Pensions Contracting in or out? Have you made your decision?

Pensions Contracting in or out?

This is a subject that comes up quite regularly and involves your second state pension. Nearly everyone can expect to get a basic State Pension when they reach State Pension age, currently around 65, but this age is rising. You qualify for the State Second Pension (S2P, although it was known as SERPS) if you are or have been employed and earning above a certain amount on which you have paid National Insurance contributions (NICs). The government currently allows people to leave S2P by contracting out. If you contract out, the government will pay some of your National Insurance contributions (called a rebate) and income tax relief into a personal or stakeholder pension of your choice.

This money is invested to provide benefits at retirement instead of the benefits you would have received from S2P had you remained in the state scheme.

The government is expected to remove the option to contract out of S2P from 2012, but final salary occupational schemes will keep the option.

If you are contracted out through a personal or stakeholder pension, you should review your decision now.

Your decision about whether to stay contracted out will depend on, among other things:

• your personal circumstances
• how you wish to receive your benefits at retirement
• your attitude to investment risk

Although each client is different, we would normally recommend that you contract back into the State system and if you would like to achieve this change then we would recommend this is undertaken before the end of the tax year. We look forward to hearing from you if this is of interest to you.

This may also provide a great opportunity to review your pension planning at the same time.

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority.

Newsletter Notes March 2010/ End of tax year planning

End of Tax Year Planning Issues 2009/2010

Having just finished our march 2010 client Newsletter, I did not think it would be prudent to not provide you with a reminder of the tax year end issues which are coming a bit earlier this year because of the Easter break. Some institutions will only accept applications and changes up to Thursday 01^st April because of this.

A quick reminder of the issues that you may want to consider with your financial planning are:

• ISA investment 2009/2010, up to £10,200 for those over the age of 50.
• New ISA allowance 2010/2011 of £10,200 for all from 06^th April 2010.
• Capital Gains Tax allowance available up to £10,100 in the tax year 2009/2010.
• Gift allowance of £3,000 per donor for inheritance tax purposes (you can also go back 1 year if not used).
• Tax changes due for those earning over £100,000 pa with a phased reduction in the personal allowance and over £150,000 pa (50% income tax) from 06^th April 2010.
• Pension contributions allowances for 2009/2010.
• Minimum Pension age increases to 55 from 06^th April 2010.

This is not an exhaustive list and your planning may involve one or more of these allowances. If you have not completed your planning for this tax year then please let us know how we can help to maximise the potential that may be available to you.

With a general election due in the next few months, you may be reminded that donations to political parties are an allowable business expense.

Contact Churchouse Financial Planning Limited at info@churchouse.com for further information.

Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority