UK Households Urged to Act Within 39 Days to Boost Pensions
UK households are being advised to take action by April 5 to significantly enhance their pension savings, a strategy described as 'turbo-charging' retirement funds. Financial firm Evelyn Partners has issued a call for savers to evaluate whether they can afford to increase contributions while tax relief at their highest marginal income tax rate remains accessible.
Importance of Pension Tax Relief
Emma Sterland, Chief Financial Planning Officer at Evelyn Partners, emphasized the critical nature of leveraging pension tax relief in the current economic climate. "Taking advantage of pension tax relief is now perhaps more important than ever," she stated. "Fiscal drag is increasing the tax burden on income and pushing many earners into higher tax brackets, which in turn also means savings and capital gains will be more exposed to tax, unless protected."
Sterland highlighted concerns over potential future changes to pension policies, noting, "The pressure on the UK’s public finances is not going away, so who knows what could happen to the higher rates of pension tax relief, or to the recently-expanded £60,000 annual allowance, in the next few years?" With personal tax allowances frozen and rising tax liabilities, she pointed out that pension saving stands as one of the few effective methods to retain more earned income and build wealth efficiently.
Key Deadlines and Strategies
Sterland warned that salary sacrifice schemes will be capped at £2,000 starting from April 2029, creating an incentive for those with access to such arrangements to act promptly. For the over 20 million employees enrolled in workplace pensions, increasing monthly contributions through payroll can be a straightforward way to boost retirement savings.
Additional strategies include:
- Considering sacrificing part of an expected bonus into a pension, while ensuring it does not exceed the annual allowance.
- Utilizing unused allowances from the previous three tax years under 'carry forward' rules.
The annual allowance reduces by £1 for every £2 of adjusted income above £260,000, dropping to a minimum of £10,000 for individuals earning £360,000 or more.
Benefits and Warnings
Sterland explained that the combination of tax relief at marginal rates and tax-free growth makes pension savings particularly attractive, especially for higher and additional rate taxpayers. However, she cautioned, "Forgetting to claim back higher rates of tax relief will defeat half the rationale of injecting a lump sum into one’s pension in the first place."
This advice is especially timely as the tax year concludes on April 5, urging households to review their pension plans and take advantage of current opportunities to secure their financial future.
