pension scheme is £5,000 you keep, compared with less than £2,600 if you withdraw it as income – investing in a pension basically doubles your money!

As an additional rate tax payer, £10,000 a year invested in a pension scheme is £10,000 you keep, compared with less than £4,300 if you withdraw it as income – investing in a pension more than doubles your money!

But I Don’t Trust Pensions Anymore!

Did you know you can now invest in pension schemes with a guaranteed return – i.e. they will guarantee you a certain percentage increase in value, every year, even if the underlying market and investments are below this level? And you still benefit if returns are higher!

There are also pensions that will offer you the best return available from any month in a given year.

What Can I Do With A Pension?

Pensions are not just be about putting money away and forgetting about it. These days, pensions are truly dynamic. Using something called a 'SSIP' you can use money invested in your pension to make a whole range of investments, for example:

  • Purchasing commercial property on which it receives rent (particularly useful if you need office premises)
  • EIS and VCT schemes, for investing in small or start-up businesses
  • Making a deposit on a child’s house
  • Fine wine and art

What’s more, your SSIP fund can borrow up half its value to increase the level of investment it can make – and our advisers can handle all of this for you.

What if I Already Have a Pension? – Benchmarking Services

If you already have a pension, how do you know if it is any good?

Even if you have an occupational pension from previous employment, now that you have left the company, the chances are your pension may not be being actively managed or looked after by anyone and may well be achieving poor returns, or not be relevant for your circumstances as they are today.

Our advisers can get a valuation for your legacy and current pension arrangements and benchmark it against the best available in the market and, if appropriate, transfer it to ensure it is achieving the best returns – you won’t incur any cost until you’ve received detailed advice and made a decision.

Our active management service means our advisers will be contacting the relevant funds and fund managers regularly and asking them a detailed set of questions to ensure return levels are going to be maintained, as well as benchmarking your funds annually, to make sure you maximise the value of your pension over your working life.

Please call us on 0845 272 4009 or email us at [email protected] if you are interested in learning more about any of the above products, services or ideas.