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Making the most of your pension – make sure you don’t cross tax brackets

Enable’s IFA’s work hard with clients to facilitate good financial planning to make sure that they put enough money away for their pensions. Having saved so hard and so efficiently it also makes sense to make the most of your pension as you draw on it.

One of the most important things to do unless you can afford to is not to push yourself into a higher tax bracket by accident. When you are planning to use your pension money you need to be careful not to take out too much pension income in any tax year. Only take out as much money as you need. If you’re a basic rate taxpayer for every £1,000 of pension income you will get £800 in your pocket. If you go over the basing tax allowance every £1,000 of pension income will be subject to higher rate tax leave you with just £600.

You need to be careful how much you take out in any tax year to avoid crossing a tax band and paying more tax then you need to. If you need some extra cash for something it may be worth taking some pension income alongside income from other savings to keep you below the income tax threshold. You can draw down tax-free from your ISAs.

Typically, you shouldn’t take money out of a tax-advantaged savings plan until you actually need the income. It is best to make sure all your savings accounts are working for you. Another advantage of a pension is that unlike ISAs and LISAs, they don’t form part of your estate, so inheritance tax isn’t normally payable. Pension savings can be passed on tax-free to your loved ones if you die before you are 75. Enable’s experienced IFAs of Bishops Stortford can help you make the most of your savings and pensions.

Contact us for a meeting to talk about your pension 


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