According to our latest research*, the South West of England is the UK’s self-employment growth capital despite the drop in the number of people working for themselves.
Up to 40,000 more workers turned to self-employment in the South West taking the total to 438,000 in the region – a 10% increase on the past year, according to the most recent Government data.
Just three other regions – Wales, Northern Ireland, and London – recorded increases in the number of self-employed in the past year. London has the most self-employed people at 757,000 out of the UK total of 4.243 million.
The numbers of self-employed people fell in every other region with the North East of England recording the biggest drop in numbers at 14% followed by the North West which saw a 6% decline. Across the UK the number of self-employed people fell by just 1%.
We believe a key reason for the drop in the numbers of self-employed is people returning to full-time employment to benefit from the safety of employer-funded pensions. Our recent research** shows one in six (16%) people who stopped pension saving entirely or who reduced contributions last year did so because of a change in their employment status.
Our analysis shows men are more likely to have stopped working for themselves – currently around 2.728 million men are self-employed which is nearly 4% lower than a year ago while the number of self-employed women at 1.515 million is up 1%.
Here at iSIPP, we help UK and international customers to consolidate their pensions and enable customers to sign up easily at www.isipp.co.uk with access to regular and ad-hoc contributions. Our service is particularly suited to the self-employed or those who have become self-employed recently as they can combine all their existing pensions and continue contributing whilst in control of their savings.
The table below shows the changes in the numbers of self-employed people across the UK.
iSIPP Managing Director Hrishi Kulkarni said: “Self-employment is going strong in the South West with the region recording a 10% increase in the number of people working for themselves despite the overall decline across the UK.
“While many value the freedom of working for themselves there are clearly benefits from working for an employer and a company pension scheme is a major attraction.
“People who have chosen the self-employed path should look to continue their pension contributions once they stop working for an employer. A previous iSIPP survey*** has found that 44% of self-employed do not contribute regularly to a pension, putting them at risk of having insufficient funds at retirement. Both self-employed as well as those who have gone back to full time employment should also consider combining any existing pensions as consolidation could substantially save money and help increase the funds available to them at retirement. iSIPP makes it easy to combine pensions, make contributions and gives you control over your investments.”
Our free to set up service has no dealing charges or charges to transfer in existing pension funds and enables clients to create their own investment portfolio complementing our existing ‘Choice’ range of Ready-Made funds from world-leading fund managers BlackRock and Schroders.
Our digital pension consolidation service is available to all customers with UK pension funds who are working or have worked in the UK. Built around flexibility, iSIPP provides access to over 100 funds under our ‘Create’ option allowing users to build their own portfolio.
Our ‘Choice’ range include Ready-Made Portfolios from world-leading fund managers BlackRock and Schroders. BlackRock’s multi-asset, risk-managed MyMap range of funds are available which include an ESG fund and iSIPP also provides access to the Schroders’s Shariah compliant fund. Focusing on transparency, our annual trust fee is £200 plus a 0.25% platform services fee. Funds with OCF (Ongoing Charges Figure) start at as low as 0.16%.
*Source here.
** Study conducted by independent research company Opinium among a nationally representative sample of 2,000 UK adults aged 18-plus between January 10th and 13th 2023 using an online methodology.
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
The UK pensions market, worth £13.9billion, is facing unprecedented challenges and opportunities as technology-driven innovation transforms the way people save, invest, and retire. While the current system has served many people well, it also suffers from complexity, inefficiency, and uneven outcomes. As the population ages, and financial pressures mount, the need for more accessible, affordable, and personalised pension solutions is on the rise. In this context, technology is playing a disruptive role by introducing new products, services, and platforms that empower consumers and providers alike.
