Pensions
Why have a pension?
There are two main reasons to start a pension.
Retirement Income.
After you have finished working you will still need an income. Most people realise that the basic state pension is not enough to live on so they plan for the future with a pension. With a suitable pension portfolio you will be able to enjoy your retirement without worrying about income.
Tax Benefits.
Pensions are the most tax efficient saving vehicle currently available to you. This is because you get tax breaks for planning for your retirement up to 40%.
Your company can contribute upto £245,000 (2009/2010 tax year) per year into your pension and contributions are deemed to be a business expense so therefore free of corporation tax.
If you are caught by IR35 then pensions are even more favourable as the contributions from your company are free of income tax, corporation tax, employers National Insurance and Employees National Insurance meaning that your income is lower and therefore you pay less tax.
What to Consider when choosing a pension.
For Contractors working through their own limited company a personal pension is more suitable than a company pension as your pension will move with you through out your working life and is not tied to your company, plus it receives exactly the same tax benefits.
There are three main types of personal pension:
Stakeholder Pensions.
These are low cost pensions with a cap of 1.5% on the annual management charge that the pension provider can charge. The major drawback to these pensions is a limited number of investment funds with which to construct a portfolio from.
Personal Pension.
These do not have a cap on the annual management charges but do allow you a much wider choice of funds. Generally, a personal pension will have fund charges in line with the maximum charge allowable under a stakeholder pension.
Self Invested Personal Pension. (SIPP)
A SIPP allows you to have total control over your pension portfolio and will allow you to invest in individual stocks and shares, unit trusts and commercial property. The charging structure is higher than Personal Pensions to reflect the increased functionality. However, you should only look at investing in a SIPP if you have the experience and time to manage your investments.
All of the above are treated the same for tax purposes.
WHY USE CLEARSKY FINANCIAL FOR YOUR PENSION NEEDS?
ClearSky Financial has over 10 years experience in arranging and managing pensions for IT Contractors. We can accurately assess you attitude to risk and reward and construct a pension portfolio that will reflect this attitude while working with you on an ongoing basis to ensure your pension meets your financial goals and aspirations.
We offer you a personal service where you will meet with one of our Independent Financial Advisers to discuss your needs and who will take into account your overall financial position before recommending a suitable pension strategy for you. We feel that retirement planning is far too important to be done over the phone or internet and that a rapport should be built up over time between a client and an individual adviser.
If you would like more information on pensions please contact us on 01202 751259 or post@clearskyfs.com
