I don’t need to save towards my financial future now, there’s plenty of time to do that later! If I use a pension to boost my savings, allowances are very generous and I’ll catch up through funding a plan more heavily when I get around to it. Planning and saving is always something that can be done at a later date, isn’t it?

The time constraints of working or running your own business, making time for your family and possibly fitting in some leisure activities often seems all consuming, so turning your attention to longer term financial planning can often sit someway down your list of things to do. In addition, many people are aware that saving towards pensions can always be accelerated at a later date with sizeable amounts of money being able to be thrown at a plan when time and funds become available.

For most people, the maximum tax relievable contribution into pension is £40,000 in a tax year, known as the Annual Allowance. There are some restrictions to this amount for individuals who have drawn down from their pension funds and for high earners, but this falls outside the scope of this article.

This accelerated funding, known as carry forward is the dragging forward of unused contributions from previous tax years allows for payments in excess of £40,000 to be paid into pension as long as your earnings will support such a payment. For those running their own limited company, an employer contribution is not linked to what you draw as a salary but needs to pass the wholly and exclusively test. With this in mind, it is possible to pay in as much as £160,000*, i.e. £40,000 in this tax year together with £40,000 for the preceding three tax years, taking us back to 2014/15 if no other pension contributions have been for the period.

However, for this approach to work you must have historically been a member of a pension plan. A good example of this might be a personal pension plan set up to receive a redirection of National Insurance contribution or simply having been a member of a final salary scheme, even if this was a good number of years ago. Without this historic pension plan in place carry forward is not an option. So effecting a pension policy today could increase your future options.

So planning for the future may well start today!

If you need assistance building a long term plan and getting your finances in order please contact Peter on 01883 33 22 64

Opinions & Insights

Hello Lifetime ISA, Goodbye Pensions…

The Lifetime ISA which was introduced in the Budget on March 16th 2016 is so niche as to be initially of very little interest to most people. Contributions are restricted to £4,000 per annum, applicants must be under 40 and will find their ISA savings are restricted until either they purchase a first home (capped at £450,000), reach the age of 60, or on payment of a tax penalty if they withdraw it earlier. Read more →

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