Why you may wish to consider getting your financial ducks in a row rather sooner than 5th April!!

Pension Consultation Papers don’t normally spark the ears of the general public, this tends to be reserved for the pension ‘geeks’ amongst us, a category of which I am absolutely convinced applies to yours truly!!
However, the current pension consultation is interesting to all, really it is, bear with me! Initially planned to be announced in October, delayed until the Autumn Statement, and now on the agenda for the Budget in 7 weeks time (on 16th March) this consultation is specifically looking at the tax relief applicable to future pension contributions.

The Chancellor appears to be minded to introduce a flat rate of tax relief on all pension contributions which will have an impact upon every single person in the UK making pension contributions hence forth. It will of course also (potentially) simplify understanding of these interesting beasts – possibly!

All of which is all very well, but why on earth should your ears be picking up?

Right now, an additional rate tax payer making a pension contribution will receive up to 45% tax relief on a pension contribution they make, and a 40% tax payer will receive up to 40%. This means that for an additional rate tax payer a £10,000 pension contribution has a cost as low as £5,500 and for a higher rate tax payer the same contribution has a cost as low as £6,000.

The consultation outcome has not yet been decided, but a flat rate would no doubt be lower than either of the above two rates, meaning that there may be a real advantage to reviewing your finances now and considering whether you wish to make a pension contribution in the current year, with the current rules. We are planning in this way for all of our clients who this applies to – this is simply good financial planning.

Imagine my shock then to turn on BBC Breakfast News last Friday morning to hear the business report discussing the above – and closing with ‘this may of course come into effect immediately on 16th March’, to stop [those who are negatively impacted upon undertaking] ‘emergency planning’. So all thoughts of pension planning for higher and additional rate tax payers within the current tax year have been brought forward. Their planning is now lined up to be concluded by close of play on 10th March, allowing time for monies to be processed and allocated before 16th March.

There is always something to work towards when planning your finances, we all know that, and more often than not, life and all it entails, overtakes, and your planning goes further and further down the list. However, in this instance I would urge you to talk to your adviser, go through your planning and see if there is anything that they would advise you to consider in the coming weeks. This is a real deadline, one that will impact 4.8 million people if the reports are correct – I wonder how many of those people live in Sevenoaks? I wonder if any of those people are you? Please consider speaking to an authorised adviser sooner rather than later and make sure you are appropriately planned!

Carrie Devonshire BSc(Hons) FPFS

Director & Chartered Financial Planner

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Athena Wealth Planning is an Independent Financial Adviser and is not tied to one product provider or marketing group. We are authorised to advise on the products of different companies. Athena Wealth Planning Ltd is authorised and regulated by the Financial Conduct Authority FRN 627636: and registered as a limited company at Companies House, England, Company number 9086612. The registered address is 61a Walton Street, Walton on The Hill, Surrey, KT20 7RZ. All comment on tax and investment is based on our understanding of current law and practice and should be referred to your accountant. We recommend that you confer with your accountant before investing in products or investments which depend on tax relief for part or all of their returns.