One way technology is already disrupting the UK pensions market is by offering flexible and personalised retirement savings and income solutions. Our direct-to-consumer Self Invested Personal Pension (SIPP) is a prime example of a solution to consumers who are happy to make their own decisions. This reflects the choice consumers want due to their diversity of lifestyles, careers, and financial circumstances. Digital platforms such as pension dashboards, individual pension provider portals and retirement planning tools are enabling retirees to manage their savings more dynamically and holistically. These include, for example, funds available at retirement, choosing how much to save or withdraw each year, investing with flexibility and choice, or accessing new sources of income such as part-time work.
The second way in which technology is advancing the UK pensions market is by promoting greater engagement and education among savers and investors. Still many people lack sufficient knowledge or interest in pensions, which leads to poor decision-making or inadequate savings. Evidence from the Financial Conduct Authority’s Financial Lives 2020 survey found that 58% of those aged 45+ who were yet to retire have put little or no thought into how they will manage financially in retirement. Furthermore 37% of those aged 45+ with a Defined Contribution pension in accumulation did not understand the different options they can choose from when taking money from their pension. However, online pension calculators, pension information portals such as the UK government websites, pension provider portals (such as https://test.isipp.co.uk/pension-knowledge) and even online courses are helping raise awareness, motivation, and literacy about pensions. With relevant and up to date knowledge, individuals will be empowered to take more control over their retirement planning, and contribute to a more vibrant and sustainable pensions ecosystem.
Another way technology is trying to help the UK pensions market is by enabling greater transparency and competition. More needs to be done to increase transparency and trust amongst consumers. Poor service, non-competitive and hidden fees or lack of investment choices can discourage people from saving or investing, or make them switch to other providers that may not be better. However, digitisation of services is trying to solve these problems. Digital portals are aiming to improve service quality, provide information to savers at a click of a button and foster innovation among pension providers that want to attract and retain customers.
Of course, technology-driven disruption also poses risks and challenges that need to be addressed. These include, for example, data privacy, cybersecurity, regulatory compliance, and ethical concerns. Moreover, technology cannot replace human judgment and empathy entirely, especially when it comes to sensitive and complex issues such as retirement planning. However, if harnessed wisely and collaboratively, technology will indeed help transform the UK pensions market into a more customer-centric, efficient, and resilient system that benefits everyone.
In conclusion, the UK pensions market is ripe for disruption, and technology is a powerful force. By promoting transparency, flexibility and engagement, digital tools and platforms are enhancing the value and accessibility of pensions for millions of people.
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Up to 1.7 million who became self-employed or changed jobs stopped retirement payments or cut back.
We urge retirement savers to think carefully about pensions despite cost-of-living pressures.
Workers deciding to become self-employed or change their jobs are contributing to a rise in people cutting back on retirement saving.
Our research* has found one in six (16%) of people who stopped pension saving entirely or who reduced contributions last year did so because of a change in their employment status.
That equates to around 1.7 million people out of the UK’s total of 45 million-plus retirement savers.
Around half who cut back or stopped payments did so because they have moved jobs while the rest stopped paying into a pension because they were self-employed and no longer had a pension scheme.
The good news is that people who have stopped or cut back do restart payments, the study found. Just 11% who have done so say they will never start saving into a pension again.
We help UK and international customers to consolidate their pensions. You can sign up easily at www.isipp.co.uk where both individuals and their employers can make contributions.
Our service is particularly suited to the self-employed or those who have become self-employed recently as they can combine all their existing pensions. Our research** last year found self-employed workers are nearly three times more likely to not be paying into pension funds compared with employees.
The study found 11% of the UK’s 4.2 million self-employed*** would increase pension contributions if they consolidated funds into one, while another 17% say they would make more regular contributions. Less than one in 10 (9%) say they have already consolidated funds into one.
iSIPP Managing Director Hrishi Kulkarni said: “The cost-of-living crisis is forcing many people to think hard about savings, and it may be easy to stop pension contributions particularly if you have just become self-employed and need to conserve your cash.
“In most cases where people have stopped pension savings after becoming self-employed or moving jobs they will restart retirement saving. But it is worryingly the case that the self-employed are most likely to not save into a pension as they don’t have an employer making the payment on their behalf.
