Regardless of earnings, it’s possible to make pension contributions of up to £3,600 gross in any fiscal year and benefit from tax relief.
Many people are unaware that pension contributions can be paid for minors or non-working spouses up to £3,600 per annum and as they attract tax relief, the net cost is just £2,808.
The competitively priced savings environment of a stakeholder pension can be used for such investments. Charges are restricted to a maximum of 1.5% per annum of the fund value for the first ten years and 1% thereafter, with no initial charges.
The benefits of this tax subsidy and the favourable treatment of the underlying pension fund makes this an attractive way of building up long-term pension funds for non-taxpayers.
For example, many grandparents have taken advantage of these provisions to finance pension contributions for their grandchildren by making gifts within their annual allowance for IHT.
Also, parents have used the plans to fund savings for their children, as they are not taxed on the income or gains arising from the pension fund. HMRC’s view is that, because the underlying investment is tied up for a longer term, it is a valuable savings discipline.
With this in mind, you might want to consider whether this little-used tax efficient savings plan could be valuable to you or your family. If so, we’d be happy to help you find an appropriate provider.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
