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Pensions & Retirement Options

Tax Planning for Retirement

It is estimated that we pay almost £8 billion too much into H M Treasury's coffers each year - that's nearly £155 per person. Paying tax is often unavoidable, yet many people pay more than they need to.

As you plan for your retirement, you need to consider the tax implications of your income and your pension contributions. PKF - Retirement Planning Services. Tax Planning, Pension Planning, Retirement and more

Receiving the right advice from a tax specialist is one way of making sure you are not paying too much tax and also making sure that you are taking full advantage of the tax allowances that are due to you.

What's new? Phased Retirement for anyone (2016)

Phased retirement was introduced to add flexibility to drawing benefits from a personal pension. Basically, it divides your pension fund into one thousand little policies allowing you to draw the combination of tax-free cash and annuity income from each one separately. The concept is to encash (vest) the exact number of plans each year to meet a target income.

As most of the cash released comes from the tax-free cash element of the policy initially there is very little tax liability in the early years. Over the years the annuity element will rise and eventually this will provide the majority of the income.

The main advantages of the system is that it allows you to adjust your income levels at will in the early years and to leave most of the fund invested whilst drawing an income. Annuity purchase is thus delayed and spread over a number of years rather than taking place all at once. The concept is very flexible but the main disadvantage is that most of the tax-free cash is used to provide income and cannot be drawn as a lump sum.

These days phased plans are often combined with income drawdown to give the greatest possible flexibility but the administration of these plans can be complex. At age 75 any remaining funds that have not been vested must then buy their annuity (or tax-free cash.). Phased Retirement -


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