How the Chancellor has given you a one time only opportunity to add extra to your pension

Well the chancellor threw in a few surprises, sat on the fence and deferred to a later date some decisions, especially on pensions and pleased and upset individuals in equal measure.

Whatever your opinion there are some great short term opportunities especially if you have capital available and want to get it into your pension to top up for your retirement provision. There was a significant change regarding the Pension Input Period (PIP) now I don’t want to get technical but a little explanation will help your understanding. Before the summer budget the PIP on a pension usually ran over a 12 month period from when the pension started, this is the period in which your contributions count toward the annual pension allowance. As you can imagine everyone starts a pension at different times so each individual person had a different PIP. The chancellor has decided to tidy this up, which makes complete sense with the changes he also announced in the budget for additional rate tax payers and the reduction in their allowances.

So regardless of when your PIP ran until, the budget put an end date as of 8 July 2015. Which means that a new PIP period will run until 5 April 2016. From 6 April 2016 every PIP will run in line with the tax year, far simpler for everyone to know where they stand and for reporting to HMRC. This, however, provides a wonderful opportunity to add extra money into your pension. The current annual allowance is £40,000. As a new PIP year started on 9 July 2015 and runs to 5 April 2016 it means that regardless of what you may have contributed up to 8 July you can still contribute up to another £40,000 in this new (one time only) special PIP period.

If you happen to be drawing from your pension already the annual contribution is £10,000, but the same opportunity is there for you. Should you want to make more contributions then you too have a new PIP period from 9 July 2015 to 5 April 2016 and can add up to £10,000 regardless of any monies that you may have put in previously.

Whilst this opportunity is only applicable to you if you have the capital and want to maximise an investment that offers you extra money through the tax relief (no other investment can give you an immediate 20%, 40% or 45% addition other than a pension) so for every £10,000 that you contribute the government will top it up to £12,500 for a basic rate tax payer, £16,666 for a higher rate tax payer and £18,181 for an additional rate tax payer.

If you are one of these people then now is the time to act, Savvy Financial Planning can help you with the details and ensure that you make the most of this and the other opportunities presented by this budget. Remember that this is a one time offer that is unlikely to ever be repeated and has only arisen due to the emergency budget. Call 0845 680 8910 or fill in the contact form on the home page now to discuss the opportunity or lose it forever.

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