Dominic Browning, Managing Director
Posted by Dominic Browning
News, Resources, Insight and Opinion from Browning Financial Planning

Are pensions rubbish?

Dominic Browning, Managing Director
Posted by Dominic Browning

I often meet people who say that pensions are rubbish. On asking them why, they say it has not grown in years.

I inform them that pensions are great savings vehicles but it is probably the fact that the fund(s) in which they are invested are bad.

On further investigation, I usually agree with them that the fund within their pension is indeed rubbish, but the pension itself is NOT rubbish, it is brilliant. "Why is that?", they ask.

A pension is a tax-free wrapper around one or more funds. The funds grow free of capital gains and income tax, just like an ISA. If you put in say £8000, the Taxman will put in a further £2000. If you are a higher-rate tax payer, you can claim a further £2000, off your tax bill.

When you take the money out at retirement, 25% is available tax free.

You can pay up to £60,000 gross into a pension every year.

Even if you have already taken taxable benefits, you can still put in a further £10,000 per annum.

Any money in your pension when you die is exempt from Inheritance Tax, so it is a great vehicle to save into, not just for your own retirement but also to avoid Inheritance Tax.

If you die before 75, your beneficiaries gets the money tax-free. If you die after 75, your beneficiaries only pay income tax at their marginal rate on the money they take out.

Pensions are so good that previous governments have capped the amount of money that can be in them. This government has just removed the cap.

SO, ARE PENSIONS RUBBISH? No - but sadly, the underlying funds often are. We can help you plan for your retirement using funds which will work hard for you.

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