Money: Tax Planning and Saving: Work the System to Retire in Comfort
Read, Simon, The Independent (London, England)
In the next few weeks the 250,000 pension customers of the TSB will face a financial challenge. It will arrive in the form of a statement that will show how much retirement income they can expect to receive if they continue with the same level of payments.
The TSB is asking its customers whether or not they think the projected income will be enough to live on. The bank will be giving examples - showing, for instance, what the difference is if payments are increased by pounds 50 a month.
This is not just to increase business, but a way of alerting people to the real danger of their pensions proving inadequate. According to research by Norwich Union, as many as one in three people could find that in retirement they will be surviving on less money than they thought would be the case. So what can you do? Initially you should review your pension arrangements. And if your pension provider does not provide a statement as full as that given by TSB, you may need expert advice to help sort out your options. Whether you are in a company scheme or a personal pension plan, you are in effect saving for what could be the longest holiday you will ever have. Working out how much you will need should not be too difficult. From that sum you should be able to calculate just how much you should be saving now. One of the key elements in all this is tax planning. The Government is keen to encourage all of us to make provision for our retirement and not become a "financial burden" on the state. Pensions, therefore, are tax-efficient, allowing savers to make tax-free payments into schemes. If you have a company pension scheme your pension contributions are taken out of your gross salary, so you pay no tax on them. Additionally, depending on the type of pension you have, your company could be contributing a large additional amount to your scheme. Even if you are not in a company scheme, or if you are self-employed, the Government allows equal tax breaks on contributions to personal pensions. For every pounds 76 you put into a personal pension in the current tax year (now 1996/97), the Government adds another pounds 24 to make it up to pounds 100. With the basic rate of income tax falling to 23 per cent …
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Publication information: Article title: Money: Tax Planning and Saving: Work the System to Retire in Comfort. Contributors: Read, Simon - Author. Newspaper title: The Independent (London, England). Publication date: February 23, 1997. Page number: 20. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.