Pension Solutions

Pension Solutions

Business owners often face the challenge of trying to maintain their living standards into retirement. Not an easy task given changes to UK pension legislation which make them even more restrictive, particularly prior to retirement age. Now, you can be the master of your own pension fund.

Q. It is often said by business owners that their business is their pension. Is this a valid statement?

Not so. Using figures compiled by the Life Office Actuary, most SME owners retire with a private pension of £1,400, excluding state benefits.

Q. It is often said by business owners that their house is their pension. Is this a valid statement?

A. No. Moving from a 4 bedroom to a 2 bedroom house generates enough capital to give an income of £1,050 pa on an annuity basis [source: Government Actuaries Dept.

Q. To achieve average state earnings in retirement, how much would a couple need in their pension fund?

A. £560K. The average size of personal pension funds at retirement in the UK is £30K.

Q. What is the average state pension?

A. £5,311 pa

Q. What are the personal allowances for pension schemes?

A. The current annual allowance is £40,000 per person.

However, the Carry Forward system will help clients who are able to save more than £40,000 in their pension this year.

If you haven’t contributed to your pension in the past 3 years, any unused annual allowance from the three previous tax years can be carried forward into the current tax year, but only if you are able to fully use this year’s tax allowance.

For instance, if you haven’t contributed in the previous 3 years, you can contribute £40,000 for this year, £40,000 for each of the last two years and £50,000 for the previous year.

The lifetime allowance is now £1M.

Q. What options do you have if you are likely to exceed your lifetime allowance in the future or have done so already?

A. There are a number of options to allow the fund, up to the LTA limit, to continue to grow. Amounts in excess of the LTA would be looked at individually.