“People should think carefully about stopping pension contributions as while it will save money to some extent in the short-term it will cost more in the long-term. People should also consider combining all their existing pensions as consolidation could substantially save money and help increase the funds available to them at retirement. iSIPP makes it easy to combine pensions, make contributions and give you control over your investments.”
Our free to set up service has no dealing charges or charges to transfer in existing pension funds and enables clients to create their own investment portfolio complementing our existing ‘Choice’ range of Ready-Made funds from world-leading fund managers BlackRock and Schroders.
Our digital pension consolidation service is available to all customers with UK pension funds who are working or have worked in the UK. Built around flexibility, we provide access to over 100 funds under our ‘Create’ option allowing users to build their own portfolio. Our ‘Choice’ range include Ready-Made Portfolios from world-leading fund managers BlackRock and Schroders. BlackRock’s multi-asset, risk-managed MyMap range of funds are available which include an ESG fund and we also provide access to the Schroders’s Shariah compliant fund. Focusing on transparency, the annual trust fee is £200 plus a 0.25% platform services fee. Funds with OCF (Ongoing Charges Figure) start at as low as 0.16%.
* Study conducted by independent research company Opinium among a nationally representative sample of 2,000 UK adults aged 18-plus between January 10th and 13th 2023 using an online methodology.
** Study conducted by independent research company Opinium among a nationally representative sample of 2,000 UK adults aged 18-plus between March 1st and 3rd 2022 using an online methodology.
*** https://www.statista.com/statistics/318234/united-kingdom-self-employed/
Pension tax relief for self-employed and contractors
Pensions for the self-employed
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Do you have multiple pension pots? Don’t worry – this is the situation for many of a certain age. People will go from career to career, having multiple jobs over their lifetime. The result of this is the creation of a pension pot by each individual employer, which leaves you with money saved in different places. One question you might have asked yourself is – is it better to combine pensions?
If you currently have multiple pension pots and are contemplating whether these should be combined or not, this is the question you have on your mind. So, is it better to combine pensions?
The answer is an unequivocal yes. In fact, you should start looking into combining your pensions right now.
Need a little more convincing? Well, there are various benefits gained from consolidating all of your pension pots into a single large pot. Here are some of the main advantages to keep in mind:
Greater convenience
One of the biggest reasons to combine pensions is the convenience it provides. Think about it. Multiple pension pots result in you having to follow multiple different funding collections. It’s like having to visit multiple shops to get all of your groceries. Now imagine how much easier it is to simply visit a supermarket for your groceries – that’s what combining your pensions effectively does.
With your pension being in just a single location, you can easily keep track of its performance. One platform also makes it a breeze to manage your pension.
More investment options
Pensions are an investment. Yet if you simply stick with multiple pension pots created by past employers, you are effectively following their investment options. Understandably, some pensions can perform poorly in comparison to others.
By taking control and having your pension pot in a single location, you open the door to more investment options – and these can be more lucrative than those you are currently benefiting from.
Lower pension charges
Multiple pension pots result in multiple charges. While these typically won’t be too drastic, they can soon mount up when combined. When you consolidate these pots, however, you are left with only one general charge to cover. This charge will typically be lower than all of those smaller, multiple charges when added together.
Access your pension with more flexibility
The added flexibility is another benefit of combining your pensions. When you have a single pension pot, there are more options available in terms of accessing funds. Once you have passed the minimum pension age, you can withdraw your cash with greater flexibility and ease.
Budget better
Keeping track of multiple pensions is tricky. Rather than having to check each one and add up how much you will receive each month, a combined pension ensures you only have to keep track of a single funding source.
Combining your pensions will only work if it is done the right way. That is where iSIPP can help. As specialists in making pension management simple, we know a thing or two about combining pensions successfully. Furthermore, our specialist pension platform ensures you can easily track and manage your combined pension.
Our pension experts will also leave no stone unturned in finding any lost or forgotten pension pots. This means your combined pension pot is maximised in value and you don’t miss out on any lost funds.
