Farley And Partners

Case study

Phillip will earn £55,000 in 2015/16. He will invest £12,500 into his personal pension policy. He has no other income and claims only the standard personal allowance. 

Phillip will write out a cheque to his pension provider of the premium, net of basic rate tax relief, £10,000. Phillip is also entitled to higher rate tax relief on the gross premium, amounting to £2,500. As Phillip is an employee, we can ask HMRC to give the relief through Phillip’s PAYE code. Otherwise, we would claim relief in Phillip’s 2016 Tax Return.

Thus the net cost to Phillip of a £12,500 contribution to his pension policy is just £7,500.

You will normally have selected one fund, or a spread of funds, for your pension savings. Would a switch give you more security or the scope for more growth?

Premiums on personal pension policies and stakeholder pensions are payable net of basic rate tax relief at source, with any appropriate higher rate relief usually being claimed via the PAYE code or self assessment Tax Return.

SIPPs

In response to poor performances from pension fund managers, some retirement savers have switched their pension savings into Self Invested Personal Pension schemes (SIPPs) – a form of personal pension plan which gives the investor much more influence over how the funds are invested. 

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