With the New Year come the ubiquitous resolutions that have a habit of being quickly forgotten. One resolution that is likely to be on many people’s agendas in 2011 and for some time to come is investing for their future.
The government issued a sobering note before the end of 2010 when it published figures outlining the rise in the number of people expected to reach their 100th birthday.
“These staggering figures really bring home how important it is to plan ahead for our later lives,” pensions minister Steve Webb said.
Part of the government’s efforts to encourage saving is the introduction of auto-enrolment in a workplace pension and moves to improve the flexibility in pensions by looking at early access arrangements for pension saving.
Pension reform in 2011
The coalition government has outlined a number of reforms to pensions in the UK and is consulting on further changes that aim to improve the flexibility around pensions.
An imminent change is the reduction in the amount that can be invested in a pension in a tax year free from tax charges. At the moment the limit is set at £255,000 but from 6 April 2011 the maximum annual tax relief pensions allowance will be £50,000.
Any investors making large pension contributions may need to ensure they make the most of the current allowance before the charges come into force. From 6 April any income or earnings over £50,000 that are invested in a pension will first be subject to tax.
The change in the allowance level may also be an issue for employers and employees who may want to take advantage of the first few months of 2011 when pension contributions up to £255,000 can be made before tax.
More changes to come
As 2010 came to a close, the government published two consultations on changes to how pensions work in the UK. On 13 December 2010, the government outlined the main options it is considering to provide greater flexibility on pension saving.
The four options for allowing partial access to pension funds before retirement are: a loan model, permanent withdrawal of some funds in limited circumstances, early access to the existing 25 per cent lump sum provision and a feeder-fund model linking savings and pension funds.
This paper is likely to create lively debate on just how pensions can be made more attractive, with more changes to the pensions system looking inevitable.
Fair Investment SIPP
One of the ways to boost pension saving is to take control of pension investments. Self Invested Personal Pensions (SIPPs) can offer low charges and wide investment choice allowing you to choose how your pension savings are invested, in line with your attitude to risk and level of return on investments.
SIPPs are eligible for pension contributions with tax relief up to the annual allowance. For more information about the Fair Investment SIPP see the Pension section.
© Fair Investment Company Ltd