A £20,000 minimum total transfer is required for an iSIPP account. Alternatively, a pension contribution option, starting from £250 per month, is available.
Retirement savers struggle to consolidate pension funds
Pension contributions explained
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Money is tight for many UK residents right now. The cost-of-living crisis has seen various bills skyrocket, which has put a squeeze on finances. Yet this isn’t resulting in people only having to put luxury purchases to one side – it can also see them struggling to pay for everything from food to energy.
The result: people are finding themselves spiralling into debt.
If you are in the same position, you might be wondering what options are available to get out of this situation. If you have built up a sizeable pension pot, you might be wondering if this is a route you can take. Yet what if this isn’t a choice? Can creditors take your pensions to cover your debts?
There are certain situations where it is possible for a creditor to claim your pension as a payment form. This is the case if an arrangement has been made between you and your creditors to pay off your debts. They can then complete payments by taking money directly from your pension pot.
There are various situations where pension-related money can be taken from your account. These situations include:
Note that creditors can only take your pension when the pension becomes available as income. That is typically when you reach the minimum age where you’re able to access your pension, which is currently 55 years old (57 from 2028).
As mentioned above, you need access to your pension to use this as a form of payment. There is also another situation where you cannot use your pension for debts: when you enter bankruptcy.
Bankruptcy is often an option for those struggling with large debts, and that is no different during the cost-of-living crisis. However, it is something that cannot be taken lightly, as it often comes along with numerous serious financial implications.
It is important to note most pensions are not classed as assets when entering bankruptcy.
When a trustee is appointed to help with your bankruptcy, the pension cannot be claimed as part of it. The situation is different, however, if you take out money from your pension. For instance, if you do take any lump sums, you could be asked by your trustee to use these to make payments towards your debts. They could even go to the extent of claiming entire lump sums if taken out during bankruptcy.
It is always a stressful time when dealing with substantial debt. Sometimes you don’t know where to turn and your options can seem limited. However, it is highly recommended you avoid using your pension to pay off any debt.
If you do take money out to cover these debts, it is likely to have a negative impact on your long-term prospects. Firstly, it will leave you with a smaller pension pot. With the cost-of-living crisis and issues like inflation being experienced first-hand right now, you understand how bad it could be to have a smaller income in the future.
In addition, reducing your pension pot will impact your tax position – not just later on, but also in the present. You will get fewer benefits, which will ultimately handicap how much money is built up in your pension. In other words, it’s something you should think very carefully about.
Can a private pension be passed onto a child?
Do you lose your pension if you get fired?
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Have you had several jobs over the years? In that case, it is likely you have built up several pension pots. Many have followed the same path. However, there is one aspect of this you want to avoid: forgotten or lost pension pots. With so many pots spread around, it is easy for some of them to go missing. This can happen due to something as simple as moving house and not updating a pension provider about your new address.
Due to this, you might be wondering if it is worth the effort of consolidating your pensions. This guide will explore the process, seeing how it can be done and if you should do it with your pension savings.
So, is it worth consolidating pensions? The short answer is yes. It is absolutely worth going through the effort of consolidating your pensions.
Now there isn’t only one reason why this is the case. There are numerous benefits gained from gathering up all of your pension pots, transferring them, and combining them all into a single pot. Let’s highlight some of the main advantages:
Yes, there are plenty of benefits up for grabs if you decide to consolidate your pensions. At least, that is the case if you complete the process the right way. Go down the wrong path, and it could be more time-consuming and less effective than you envisaged.
One way to get it right is to work with iSIPP. Now, it’s true that you would expect us to say that. However, we are experts in making pensions simple. Our platform is built to ensure you can monitor and manage your pension all in one place. Most importantly, in this case, it is also the ideal place to consolidate your pension pots.
With our expertise, we can go out there and gather all of your pension pots efficiently and ensure nothing goes unclaimed. Even if you have forgotten about a pot or lost employer details, we can still uncover these pensions for you!
