Contributing to a pension not only helps with saving for your retirement but is also tax efficient too………
Pensions are a huge area to consider, so as a quick summary it is worth considering this:
- Pension contributions can be tax efficient due to the tax relief available on contributions;
- We each have an annual allowance that works on a “use it or lose it” basis (across several tax years); but
- Money is invested in a pension and not available to spend until a certain age.
Therefore, making investments into any pension scheme is something that should be considered as part of your long-term planning.
While thinking about your future it is also worth thinking about what you may already have in place -
If like me, you spent the early part of your career moving around companies and gaining experience, you may well have ended up with several pension pots in different places. If you have the paperwork and kept all of that up to date with your name and latest address – top marks to you. However, if you do not have all that paperwork all is not lost. You can track down any previous pension investments with a search on gov.uk.
Here’s the link: https://www.gov.uk/find-pension-contact-details
And if you don’t like following links, then simply search for “find pension contact details” and you should get there. Please be careful though, as you can pay someone to do this for you, but the gov.uk set up is there so that you can do this for free yourself.
Once you find them, it is definitely worth chatting with a Financial Advisor to see what the best approach is for your pension pot(s). Please let me know if you need some names of people that could help you with this.
Your National Insurance Record and State Pension
You should also check your National Insurance record to see how many years of contributions you have.
New State Pension rules apply to anyone who reaches State Pension Age (SPA) on or after 6 April 2016.
- You need at least 10 qualifying years on your National Insurance Record
- You need 35 qualifying years to get the full New State Pension
It is worth knowing how many years of contributions you have so you can work out the working years ahead of you and whether you need to “fill the gaps”. To check your record check here: https://www.gov.uk/check-national-insurance-record
Again if you don’t like following links, then simply search for “check NI record” and you should get there.
From reviewing your contributions, you will know how many years you have credit for from your previous payments/credits and the amounts you would need to pay to “top up” your contributions to get additional years credited. It is also worth checking what credit you can get if you have young children.
If you need “more years”, then you have the ability to top up your contributions. This is time sensitive, as older years and the ability to top up changes with each new tax year. So it is worth looking ahead of 5th April and making any top ups ahead of that before those years are “lost”.
Child benefit is now a means tested benefit (threshold income of £50,000) and in light of that some have never looked into it or considered applying for it, if their or their partner’s salary was over that threshold.
However, you can apply for child benefit and opt not to receive the payment. This seems like an odd suggestion but the registering for the entitlement has advantages:
- You will get national insurance credits – which count towards the 35 qualifying years needed;
- It should ensure that your child is registered to receive a national insurance number shortly before they turn 16.
Also, if your income has been impacted by COVID, worth considering your eligibility for this benefit with your current circumstances.
Information on the Child Benefit and eligibility criteria can be found here: https://www.gov.uk/child-benefit