Pensions
Retirement planning is one of the most significant aspects of long-term financial management. With a complex set of rules and ongoing tax updates, professional support can make a real difference in how your pension is structured and accessed. We provide practical guidance across all stages of pension tax planning, tailored to your residency status, income level, and goals.
Understanding Pension Tax Relief
For most individuals, the tax benefits of pension contributions are a major incentive to save. As part of the UK pension tax system, contributions to qualifying pension schemes can attract pension tax relief at your highest marginal rate—currently up to 45%.
If you’re employed, your employer may apply this relief automatically through payroll. For those who are self-employed or making personal contributions, a claim may be made via self-assessment. We help clients optimise their contribution strategy while staying within the rules, including:
- Carrying forward unused relief from the previous three tax years
- Adjusting contributions to avoid breaching the annual allowance pensionthreshold
- Identifying contributions that may result in a loss of personal allowance or child benefit
Annual Allowance Pension Cap
The annual allowance pension limit places a cap on the amount that can be saved into pensions each tax year while still benefiting from tax relief. The standard limit is currently £60,000 but may be tapered to as low as £10,000 for high-income individuals.
We advise clients who are affected by the tapering rules or whose employer contributions push them above the threshold. It’s particularly relevant for directors, consultants, and those with fluctuating income from dividends or bonuses.
We’ll assess your annual allowance position, help you make the most of available relief, and deal with any reporting or tax charge requirements should you exceed the limit.
Pension Lifetime Allowance – Where It Stands Now
While the lifetime allowance tax charge has been removed, it’s still important for individuals with larger pension pots to consider its historical and future implications.
For those who previously applied for protection or built up significant pension wealth, the calculation of entitlements may still require reference to the allowance. Moreover, it remains relevant when assessing possible legislative changes, succession planning, and decisions about drawdown or annuity conversion.
We assist in reviewing pension values against past and current thresholds, helping clients avoid unintended consequences when benefits are accessed.
Tax on Pension Withdrawals
Once you begin taking money from your pension, the way it is taxed can have a lasting effect on your income. The pension income tax UK regime treats 75% of withdrawals as taxable income, which could affect personal allowance entitlements, benefits, or exposure to higher tax bands.
Careful planning of the timing and structure of withdrawals can reduce the overall tax burden. We consider:
- Combining drawdown with other income sources
- Timing withdrawals across tax years
- Using tax-free lump sum allowances strategically
- Avoiding higher tax bands with phased withdrawals
Cross-Border and International Pensions
Many individuals now have retirement savings in more than one country. From EU-based pensions and US 401(k)s to offshore trusts or QROPS (Qualifying Recognised Overseas Pension Schemes), the treatment of international pensions can vary widely.
We provide advice on the UK tax treatment of these schemes and how they interact with local tax systems. Key areas of support include:
- Identifying when UK tax applies to foreign pension withdrawals
- Understanding tax treaties and claiming double taxation relief
- Helping UK residents receiving overseas pension income
- Supporting non-residents who have built up UK pension benefits
For individuals relocating abroad or returning to the UK, a review of both current and future international pensions is essential for efficient pension tax planning.
Estate and Succession Considerations
While pensions are generally outside your estate for inheritance tax (IHT) purposes, there may still be tax considerations depending on how and when the pension is accessed or passed on. We review how pensions fit into your wider estate planning strategy and advise on potential IHT exposure, particularly in relation to drawdown arrangements or lump-sum death benefits.
Tax on Pension Withdrawals
Once you begin taking money from your pension, the way it is taxed can have a lasting effect on your income. The pension income tax UK regime treats 75% of withdrawals as taxable income, which could affect personal allowance entitlements, benefits, or exposure to higher tax bands.
Careful planning of the timing and structure of withdrawals can reduce the overall tax burden. We consider:
- Combining drawdown with other income sources
- Timing withdrawals across tax years
- Using tax-free lump sum allowances strategically
- Avoiding higher tax bands with phased withdrawals
How We Support Pension Tax Planning
We work closely with individuals, families, financial advisers, and business owners to help them structure their pensions effectively. Services include:
- Tailored UK pension taxplanning strategies
- Annual and lifetime allowance reviews
- Tax relief optimisation and pension drawdown plans
- Cross-border pension support for international pensions
- Guidance on pension income tax liabilities
- Reporting assistance and disclosure support
- Review of foreign pensions and claims for double taxation relief
Speak With a Pension Tax Adviser
Effective pension tax planning is key to making the most of your savings, both now and in retirement. We provide direct, thorough advice for those contributing, drawing down, or reviewing international pensions. Whether you’re nearing retirement or just starting to think about it, we’re here to support your tax strategy every step of the way.