An iSIPP account can be created with a minimum £20,000 total transfer. Alternatively, you can set up a monthly pension payment of at least £250.
What is pension consolidation?
Is it better to combine pensions?
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Do you have regrets about the pension scheme you have signed up for? Perhaps money is tight, and you require some quick funds? There are various reasons why you might be looking into getting your pension contributions back. Yet is it possible?
If you’re wondering if it’s possible to gain your pension contributions back, the answer of “maybe” is not exactly the most reassuring. However, there are only certain cases where it is possible to claim back contributions you’ve made to your pension scheme early.
In most situations, you have to wait until you have reached the defined pension access age. The current access age is 55. However, from 2028, that is scheduled to go up a couple of years to 57.
While most people will need to reach either of these ages in the future before they can get their pension contributions back, there are specific cases where a more premature resolution is available.
The pension type you have will play a key role in whether a refund is viable or not. With a salary sacrifice workplace pension, for example, it isn’t possible to make a claim for any of your contributions. The reason: these are not classed as personal contributions, but rather as employer contributions.
With other personal or workplace pension types, there is the potential to get your contributions back early. This can be dependent on the amount of time you have been contributing financially to your selected scheme.
Time is one of the main elements of getting your pension contributions back. If you don’t want to wait until you reach the pension access age, there are generally two options available.
Firstly, if you have an instant regret about the pension scheme you joined, you will often be able to get a refund if you request it within 30 days of joining. Some pension options will even extend this up to the two-year mark.
Aside from an employer-related pension, you could have a private or personal pension. With either of these, there will be a 30-day cooling-off period automatically applied under your chosen scheme. Certain pension schemes will also give you the option to cancel your plan at any time and receive a refund. However, refunds won’t include any applied tax relief contributions.
Have you made personal pension contributions that exceed your relevant earnings? While this is unlikely, there are cases where you can gain a refund for the excess, achieved through the “refund of excess contributions lump sum” process.
Another extreme circumstance is if you were to suffer from a terminal illness. In this case, it might be possible to retire and claim your pension early.
You may have some clear reasons for looking to get your pension contributions early. However, there are some notable drawbacks if you decide to get your pension contributions back early.
Perhaps the biggest is that if you receive a refund on your workplace pension contributions, you will lose your employer’s contributions. The only way to get employer contributions is if you were to leave their pension scheme entirely.
Another issue is that once you request a refund, the period from this won’t result in any pension savings. This means your pension pot will suffer – and you will have less money to live on once retired. Additionally, one of the biggest benefits of pension contributions is tax relief, but this is lost with refunds.
Pension contributions explained
How much can I pay into a pension each year?
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
As you likely already know, National Insurance is a type of tax that is deducted from your earnings. While this is the situation when it comes to your salary or self-employment profits, you might be wondering if you pay national insurance on your private pension. This guide has the answer.
No. National Insurance is not something you have to contribute to with your private pension. This also includes annuity payments. The rules are even applicable if you begin receiving your pension income prior to reaching the state pension age.
Even better, National Insurance contributions are not taken from any lump sum you may decide to remove from your pension. Additionally, income tax also isn’t applied to the first 25% of this lump sum, either.
The only time you contribute to National Insurance is based on your job earnings. However, this generally stops once you reach state pension age. Even if you opt to work beyond the state pension age, National Insurance contributions are not needed from your side. Employers, on the other hand, will still need to make contributions based on your earnings if applicable.
At the time of writing, 66 is the state pension age. 2028 will see this increase to 67 based on current plans. Are you self-employed? In this situation, and once you hit the state pension age, Class 4 National Insurance contributions will continue until the tax year-end. After that, no more contributions are required when it comes to National Insurance.
Again, it is good news. It doesn’t matter the amount of private pension you receive – it will not be impacted by any National Insurance contributions. This is applicable whether you receive the pension as either a regular income or a lump sum payment.
So, you know that National Insurance is not something to worry about with your private pension. However, you are not completely out of the woods. There are other factors that will affect the pension amount you will eventually take.
Perhaps unsurprisingly, the most notable is income tax. Even after reaching the state pension age, you can still be liable to pay income tax on your retirement income. This is dependent on whether your personal allowance sits above the annual threshold, which is currently at £12,570. If it does, you will have to pay income tax in the same way as when in employment or self-employed.
Another factor to consider is inflation. Unless you have been living under a rock, you know that inflation has been soaring in recent years. This upward trajectory has, naturally, had a current impact on pension savings, to the point it could erode any capital value gained.
With points like these, it can make it challenging to gain the full picture of how valuable your pension pot will be when retirement comes around.
Even with National Insurance being off the table, other factors like those mentioned above can make it difficult to manage your pension. You can struggle to understand just how much you have available and rely on advisers to make important decisions.
This is where iSIPP can help. With the ideal blend of technology and personal service, iSIPP makes it much more efficient and effective to manage your pension. You’ll be able to keep a close eye on your retirement income whenever and wherever. Furthermore, you are given the power to make any pension-related decisions for greater flexibility.
Do pensions reduce tax for the self-employed?
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
Are you looking to help out one of your children with their monetary needs? Perhaps you want to provide your loved ones with a financial gift? You might be looking towards your private pension as the answer and wondering if a private pension can be passed onto a child, but there are various points you need to consider when understanding how this works.
So, can a private pension be passed onto a child? The good news is that, yes, it is possible to shift your pension funds to any designated family members or other beneficiaries.
If you have looked into this in the past, you may have heard about a 55% pension “death tax”. Fortunately, this has been left in the past – it was abolished by the government back in 2015. As a result, your remaining pension pot will not be subject to any excess charges and fees.
Better yet, pensions are also not usually included with your estate when it comes to inheritance tax purposes. There are even some instances where no tax needs to be paid at all.
There are various points to consider when passing your pension down to your children – mainly tax-related. Here are how different pension types can change the situation:
“Drawdown” or untouched pension pot
Do you have a personal pension? Maybe an employer-run contribution pension? Either of these means you can pass on your pension to your children or other beneficiaries – these don’t necessarily have to be relations, either. They can receive the money either as an income or a lump sum.
There are tax differences depending on the age you pass away. Pass away at 75 or older, and the beneficiary will have to pay income tax based on their marginal rate, aka the income tax rate they pay. If you die before your 75th birthday, your pension is passed on completely tax-free.
Salary or defined benefit-related pension
With either a salary or defined benefit (DB) pension, it will typically result in a surviving spouse receiving the pension amount. For your offspring to benefit from this money, however, it requires a defined contribution arrangement to transfer your rights.
Pension annuity
When you die, income is usually stopped with a pension annuity. However, this isn’t always the case. A chosen benefactor could keep receiving an income or lump sum when you pass away. This is sometimes the situation with capital-protected, guaranteed period, or joint annuities.
Again, the tax paid by the beneficiary – if applicable – is dependent on if you die before or after the age of 75.
State Pension
After you have passed away, it is not possible to pass your State Pension rights onto your other family members. However, it is possible to currently give these benefits as a financial gift. Keep in mind there are set annual limits in terms of how much can be passed on tax-free.
If you are between the age of 55 and 75, there is a tactic available that can make looking after your estate even more tax efficient.
For those that fall between the set age criteria, it is possible to take up to 25% of your pension fund as a lump sum without any taxes imposed. That’s right: it is a tax-free amount that you can use in any way you want, whether it’s for yourself or to pass on to your children.
This is potentially a savvier approach than simply keeping the money in your pension pot. If you do this and pass away on your 75th birthday or beyond, the entire pension pot will be taxed as normal – including that 25% you could have received as a tax-free lump sum.
Death Benefits and your pension
Spring Budget 2023: Pension Lifetime Allowance abolished
Disclaimer
The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.
This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.
©️ 2024 iSIPP. All Rights Reserved.
